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IFRIC Rejections and Guidance- May 2007 - Reassessments on a business combination
- November 2006 - Are puts or forwards received by minority interests in a business combination contingent consideration?
- March 2006 - Transitory’ Common Control
- March 2006 - Whether a New Entity that pays Cash can be identified as the Acquirer
- February 2005 - Business Combinations
- April 2003 - Non-monetary exchanges of assets
- August 2002 - Exchanges of businesses or other non-monetary assets for an interest in a subsidiary, joint venture or associates
- August 2002 - Exchanges of businesses or other non-monetary assets for an interest in a subsidiary, joint venture or associates
- August 2002 - The seller’s contingent consideration
1. May 2007 - Reassessments on a business combination
Issue:
The IFRIC was asked to provide guidance on whether, and in what circumstances, a business combination triggers reassessment of the acquiree’s classification or designation of assets, liabilities, equity and relationships acquired in a business combination. Reassessment issues include, for instance, whether embedded derivatives should be separated from the host contract, the continuation or de-designation of hedge relationships and the classification of leases as operating or finance leases.
IFRIC Decision:
At its meeting in February 2007, the Board decided that the issue should be dealt with in Business Combinations phase II.
Given that decision, the IFRIC decided not to take this item on to its agenda.
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2. November 2006 - Are puts or forwards received by minority interests in a business combination contingent consideration?
Issue:
Whether a put or forward entered into by a parent entity, as part of a business combination, to acquire the shares held by the [non-controlling] minority interest was contingent or deferred consideration
IFRIC Decision:
The accounting for these arrangements, including the circumstances considered by the IFRIC, was being considered by the Board as part of the current redeliberations on the proposed revised IFRS 3 Business Combinations. The IFRIC expected that the revised IFRS 3 would assist in clarifying whether this type of arrangement includes a component of contingent consideration. The IFRIC therefore believed that it could not develop guidance more quickly than it was likely to be developed in the Business Combinations project and decided not to take a project on this issue onto its agenda.
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3. March 2006 - ‘Transitory’ Common Control
Issue:
Whether a reorganisation involving the formation of a new entity to facilitate the sale of part of an organisation is a business combination within the scope of IFRS 3.
IFRS 3 does not apply to business combinations in which all the combining entities or businesses are under common control both before and after the combination, unless that control is transitory. It was suggested to the IFRIC that, because control of the new entity is transitory, a combination involving that newly formed entity would be within the scope of IFRS 3.
IFRS 3.22 states that when an entity is formed to issue equity instruments to effect a business combination, one of the combining entities that existed before the combination must be identified as the acquirer on the basis of the evidence available.
IFRIC Decision:
The IFRIC noted that, to be consistent, the question of whether the entities or businesses are under common control applies to the combining entities that existed before the combination, excluding the newly formed entity. Accordingly, the IFRIC decided not to add this topic to its agenda.
Issue:
The IFRIC also considered a request for guidance on how to apply IFRS 3 to reorganisations in which control remains within the original group.
IFRIC Decision:
The IFRIC decided not to add this topic to the agenda, since it was unlikely that it would reach agreement in a reasonable period, in the light of existing diversity in practice and the explicit exclusion of common control transactions from the scope of IFRS 3.
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4. March 2006 - Whether a New Entity that pays Cash can be identified as the Acquirer
Issue:
Whether a new entity formed to effect a business combination in which it pays cash as consideration for the business acquired could be identified as the acquirer.
IFRS 3.22 states that when a new entity is formed to issue equity instruments to effect a business combination, one of the combining entities that existed before the combination shall be identified as the acquirer on the basis of the evidence available.
IFRIC Decision:
The IFRIC decided that, as it is clear that IFRS 3.22 does not prohibit a newly formed entity that pays cash to effect a business combination from being identified as the acquirer, it would not expect diversity in practice and would not take this item onto its agenda.
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5. February 2005 - Business Combinations
Issue:
The IFRIC discussed a potential agenda item regarding the accounting for the acquisition by the reporting entity of a third party interest in a subsidiary.
IFRIC Decision:
The IFRIC recognised that this is an urgent issue and that there is wide divergence in current practice, but that this issue is to be addressed in the Board’s Phase 2 project on Business Combinations. The IFRIC concluded that it would monitor the progress of the Board’s project, and reconsider whether to add the issue to the agenda later in 2005. No further decisions were made at this meeting regarding issues to be added to the agenda.
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6. April 2003 - Non-monetary exchanges of assets
Issue:
This issue concerns a transaction involving exchanges of non-monetary assets in which Company A exchanges its 13 per cent interest in Company B for a 13 per cent interest in Company C, where C’s only asset is its 100 per cent holding in B. As a result, A’s holding in B is held in a different legal form (ie via an intermediate holding company with no other activities), rather than held directly.
The issue is whether the exchange of A’s interest in B for the 13 per cent interest in C would result in derecognition of the investment in B with any gain or loss reported in profit or loss and recognition of a new investment in C.
IFRIC Decision:
The IFRIC agreed not to publish an Interpretation on this issue because the example is relatively narrow. However, the IFRIC agreed to consider including this example in its future guidance on Reporting Linked Transactions.
This issue is within the scope of a draft Interpretation considered by the IFRIC at the February 2003 meeting as part of the IFRIC project on Reporting Linked Transactions (though the draft Interpretation did not include a specific example on the topic).
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7. August 2002 - Exchanges of businesses or other non-monetary assets for an interest in a subsidiary, joint venture or associates
Issue:
Whether exchanges of businesses or other non-monetary assets for an interest in the assets of a subsidiary, joint venture or associate should be recognised in the consolidated financial statements at:
(a) fair value as at the acquisition date, therefore recognising a gain (or loss) on ‘sale’ in the consolidated financial statements; or
(b) the pre-combination carrying amount, therefore reversing the gain (or loss) out of the consolidated financial statements; or
(c) the pre-combination carrying amount to the extent of continued ownership interest in the business or non-monetary asset, therefore recognising a gain only for the minority interest portion in the consolidated financial statements
IFRIC Decision:
The IFRIC agreed that this item should not be added to the agenda and that this issue (specifically exchanges of businesses or other non-monetary assets for an interest in a subsidiary) should be dealt with in the Board’s Business Combinations (phase II) project.
At its January 2003 meeting the IASB considered the accounting for business combinations in which consideration in the form of a business or other non-monetary asset is transferred to an entity in exchange for equity instruments issued by that entity, which thereby becomes the first entity’s subsidiary. The Board decided that the business or non-monetary asset transferred by the acquirer should not be viewed as part of the net assets acquired. This is because the acquirer controls the business or non-monetary asset both before and after the business combination. Therefore, the full amount of any profit or loss arising on the transfer to the acquiree of the business or non-monetary asset should be eliminated in the consolidated financial statements.
The Board is not considering this issue as it relates to exchanges that result in joint venture or associates relationships, because it is outside of the scope of the Business Combinations project.
The IFRIC decided to reconsider this issue after the Business Combinations (phase II) project is complete.
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8. August 2002 - Exchanges of businesses or other non-monetary assets for an interest in a subsidiary, joint venture or associates
Issue:
The IFRIC considered addressing the issue of whether exchanges of businesses or other non-monetary assets for an interest in the assets of a subsidiary, joint venture or associate should be recognised in the consolidated financial statements at:
(a) fair value as at the acquisition date, therefore recognising a gain (or loss) on ‘sale’ in the consolidated financial statements; or
(b) the pre-combination carrying amount, therefore reversing the gain (or loss) out of the consolidated financial statements; or
(c) the pre-combination carrying amount to the extent of continued ownership interest in the business or non-monetary asset, therefore recognising a gain only for the minority interest portion in the consolidated financial statements.
IFRIC Decision:
The IFRIC agreed that this item should not be added to the agenda and that this issue (specifically exchanges of businesses or other non-monetary assets for an interest in a subsidiary) should be dealt with in the Board’s Business Combinations (phase II) project.
At its January 2003 meeting the IASB considered the accounting for business combinations in which consideration in the form of a business or other non-monetary asset is transferred to an entity in exchange for equity instruments issued by that entity, which thereby becomes the first entity’s subsidiary. The Board decided that the business or non-monetary asset transferred by the acquirer should not be viewed as part of the net assets acquired. This is because the acquirer controls the business or non-monetary asset both before and after the business combination. Therefore, the full amount of any profit or loss arising on the transfer to the acquiree of the business or non-monetary asset should be eliminated in the consolidated financial statements.
The Board is not considering this issue as it relates to exchanges that result in joint venture or associates relationships, because it is outside of the scope of the Business Combinations project.
The IFRIC decided to reconsider this issue after the Business Combinations (phase II) project is complete.
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9. August 2002 - The seller’s contingent consideration
Issue:
Whether IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IAS 39 Financial Instruments: Recognition and Measurement applies when accounting for contingent considerations received by the seller in a business combination.
IFRIC Decision:
The IFRIC agreed not to require publication of an Interpretation on this issue because:
(a) it is not pervasive in practice; and
(b) the Board is currently looking at contingent consideration from the purchaser’s perspective as part of its Business Combinations Phase II project.
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