(Editorial changes were made to this section on 4 October 2012.)
The IASB discussed a recommendation from the IFRS Interpretations Committee (the Interpretations Committee) to provide guidance on the application of IFRS 3 Business Combinations by joint operators when those joint operators are acquiring interests in joint operations (as defined in IFRS 11 Joint Arrangements).
This relates to circumstances in which the activity of the joint operation would constitute a business, as defined in IFRS 3. The issue to be addressed was one that also affected the acquisition by venturers of interests in jointly controlled operations or assets as specified in IAS 31 Interests in Joint Ventures. However, new guidance will not be added to IAS 31 because it would have an effective date after 1 January 2013, when IFRS 11 supersedes IAS 31.
At this meeting the IASB tentatively agreed with the recommendation from the Interpretations Committee to add new guidance in IFRS 11 for such transactions in order to reduce the significant diversity in practice. Such guidance should:
- make general reference to the relevant principles of business combination accounting and related disclosure requirements in IFRS 3 and other Standards;
- include minimal application guidance on the following issues on which the Interpretations Committee noted diversity in practice; ie:
- measuring identifiable assets and liabilities at fair value with exceptions;
- recognising acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received, with the exception that the costs to issue debt or equity instruments are recognised in accordance with IAS 32 Financial Instruments: Presentation and IFRS 9 Financial Instruments;
- recognising deferred tax assets and deferred tax liabilities that arise from the initial recognition of assets and liabilities except for deferred tax liabilities that arise from the initial recognition of goodwill; and
- recognising the residual as goodwill;
- address the accounting for the acquisition of an interest in a joint operation on its formation, unless the formation of the joint operation coincides with the formation of the business; and
- be applied prospectively to acquisitions of interests in a joint operations that constitute businesses on or after the effective date.
The IASB tentatively agreed that the comment period for the exposure draft should not be less than 120 days.
All IASB members agreed with these recommendations.