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IFRS for SMEs

Meeting Summaries and Observer Notes


 IASB October 2008


 

At this meeting the Board discussed issues that had been deferred at previous meetings and made the following tentative decisions:

Consolidation - temporary control. In the light of the Board�s decision at its meeting in September 2008 to eliminate the �held for sale� classification, the Board considered whether there should be an exemption from consolidation for a subsidiary that was acquired with an intention to dispose of it in the near future. In effect, such an exemption exists under full IFRSs. The Board decided that a similar exemption from consolidation should be added for subsidiaries where on acquisition there is evidence that control is intended to be temporary (ie there is an intention to dispose of the subsidiary within twelve months and management is actively seeking a buyer). If the condition for exemption is met, the investor would need to provide specified disclosure.

Options as hedging instruments. Purchased options should not be permitted as hedging instruments under the hedge accounting provisions of Section 11. This decision would not prevent private entities from using purchased options to hedge risks or from disclosing the effect of doing so; it would only prohibit hedge accounting for those transactions

Operating leases. The staff presented a revised proposal to modify the application of the straight-line method by lessees for operating leases if minimum lease payments are structured to compensate the lessor for expected inflation. The Board supported the staff proposal but clarified that �expected inflation� means changes in general purchasing power based on published statistics, rather than a general estimate of the lessor�s future cost increases.

Classification of equity/liability. The Board decided to incorporate into the IFRS for Private Entities the amendment to IAS 32 Financial Instruments: Presentation issued in February 2008 on puttable instruments and obligations arising on liquidation. The Board rejected a staff proposal to reword the amendment.

Definition of government grant. The staff withdrew a recommendation that would have removed from the definition of a government grant the phrase �in return for past or future compliance with certain conditions relating to the operating activities of the entity�.

Remaining issues. The Board will discuss the remaining issues in November and December. Some of the main issues outstanding relate to restructuring the financial instruments section, possible replacement of the term �fair value�, concepts and pervasive principles, equity-settled share-based payments, defined benefit plans, income taxes, and impairment of goodwill. The staff will also ask the Board to revisit some of the tentative decisions made during its redeliberations, including the name of the standard, consolidation, amortisation of indefinite-life intangibles, and recognition of actuarial gains and losses.

Date: 10/15/2008