Tentative Agenda Decision—Sale of output by a joint operator

 

The IFRS Interpretations Committee tentatively decided not to add this matter to its standard-setting agenda at its meeting in November 2018. The Committee will reconsider the following tentative agenda decision, including the reasons for not adding the matter to the standard-setting agenda, at a future meeting. The Committee encourages interested parties to submit their responses using the link below.

Tentative agenda decision

The Committee received a request about how a joint operator accounts for output arising from a joint operation (as defined in IFRS 11) when the output it receives in a reporting period is different from the output to which it is entitled. In the fact pattern described in the request, the joint operator has the right to receive a fixed proportion of the output arising from the joint operation and is obliged to pay for a fixed proportion of the production costs incurred. For operational reasons, the output received by the joint operator and transferred to its customers in a particular reporting period is different from the output to which it is entitled. That difference will be settled through future deliveries of output arising from the joint operation—it cannot be settled in cash. Applying IFRS 15 Revenue from Contracts with Customers, the joint operator recognises revenue as a principal for the transfer of all the output to its customers.

The request asks whether, in the fact pattern described, the joint operator recognises revenue to depict the transfer of output to its customers in the reporting period or, instead, to depict its entitlement to a fixed proportion of the output produced from the joint operation’s activities in that period.

In relation to a joint operator’s interest in a joint operation, paragraph 20(c) of IFRS 11 requires the joint operator to recognise revenue from the sale of its share of the output arising from the joint operation. Accordingly, the revenue recognised by a joint operator depicts the output it has received from the joint operation and sold, rather than for example the production of output. The joint operator accounts for the revenues relating to its interest in the joint operation applying the IFRS Standards applicable to the particular revenues (paragraph 21 of IFRS 11).

The Committee concluded that, in the fact pattern described in the request, the joint operator recognises revenue that depicts only the transfer of output to its customers in each reporting period, ie revenue recognised applying IFRS 15. This means, for example, the joint operator does not recognise revenue for the output to which it is entitled but has not received from the joint operation and sold.

The Committee concluded that the principles and requirements in existing IFRS Standards provide an adequate basis for a joint operator to determine its revenue from the sale of its share of output arising from a joint operation as described in the request. Consequently, the Committee [decided] not to add this matter to its standard-setting agenda.

 

Deadline for submitting comment letters: 6 February 2019

Login/register to submit a comment letter

All comment letters should be submitted via the online upload page. If you have any problems using this page, please contact us for help with the submittal process. Please refrain from sending comment letters to IASB or IFRS Foundation individuals. Board and staff members have access to all comment letters submitted via the online upload page. You must be an eIFRS Basic user to submit a comment letter and registration is free.

All comment letters will be on the public record and posted on our website unless the respondent requests confidentiality. Such requests will not normally be granted unless supported by a good reason, for example, commercial confidence.

 

Comment letters are public and all comment letters received on the due process document can be accessed below.

Please note that it can take up to 5 days until a comment letter appears on this page. If you have trouble finding a specific comment letter, please contact us.

Access individual comment letters in the table below or download all letters as zip file.

close

This website uses cookies. You can view which cookies are used by viewing the details in our privacy policy.