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IFRS 10 and IAS 28 (2011)

Meeting summaries and observer notes

 IASB May 2012


The IFRS Interpretations Committee received a request to clarify whether a business meets the definition of a 'non monetary asset'. The question was asked within the context of identifying whether the requirements of SIC 13 Jointly Controlled Entities-Non-Monetary Contributions by Venturers and IAS 28 Investments in Associates and Joint Ventures (revised in 2011) apply when a business is contributed to:

  • a jointly controlled entity (JCE) as defined in IAS 31 Interests in Joint Ventures; or to:
  • a joint venture (JV) as defined in IFRS 11 Joint Arrangements; or:
  • an associate.

in exchange for an equity interest in that JCE/JV or associate.

At the January 2012 Interpretations Committee meeting, the Committee noted that this matter is related to the issues arising from the acknowledged inconsistency between the requirements in IAS 27 Consolidated and Separate Financial Statements and SIC-13, in dealing with the loss of control of a subsidiary that is contributed to a JCE/JV or an associate. SIC-13 restricts gains and losses arising from contributions of non-monetary assets to a JCE to the extent of the interest attributable to the other equity holders in the JCE. IAS 27 requires full profit or loss recognition on the loss of control of the subsidiary.

At the March 2012 meeting, the Committee discussed various alternatives that would address the inconsistency and decided to ask the Board whether it wants the Committee to consider further how to resolve the inconsistency between the requirements in IAS 27 and those in SIC-13, on the basis of the different alternatives discussed.

At the May 2012 Board meeting, the staff consulted the Board on this matter. The Board discussed three alternatives that would address the inconsistency:

  • Alternative 1: account for all contributions in accordance with the rationale developed in IAS 27.
  • Alternative 2: account for all contributions of businesses (whether housed in a subsidiary or not) in accordance with IAS 27 and account for all other contributions in accordance with SIC-13.
  • Alternative 3: account for all contributions to a JCE/JV or an associate in accordance with SIC-13.

The majority of the Board members considered Alternative 1 to be the most robust alternative from a conceptual point of view, but that it would require addressing multiple cross-cutting issues. Some Board members were concerned that the Committee would not be able to address those cross-cutting issues on a timely basis.

As a result, a majority of Board members expressed support for Alternative 2. One Board member suggested that the Committee should also consider Alternative 3 when it decides which alternative to follow.

Date: 5/23/2012