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Friday 22 August 2014

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IASB meeting summaries and observer notes


 IASB July 2013


 


The IASB discussed a recommendation from the IFRS Interpretations Committee to clarify the accounting for a transaction between a joint venturer (an entity) and its joint venture. The issue relates to the circumstances in which the amount of the gain to eliminate in a downstream transaction in accordance with paragraph 28 of IAS 28 Investments in Associates and Joint Ventures exceeds the amount of the entity’s investment in the joint venture. Specifically, the issue is about whether:

    a.     the gain from the transaction should be eliminated only to the extent that it does not exceed the carrying amount of the entity’s investment in the joint venture; or

    b.     the remaining gain in excess of the carrying amount of the entity’s investment in the joint venture should also be eliminated and if so, what it should be eliminated against.

The Interpretations Committee had noted that the issue applied to an entity’s downstream transactions with an associate as well as a joint venture. The Interpretations Committee noted that the entity should eliminate the gain from a downstream transaction to the extent of related investors’ interest in the associate or joint venture, even if the gain to be eliminated exceeds the carrying amount of the entity’s investment in the associate or joint venture, as required by paragraph 28 of IAS 28. The Interpretations Committee also noted that the remaining gain in excess of the carrying amount of the entity’s investment in the associate or joint venture should be presented as a deferred gain.


The Interpretations Committee had tentatively decided to recommend that the IASB should amend IAS 28 through a narrow-scope project to clarify that the eliminated gain that exceeds the carrying amount of the entity’s investment in the associate or joint venture should be presented as a deferred gain. The IASB tentatively agreed with the Interpretations Committee’s recommendation.


Fourteen IASB members agreed.


Next steps


The IASB directed the staff to prepare an Exposure Draft of proposed amendments to IAS 28.

 

Date: 7/23/2013