In November 2013 the Interpretations Committee published a tentative agenda decision not to add to its agenda a request to clarify how an entity should account for a price difference between the institutional offer price and the retail offer price for shares issued in an initial public offering (IPO).
At the May 2014 meeting the Interpretations Committee discussed the comments received on this tentative agenda decision.
The Interpretations Committee confirmed its decision not to take this issue onto its agenda and confirmed that IFRS 2 is not applicable to the transaction analysed.
However, the Interpretations Committee decided that the agenda decision should contain more explanations about the reasons why the guidance in IFRS 2 is not applicable to the transaction analysed, including discussion of factors that distinguish the transaction analysed from other transactions that the Interpretations Committee has analysed to which paragraph 13A of IFRS 2 applies. In this respect the Interpretations Committee considered that the agenda decision should explain that:
- the existence of different prices for shares issued to retail versus institutional investors in the transaction analysed could be an indication of the existence of two different markets: one accessible to retail investors only and the other one accessible to institutional investors only;
- the only relationship between the entity and the parties to whom the shares are issued is that of investee-investors such that it is clear that the investors are acting in their capacity as shareholders and there is no receipt of an additional good or service from these investors in accordance with IFRS 2; and
- in the fact pattern analysed by the Interpretations Committee in March 2013 regarding the ‘accounting for reverse acquisitions that do not constitute a business’, the accounting acquirer receives a stock exchange listing from the listed non-operating entity; whereas in the fact pattern analysed, the entity issues shares to two classes of shareholders acting in their capacity as shareholders and, in doing so, meets a regulatory requirement to obtain a listing (which is to attain a minimum number of shareholders). The Interpretations Committee noted that the listing is not received from those shareholders.
The Interpretations Committee directed the staff to bring back a new draft of the final agenda decision at a future meeting that will reflect the conclusions mentioned above.
Read the May IFRIC Update.