At its meeting in May 2007 the IFRIC decided to take on to its agenda a project to develop guidance on how an entity should account for demergers and other in-specie distributions.
At this meeting, the IFRIC discussed the scope of the project. The IFRIC tentatively agreed that the project should:
- define in-specie distributions as unconditional non-reciprocal transfers of assets by an entity to its equity holders acting in their capacity as equity holders;
- address all non-cash distributions; and
- focus on the financial statements of the entity that makes the distribution.
In addition, the IFRIC had a preliminary discussion of how non-cash distributions should be accounted for by the entity that makes distributions.
The IFRIC asked the staff to develop a further paper, focusing on:
- how a distribution to equity holders and the corresponding obligation should be measured at the date the distribution is declared; and
- when an entity makes a distribution to its equity holders, how the assets distributed should be derecognised, based on existing IFRSs, and how any difference between the carrying amount of the obligation (ie dividend payable) and the carrying amounts of the assets distributed should be accounted for. Regarding the latter point, the IFRIC asked the staff to consider whether the difference meets the definitions of income and expense set out in the Framework.