Welcome to the website of the IFRS Foundation and the IASB

Wednesday 19 June 2013

ProjectsWork plan for Interpretations (IFRICs)Current Projects

Work plan for Interpretations (IFRICs)

Current Projects

This shows all the active projects the IFRS Interpretations Committee is currently working on. Summaries, agenda papers and audio files from the May 2013 meeting are available to view and download below:

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

At its meeting in December 2012, the IASB tentatively decided that the accounting for deferred tax assets for unrealised losses on debt instruments should be clarified by a separate narrow-scope amendment to IAS 12.

This is because:

a. the issue of whether an entity can assume that it will recover an asset for more than its carrying amount when estimating probable future taxable profits should be addressed in a separate narrow-scope project; and

b. such a project, which goes beyond clarifications and corrections (that is, a project with a broader scope than annual improvements), also allows for discussing whether to amend IAS 12 to achieve an outcome for deferred tax accounting that would be consistent with the one that was recently discussed by the FASB for the same type of debt instruments.

Furthermore, the IASB noted that clarifying this issue requires addressing the question of 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 of the contractual cash flows.

At this meeting, the Interpretations Committee decided to recommend to the IASB that it should amend IAS 12 to clarify that deferred tax assets for unrealised losses on debt instruments are recognised, unless recovering the debt instrument by holding it until an unrealised loss reverses does not reduce future tax payments and instead only avoids higher tax losses. This involves:

a. 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 of the contractual cash flows; and

b. an entity can assume that it will recover an asset for more than its carrying amount when estimating probable future taxable profits.

In addition, the Interpretations Committee understood that its recommendation would not always achieve an outcome for deferred tax accounting that would be consistent with the one that was recently discussed and proposed by the FASB. It expects that this will be the case if recovering the debt instrument by holding it until an unrealised loss reverses does not reduce future tax payments and instead only avoids higher tax losses. The Interpretations Committee concluded that deferred tax assets should not be recognised in such a situation. This is because it is not clear what the economic benefit embodied in the deferred tax asset is, if recovering the debt instrument by holding it until an unrealised loss reverses does not reduce future tax payments and instead only avoids higher tax losses.

The Interpretations Committee noted that:

a. its recommended amendment to IAS 12; and

b. an amendment that achieves an outcome for deferred tax accounting that would be consistent with the
one that was recently discussed and proposed by the FASB

would be significantly different. The Interpretations Committee decided to consult with the IASB on the approach that is to be the basis for the amendment before discussing further details and drafting a proposed amendment.

Following consultation with the IASB, the staff will present an analysis discussing further details, a recommendation and a draft proposed amendment to IAS 12 in a future meeting.

Observer note: Agenda Paper 12 (May 2013)
Meeting audio: Agenda Paper 12 (May 2013)

IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets and IFRIC 12 Service Concession Arrangements—Variable payments for the separate acquisition of PPE and intangible assets

a. be included in the measurement of an asset and liability at the start of the concession; or
b. be accounted for as executory in nature (ie be recognised as expenses as they are incurred over the term of the concession arrangement).

Where concession fees are variable, the Interpretations Committee noted that the issue is linked to the broader issue of variable payments for the separate acquisition of PPE and intangible assets outside of a business combination. This broader issue was previously discussed, but not concluded on, by the Interpretations Committee in 2011.

At the January 2013 meeting, the Interpretations Committee tentatively decided to recommend to the IASB that it should amend IAS 16, IAS 38 and IAS 39 Financial Instruments: Recognition and Measurement, to require that the adjustments of the carrying amount of a financial liability, other than those adjustments for finance costs that are not eligible for capitalisation in accordance with IAS 23, are recognised as corresponding adjustments to the cost of the asset to the extent that IAS 16 or IAS 38 requires so. The Interpretations Committee also decided to proceed with their recommendation to propose amendments to IFRIC 12. Those proposed amendments were previously discussed during the March and May 2012
Interpretations Committee meetings and address the accounting for fixed and variable payments made by an operator to a grantor as part of a service concession arrangement.

At this meeting, the Interpretations Committee reviewed the proposed amendments to IAS 16, IAS 38 and IAS 39 and IFRIC 12. It decided to recommend to the IASB that it should amend IAS 16, IAS 38 and IAS 39 and IFRIC 12 as part of a narrow-scope project. The staff will prepare a paper to present at a future IASB meeting.

Observer note: Agenda Paper 4 (March 2013)
Meeting audio: Agenda Paper 4 (March 2013)

IAS 37 Provisions, Contingent Liabilities and Contingent Assets—Interpretation on Levies

In May 2012, the Interpretations Committee published a draft Interpretation on the accounting for levies imposed by governments other than income taxes. The comment period ended on 5 September 2012.

At the January 2013 meeting, the Interpretations Committee finished its redeliberations and asked the staff to prepare a final Levies Interpretation. The final Interpretation will address the accounting for a liability to pay a levy that is accounted for in accordance with IAS 37.

At this meeting, the Interpretations Committee concluded that it did not need to re-expose the Interpretation and agreed to publish the Levies Interpretation subject to minor drafting amendments. Interpretations Committee members will now be asked to ballot the Interpretation. One Committee member declared an intention to object to the publication of the Interpretation and one Committee member declared an intention to abstain. The Interpretation will be submitted to the IASB for ratification at a future IASB meeting.

Observer note: Agenda Paper 8 (March 2013)
Meeting audio: Agenda Paper 8 (March 2013)

IAS 1 Presentation of Financial Statements—Disclosures requirements about assessment of going concern

The Interpretations Committee received a request for clarification on the disclosure requirements about the assessment of going concern in IAS 1 Presentation of Financial Statements. This Standard requires that when management is aware of material uncertainties about the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. The submitter thinks that guidance about these disclosures is unclear and asked:

(a) when an entity should be required to disclose this information,
(b) what the objective of that disclosure is, and
(c) what disclosures should be required.

At the November 2012 meeting the Interpretations Committee requested that proposals for a narrow-scope amendment to IAS 1 should be prepared to provide further guidance on this topic.

At this meeting the Interpretations Committee was presented with proposed amendments to IAS 1 that:

(a) retain, substantially unchanged, the guidance relating to ‘going concern’ as a basis for the preparation of the financial statements,
(b) provide guidance on how to identify material uncertainties, and
(c) contain requirements about what to disclose about material uncertainties.

The Interpretations Committee discussed the proposed amendment and what level of detail should be included within the amendment. They agreed that the proposed amendment should be exposed with examples of both the types of conditions that indicate when material uncertainties arise and the types of disclosures that an entity should give, but that a question should be included in the Exposure Draft to ask respondents whether or not that level of detail was helpful.

At this meeting the Interpretations Committee also decided to propose that a question be included in the Exposure Draft about whether the proposed amendments should include an alignment of the going concern assessment time frame in IAS 1 with the time frame set out in many local auditing requirements.

The Interpretations Committee recommended these revised proposals be presented to the IASB for consideration.

Observer note: Agenda Paper 3 (January 2013)
Meeting audio: Agenda Paper 3 (January 2013)

IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets and IFRIC 12 Service Concession Arrangements—Variable payments for the separate acquisition of PPE and intangible assets

The Interpretations Committee received a request to address an issue that is related to contractual payments that are made by an operator under a service concession arrangement that is within the scope of IFRIC 12. Specifically, the submitter requested that the Interpretations Committee should clarify in what circumstances (if any) those payments should:

(a) be included in the measurement of an asset and liability at the start of the concession; or
(b) be accounted for as executory in nature (ie be recognised as expenses as they are incurred over the term of the concession arrangement).

The Interpretations Committee noted that the issue of variable concession fees is linked to the broader issue of variable payments for the separate acquisition of PPE and intangible assets outside of a business combination. This broader issue was previously discussed by the Interpretations Committee in 2011, but with no conclusion.

At the November 2012 meeting, the Interpretations Committee discussed the initial accounting for variable payments. The Interpretations Committee could not reach a consensus on whether the variable payments that are dependent on the purchaser’s future activity should be excluded from the initial measurement of the liability until that activity is performed. In all other cases (ie where the variable payments are not dependent on the purchaser’s future activity) the Interpretations Committee tentatively agreed that the fair value of those variable payments should be included in the initial measurement of the liability on the date of purchase of the asset.

The Interpretations Committee also discussed the subsequent accounting for variable payments. The Interpretations Committee tentatively agreed that adjustments to the liability other than finance costs should be recognised as a corresponding adjustment to the cost of the asset acquired in some specific circumstances.

At this meeting, the Interpretations Committee continued its discussions about the subsequent accounting for variable payments. The Interpretations Committee reviewed some examples that illustrate cases in which the cost of the asset would be adjusted. The Interpretations Committee tentatively decided to recommend to the IASB that it should amend IASs 16, 38 and 39, to require that the adjustment of the carrying amount of a financial liability resulting from the application of paragraph AG8 is recognised as a corresponding adjustment to the cost of the asset to the extent that IASs 16 or 38 requires so. As a result, the AG8 adjustment would be recognised as a corresponding adjustment to the cost of the asset purchased:

(a) entirely when the adjustment is a change of estimate of a liability initially recognised upon the acquisition of the asset; and
(b) to the extent that it relates to future economic benefits to be derived from the asset when the adjustment results from the initial recognition of a liability to make variable payments that was not previously recognised as a liability upon the acquisition of the asset .

The Interpretations Committee also decided to proceed with the proposed amendments to IFRIC 12 that were previously discussed during the March and May 2012 Interpretations Committee meetings.

The staff will prepare a paper to be presented at a future meeting that proposes amendments to IASs 16, 38 and 39 and IFRIC 12 as part of a narrow-scope project.

Observer note: Agenda Paper 2 (January 2013)
Meeting audio: Agenda Paper 2 (January 2013)

IAS 32 Financial Instruments: Presentation—Put options written on non-controlling interests

In May 2012 the Interpretations Committee published a draft interpretation on the accounting for put options written on non-controlling interests in the parent’s consolidated financial statements (NCI put). The comment period ended on 1 October 2012.

At this meeting, the Interpretations Committee was presented with a summary and an analysis of the comments received on the draft Interpretation. The Interpretations Committee agreed that, if the proposals in the draft Interpretation were finalised, the final Interpretation should apply:

(a) in the parent’s consolidated financial statements, to put options and forward contracts that obligate an entity in the group to purchase shares of a subsidiary that are held by a non-controlling-interest shareholder for cash or another financial asset (‘NCI puts and NCI forwards’); and
(b) retrospectively.

The Interpretations Committee also reaffirmed that the financial liability that is recognised for an NCI put must be remeasured in accordance with IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments, which require that changes in the measurement are recognised in profit or loss. The Interpretations Committee therefore acknowledged that the draft consensus published in May 2012 is the correct interpretation of existing Standards. The Interpretations Committee expressed the view that better information would be provided if NCI puts were measured on a net basis at fair value, consistently with derivatives that are within the scope of IAS 39 and IFRS 9.

The Interpretations Committee also noted that many respondents to the draft Interpretation think that either the Interpretations Committee or the IASB should address the accounting for NCI puts —or all derivatives written on an entity’s own equity—more comprehensively. Those respondents said that many aspects of the accounting for those contracts have resulted in diversity in practice. Moreover, some of the respondents believe that the requirements, which are to measure particular derivatives written on an entity’s own equity instruments on a gross basis at the present value of the redemption amount, do not result in useful information.

Consequently, before finalising the draft Interpretation, the Interpretations Committee decided to ask the IASB to reconsider the requirements in paragraph 23 of IAS 32 Financial Instruments: Presentation for put options and forward contracts written on an entity’s own equity. The Interpretations Committee noted that such work should consider whether NCI puts and NCI forwards should be accounted for differently from other derivatives written on an entity’s own equity.

The Interpretations Committee directed the staff to report its views as well as the feedback received in the comment letters to the IASB and ask the IASB how it would like to proceed.

Observer note: Agenda Paper 17 (January 2013)
Meeting audio: Agenda Paper 17 (January 2013)

IAS 37 Provisions, Contingent liabilities and Contingent Assets—Interpretation on levies

In May 2012, the Interpretations Committee published a draft Interpretation on the accounting for levies charged by public authorities on entities that participate in a specific market. The comment period ended on 5 September 2012.

At the November 2012 meeting, the Interpretations Committee was presented with a summary and an analysis of the comments received on the draft interpretation. The Interpretations Committee tentatively decided that the final Interpretation should:

(a) address the accounting for levies that are within the scope of IAS 37 and levies whose timing and amount is certain;

(b) not address the accounting for liabilities arising from emissions trading schemes; and

(c) confirm the guidance provided in the consensus of the draft Interpretation about the accounting for the liability to pay a levy.

At this meeting, the Interpretations Committee continued its discussions and tentatively decided that:

(a) levies should be defined as transfers of resources imposed by governments on entities in accordance with laws and/or regulations, other than:
(i) levies that are within the scope of other Standards (such as income taxes within the scope of IAS 12 Income Taxes); and
(ii) fines or other penalties imposed for breaches of the laws and/or regulations.

(b) the final Interpretation should address the accounting for the liability to pay a levy but should refer to other Standards to decide whether levy costs are recognised as assets or expenses;

(c) the final Interpretation should address the accounting for levies with minimum thresholds. The Interpretations Committee tentatively decided that the accounting for levies with minimum thresholds should be consistent with the principles established in the consensus of the draft Interpretation. In particular, according to paragraph 7 of the draft Interpretation, the obligating event is the activity that triggers the payment of the levy, as identified by the legislation. The Interpretations Committee tentatively concluded that for a levy that is triggered if a minimum activity threshold is achieved in the current period (such as a minimum amount of revenues, sales or outputs produced), the obligating event that gives rise to a liability to pay a levy is the achievement of the minimum activity threshold.

(d) the same recognition principles should be applied in the interim financial statements as are applied in the annual financial statements, as stated in IAS 34 Interim Financial Reporting.

Some Interpretations Committee members asked the IASB to consider a comprehensive review of the principles in IAS 34, in particular to confirm that the ‘discrete’ approach is preferable to the ‘integral’ approach and to consider the consistency of the guidance within the Standard.

Observer note: Agenda Paper 16 (January 2013)
Meeting audio: Agenda Paper 16 (January 2013)

IAS 1 Presentation of Financial Statements—Disclosures about going concern

The Interpretations Committee received a request for clarification on IAS 1 Presentation of Financial Statements. This Standard requires that when management are aware of material uncertainties about the entity’s ability to continue as a going concern, those uncertainties shall be disclosed. The Interpretations Committee tentatively decided to deal only with two questions about this disclosure—when to disclose and what to disclose about these uncertainties.

The Interpretations Committee tentatively decided that these two questions should be made should be addressed as a narrow-focus amendment to IAS 1.

The Interpretations Committee tentatively agreed that:

(a) the high threshold for preparing financial statements on a basis other than going concern is appropriate;
(b) a threshold for the disclosure of material uncertainties should be identified more clearly in the Standard;
(c) the Standard should include objectives for this disclosure; and
(d) the staff should prepare a proposal about what specific disclosures, if any, should be required.

It is anticipated that the staff proposals for the narrow-focus amendment will next be presented to the Interpretations Committee in Q1 of 2013.

Observer Note: Agenda Paper 12-12C (November 2012)

Meeting Audio: Meeting audio: Agenda Paper12-12C (November 2012)

IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets and IFRIC 12 Service Concession Arrangements—Variable payments for the separate acquisition of PPE and intangible assets

be included in the measurement of an asset and liability at the start of the concession; or
be accounted for as executory in nature (ie be recognised as expenses as they are incurred over the term of the concession arrangement).

The Interpretations Committee noted that the issue of variable concession fees is linked to the broader issue of variable payments for the separate acquisition of PPE and intangible assets outside of a business combination. This broader issue was previously discussed, but not concluded on, by the Interpretations Committee in 2011.

At this meeting, the Interpretations Committee was presented with a summary of:

the requirements in the current IFRSs regarding the accounting for variable payments for the separate purchase of an asset;
the requirements in IFRS 3 Business Combinations regarding the accounting for contingent consideration; and
the tentative decisions taken so far by the boards in the Leases project regarding the accounting for variable lease payments.

The Interpretations Committee discussed the initial accounting for variable payments. The Interpretations Committee could not reach a consensus on whether:

the fair value of all variable payments should be included in the initial measurement of the liability on the date of purchase of the asset; or
the variable payments that are dependent on the purchaser’s future activity should be excluded from the initial measurement of the liability until the activity is performed.

The Interpretations Committee also discussed the subsequent accounting for variable payments. The Interpretations Committee agreed that adjustments to the liability other than finance costs should be recognised as a corresponding adjustment to the cost of the asset acquired in some specific circumstances. The Interpretations Committee directed the staff to prepare a paper to be presented at a future meeting:

that would propose some examples that would illustrate cases in which the cost of the asset would be adjusted; and
that would discuss whether the initial accounting affects the subsequent accounting for variable payments.

Observer Note: Agenda Paper 2 (November 2012)

Meeting Audio: Agenda Paper 2 (November 2012)

IAS 19 Employee benefits—Employee benefit plans with a guaranteed return on contributions or notional contributions

At this meeting the Interpretations Committee was presented with staff proposals on the measurement of the plans that fall within the scope of its work.

Staff presented the two main issues that they have identified as important when measuring the employee plans that will fall within the scope of the project. These issues are:

what discount rate should be used to calculate the present value of the employee benefit; and
how to measure the “higher of option” in the employee benefit plans.

On the first issue there is a concern that the application of the requirements of IAS 19 may not faithfully represent the benefit obligation because IAS 19 requires the benefit to be projected forward at the expected rate of return on the “reference” assets or index and discount those projected cash flows to be discounted to a present value using the rate specified in IAS 19 (typically a high quality corporate bond rate). Some think that unless the benefit is defined by reference to the return on the same assets as that discount rate (such as high quality corporate bonds), the measurement of the benefit will not faithfully represent the risk of the assets that the benefit is based on.

The Interpretations Committee did not make a decision on this issue at the meeting and asked the staff to prepare examples illustrating how the proposed measurement approach would apply to different employee benefit plan designs. The staff will bring these examples for discussion to a future Interpretations Committee meeting.

The second issue the Interpretations Committee discussed was how to address the measurement of the so-called “higher of option”. The “higher of option” relates to when the employee is guaranteed the higher of two or more possible outcomes; for example, the employee may be guaranteed the higher of a fixed return of four per cent and the actual return on the contributions made by the employer. The main issue is that IAS 19 does not provide guidance on how to measure the value of the option when using the projected unit credit method.

The Interpretations Committee tentatively decided that the “higher of option” should be measured at its intrinsic value at the reporting date.

The Interpretations Committee also considered the accounting and presentation for the “higher of option” but did not make a decision on the issue. The Interpretations Committee will discuss this issue again at a future meeting.

Observer Note: Agenda Paper 3 (November 2012)
Observer Note: Agenda Paper 3A (November 2012)

Meeting Audio: Agenda Paper 3-3A (November 2012)

IAS 37 Provisions, Contingent liabilities and Contingent Assets —Interpretation on levies

In May 2012, the Interpretations Committee published a draft interpretation on the accounting for levies charged by public authorities on entities that participate in a specific market. The comment period ended on 5 September 2012.

At this meeting, the Interpretations Committee was presented with a summary and an analysis of the comments received on the draft interpretation. The Interpretations Committee tentatively decided that:

it should rediscuss the accounting for levies with minimum thresholds;
the final interpretation should address the accounting for levies that are within the scope of IAS 37 and levies whose timing and amount is certain;
the final interpretation should not address the accounting for liabilities arising from emissions trading schemes that are in the scope of the IASB’s project on emissions trading schemes;
the term ‘levy’ should be defined in the final interpretation;
the final interpretation should provide guidance on the accounting for the liability to pay a levy in annual and interim financial statements;
it should confirm the guidance provided in the consensus of the draft interpretation regarding the accounting for the liability to pay a levy;
further impact analysis of the final interpretation on the accounting for levies is not needed;
the final interpretation should not require additional disclosures specific to levies;
it should not propose to introduce specific requirements regarding levies in IAS 34; and
it should ask the IASB to consider the issues regarding the accounting for levies when developing the definition and recognition criteria for a liability in its project on the Conceptual Framework.

The staff will prepare a paper to be presented at a future meeting that:

provides an analysis of the different alternatives on the accounting for levies with minimum thresholds;
discusses whether the final interpretation should address the accounting for levies that are analysed as exchange transactions and whether it should refer to other IFRSs with regard to the accounting for the debit side of the liability;
proposes a definition for the term ‘levy’; and
proposes an updated version of the interpretation based on the Interpretations Committee’s tentative decisions.

The Interpretations Committee noted that a significant number of respondents to the draft interpretation think that the result of the accounting proposed does not provide a fair representation of the economic effects of levies when the liability and the corresponding expense are recognised at a point in time, notwithstanding the acknowledgement of those respondents that the proposed accounting in the draft interpretation is a technically correct interpretation of the requirements in IAS 37. Those respondents think that the substance of a recurring levy is that it is a charge associated with a specific period (and not a charge triggered on a specific date). The Interpretations Committee directed the staff to report those comments from interested parties to the IASB.

Observer Note: Agenda Paper 11 (November 2012)

Meeting Audio: Agenda Paper 11 (November 2012)