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Meeting Summaries and Observer Notes

 IFRIC July 2008


The IFRIC considered comments received on draft Interpretation D23, published for comment in January 2008. This meeting was the first redeliberation of D23.

Should the IFRIC continue this project?

Most respondents to D23 supported the IFRIC�s conclusion that it should develop an interpretation on this issue and agreed with the IFRIC�s proposals. However, some expressed serious general concerns and recommended that the IFRIC discontinue this project. In addition, some expressed concern about what they saw as the narrow scope of the project and suggested that it was not worth while for the IFRIC to develop an interpretation that would apply to only a limited number of transactions. The IFRIC decided to continue this project without changing its scope because:

  • the accounting for the distribution of non-cash assets to owners in their capacity as owners is diverse because no IFRS guidance exists, and
  • transactions in which the shares of group entities are distributed to shareholders outside the group do not meet the definition of common control transactions in IFRS 3 Business Combinations and would therefore be within the scope of the Interpretation. The IFRIC directed the staff to redraft the Interpretation to ensure that the scope is clear

Measurement of the dividend payable and recognition of a gain on settlement

The IFRIC reconsidered whether the Interpretation should specify that all dividends payable should be measured in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The IFRIC noted that many respondents were concerned that D23 might imply that the measurement attribute in IAS 37 should always be interpreted to be fair value. This was not the intention of D23 as that question is part of the Board�s project to amend IAS 37. Therefore, the IFRIC decided to modify the proposal in D23 to require the dividend payable to be measured by reference to the fair value of the assets to be distributed. The Interpretation would analyse the requirements of potentially relevant standards but would not link the conclusion to any individual standard.

Considering the comments received, the IFRIC decided not to adopt the alternative view set out in paragraph BC44 of D23 concerning the recognition of the gain on settlement directly in equity. However, the IFRIC directed the staff to provide in the final Basis for Conclusions further rationale for the conclusion that the settlement gain should be included in profit or loss.


The IFRIC did not identify any serious concerns about the disclosure requirements proposed in paragraphs 13�15 of D23 and decided to proceed with them.

Application of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

As a result of the comment letter analysis and its redeliberations, the IFRIC decided that:

  • IFRS 5 should be applied to assets held for distribution to owners. The IFRIC would recommend to the Board that IFRS 5 should be amended to make it applicable to such distributions.
  • IFRS 5 should be applied at the commitment date at which time the assets must be available for immediate distribution in their present condition and the distribution must be highly probable. For the distribution to be highly probable, it must meet the same conditions as for assets held for sale in paragraphs 8 and 9 of IFRS 5. The probability of shareholders' approval (if required in the jurisdiction) should be considered as part of the assessment of whether the distribution is highly probable.

The IFRIC recognised respondents� concerns about the potential �accounting mismatch� in equity resulting from measuring the assets to be distributed at carrying amount and measuring the dividend payable at fair value. Consequently, the IFRIC directed the staff to consider whether it should recommend that the Board amend IFRS 5 to require the assets to be distributed to be measured at fair value, and if so, when IFRS 5 should be applied. The staff were also asked to consider any potential implications or consequences of such a conclusion for other standards.

When to recognise the dividend payable

D23 does not address when an entity should recognise a liability for a dividend payable and some respondents asked the IFRIC to clarify this issue. The IFRIC decided that the liability to make the distribution should be recognised:

(a) when declaration of the dividend by management is approved by the shareholders, if the jurisdiction legally requires such approval and the declaration of the dividend is no longer at the discretion of the entity, or

(b) when the dividend is declared by management, if the jurisdiction does not legally require shareholders� approval and the declaration of the dividend is no longer at the discretion of the entity.


Date: 7/10/2008