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IFRS Interpretations Committee consults IASB

 13 November 2012


The Interpretations Committee assists the IASB in Annual Improvements by reviewing proposed improvements to IFRSs and making recommendations to the IASB. Specifically, the Interpretations Committee’s involvement includes reviewing and deliberating issues for their inclusion in future exposure drafts of proposed Annual Improvements to IFRSs and deliberating the comments received on the exposure drafts. When the Interpretations Committee has reached consensus on an issue included in Annual Improvements, the recommendation (including finalisation of the proposed amendment or removal from Annual Improvements) will be presented to the IASB for discussion, in a public meeting, before being finalised. Approved Annual Improvements to IFRSs (including exposure drafts and final standards) are issued by the IASB.


Annual Improvements to IFRSs 2010-2012 Cycle―comment letter analysis 

 At its meeting in November 2012, the Interpretations Committee deliberated upon the comments received on four proposed amendments that had been included in the Exposure Draft of proposed Annual Improvements to IFRSs published in May 2012.

Annual Improvements to IFRSs recommended for finalisation

The Interpretations Committee decided to recommend three of these proposed amendments, subject to its final review of drafting changes, for approval at a future IASB meeting. Subject to that approval, the IASB will include the amendments in the Annual Improvements to IFRSs 2010-2012 Cycle that are expected to be issued in the second quarter of 2013. The three confirmed proposed amendments are:

IFRS 8 Operating Segments—Aggregation of operating segments

 The Interpretations Committee recommended that the IASB should finalise the proposed amendment to include a disclosure in IFRS 8 requiring a description of both the operating segments that have been aggregated and the economic indicators that have been assessed in order to conclude that the operating segments have “similar economic characteristics” in accordance with paragraph 12 of IFRS 8.

Having considered the comments received, the Interpretations Committee further recommended to the IASB that it should eliminate the examples of economic indicators in the proposed new paragraph to avoid confusion and recommended to the IASB that it should include some further minor edits to make the proposed amendment clearer.

Because IFRS 8 is largely converged with the equivalent guidance in US GAAP, the Interpretations Committee also recommended the staff to discuss the proposed amendment with the staff of the FASB.

IFRS 8 Operating Segments—Reconciliation of the total of the reportable segments’ assets to the entity’s assets

The Interpretations Committee recommended that the IASB should finalise the proposed amendment to IFRS 8 to confirm that a reconciliation of the total of the reportable segments’ assets to the entity’s assets shall be disclosed only if a measure of total assets for each reportable segment is regularly provided to the chief operating decision maker. This clarification would make this paragraph consistent with the guidance in paragraphs 23 and 28(d) of IFRS 8.

Because IFRS 8 is largely converged with the equivalent guidance in US GAAP, the Interpretations Committee also recommended the staff to discuss the proposed amendment with the staff of the FASB.

IFRS 13 Fair Value Measurement—Short-term receivables and payables

The Interpretations Committee recommended that the IASB should finalise, subject to some wording amendments, the proposals to explain in the Basis for Conclusions of IFRS 13 why it had removed certain guidance in IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement. That guidance related to the measurement of short-term receivables and payables with no stated interest rate at invoice amounts if the effect of discounting is immaterial. When deleting those paragraphs, the IASB did not intend to change the measurement requirements for short-term receivables and payables, because it noted that the materiality principle in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and the guidance for using present value techniques in IFRS 13 already covered the requirements in those paragraphs. However, the IASB was informed that some users of IFRS think that the deletion means the measurement requirements have changed.

In the light of the comments received, the Interpretations Committee recommended modifying the wording of the proposed amendment to the Basis for Conclusions of IFRS 13. These modifications do not, however, change the rationale for deleting the mentioned paragraphs in IFRS 9 and IAS 39, which the IASB provided in the Exposure Draft of proposed Improvements to IFRSs published in May 2012.

Annual Improvements to IFRSs requiring further consideration

IAS 12 Income Taxes—Recognition of deferred tax assets for unrealised losses 

The Interpretations Committee considered the comments received on the proposed amendment to clarify the accounting for deferred tax assets for unrealised losses.

The Interpretations Committee recommends that IAS 12 is amended to clarify the accounting for deferred tax assets for unrealised losses.

The Interpretations Committee noted, however, that the comments received on the proposed amendment raised questions about two matters that require further analysis and decision:

  • whether an unrealised loss on a debt instrument measured at fair value gives rise to a deductible temporary difference when the holder expects to recover the carrying amount of the asset by holding it to maturity and collecting all the contractual cash flows; and
  • whether an entity can assume recovery of an asset for more than its carrying amount when estimating probable future taxable profits against which deductible temporary differences can be utilised (see paragraph 24 of IAS 12).

The Interpretations Committee recommends that these two issues are resolved. However, it was not clear at this stage whether resolving these two issues could be achieved within the constraints of the Annual Improvements process, or whether this work would need to be undertaken as a narrow-scope amendment to IAS 12. Before commencing work on these two matters, the Interpretations Committee decided to consult with the IASB on the most appropriate path forward.

The staff will bring the Interpretations Committee’s question to a future IASB meeting.