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  • IAS 36 — Recoverable amount and carrying amount of a cash-generating unit
    of a CGU s VIU The submitter proposed an alternative approach Staff recommendation The staff disagreed with the submitter because they believed that the approach in paragraph 78 was intentional and was the consequence of applying IAS 36 s approach for assessing impairment The staff observed that when a CGU s fair value less costs of disposal FVLCD considered a recognised liability paragraph 78 required adjusting both the CGU s carrying amount and its VIU by the carrying amount of the liability in order to make those measures comparable with the FVLCD However when an entity used the VIU as its recoverable amount the entity did not need to make an adjustment to the CGU s carrying amount and to its VIU similar to the one required by paragraph 78 because the carrying amount of the CGU would already be comparable to the VIU of the CGU The staff further noted that the approach in paragraph 78 provided a relatively straightforward and cost effective method to perform a meaningful comparison of the measures involved in impairment testing The staff therefore recommended that the issue was not taken onto the Interpretations Committee s agenda and proposed wording for a tentative agenda decision The Interpretations Committee was asked whether they agreed with the conclusion of the staff and with the wording in the tentative agenda decision Interpretations Committee discussion and decision There was general agreement amongst the Committee members who spoke that the application of paragraph 78 was found to be difficult in practice and that differing views existed as to how it should be applied and what should be done to address the mismatch It was observed that although this was an issue that may not affect all industries for the industries it did affect i e the extractive industries where decommissioning liabilities are significant it was a significant issue The IASB Technical Manager noted that the feedback received from accounting firms on the outreach performed indicated that they had encountered diversity in practice regarding not only application of paragraph 78 but also other aspects of IAS 36 many of which were related to how and whether to include deferred taxes when applying the guidance in paragraph 78 The feedback also indicated that amending paragraph 78 would not resolve all issues and that the Interpretations Committee should refer the issue to the IASB who should carry out a broader review of IAS 36 Several Committee members agreed that this was something that should be dealt with by the IASB rather than the Interpretations Committee One Committee member observed that there were situations in practice where the liability determined in accordance with IAS 37 was deducted from the carrying value of the CGU and the recoverable amount was then determined by including the cash outflows in the estimate of cash flows which was then discounted by a different discount rate and noted that accordingly the impact of the mismatch could be significant The Committee member further noted that this issue also arose

    Original URL path: http://www.iasplus.com/en/meeting-notes/ifrs-ic/2015/november/ias-36 (2016-02-10)
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  • IAS 32 — Offsetting in respect of certain cash pooling arrangements
    Info IAS 32 Offsetting in respect of certain cash pooling arrangements Date recorded 11 Nov 2015 New item Offsetting in respect of certain cash pooling arrangements The IFRS Interpretations Committee has received a request to clarify whether certain cash pooling arrangements between subsidiaries in a group would meet the requirements for offsetting in IAS 32 The submitter described a notional pooling arrangement where the interest is calculated on the net balance of all the separate bank accounts and where there are regular transfers of balances into a single netting account not at the reporting date Such transfers would not be required under the contractual terms of the arrangements and the bank and the group would have the necessary legally enforceable right to set these balances off under IAS 32 at the reporting date The submitter asked whether the described transfers during the period demonstrate an intention to settle the period end balances on a net basis for the purpose of meeting the offsetting requirement in IAS 32 Staff recommendation The staff had reached out to several constituents and a number of respondents stated that it was unclear whether the described cash pooling arrangement was common There were mixed views regarding the predominant accounting treatment The staff analysed that the accounting depended on the individual facts and circumstances of each case and judgement would be required The staff also did not have evidence of diversity in practice particularly when differences in off setting practice might be attributable to differences in the facts and circumstances On that basis the staff recommends that the Committee should not take this issue onto its agenda Committee discussion and decision The Committee members broadly supported the staff recommendation to issue an agenda decision However several Committee members struggled with some of the wording in the proposed tentative agenda decision One member suggested referring to guidance in the Standard rather than judgement The Senior Technical Manager replied that there were cases where judgement was required Other members noted that the fact the amounts were unknown did not affect the intention to settle An entity could have an intention to settle unknown amounts One Committee member suggested clarifying whether it was expected that the amounts would subsequently change or if it was a mere possibility It was also proposed to clarify that this was a specific fact pattern and the decision would not apply to other financial instruments e g derivatives Related Topics Standards IAS 32 Financial Instruments Presentation Related news We comment on a number of tentative agenda decisions of the IFRS Interpretations Committee 19 Jan 2016 We comment on a number of tentative agenda decisions of the IFRS Interpretations Committee 30 Nov 2015 Accounting for sovereign debt restructurings under IPSAS 21 May 2015 IASB s Financial Instruments Guide 2015 available now 16 Apr 2015 Feedback on the EFRAG Discussion Paper on the classification of claims 31 Mar 2015 IASB s Financial Instruments Guide 2015 coming soon 19 Mar 2015 All Related Related Publications Deloitte comment letter

    Original URL path: http://www.iasplus.com/en/meeting-notes/ifrs-ic/2015/november/ias-32 (2016-02-10)
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  • Administrative session — Work in progress
    interests in associates and joint ventures including impairment in accordance with IFRS 9 IAS 28 or both Definition of a business Update on IASB s proposals IAS 2 Prepayments in long term supply contracts IAS 20 Recoverable cash payments IAS 12 Income tax consequences of interest payments on and issuing costs of financial instruments that are classified as equity IAS 36 Recoverable amount and carrying amount of a cash generating unit 2015 Agenda Consultation Response to the IASB s Request for Views IAS 32 Offsetting in respect of certain cash pooling arrangements IFRS 9 Determining hedge effectiveness for net investment hedges IFRIC 12 Combined service concession and lease arrangements Administrative session Work in progress Info Administrative session Work in progress Date recorded 11 Nov 2015 The purpose of this session was for the staff to update the Interpretations Committee on the current status of issues that are in progress but that were not to be discussed by the Committee at the November 2015 meeting Open issues The staff paper listed three open issues that are to be presented at a future meeting IAS 12 19 Recognition through profit or loss of deferred taxes for temporary differences arising from the effect of exchange rate changes on the tax basis of non current assets IAS 16 14 Accounting for proceeds and cost of testing PPE should net proceeds reduce cost of asset and IFRS 11 6 Remeasurement of previously held interests loss of control Issues on hold IAS 28 13 Assessment of significant influence fund manager acting as an agent and holding own investment in the fund New issues The staff are analysing three matters that are yet to be presented to the Interpretations Committee IAS 39 43 Derecognition of financial liabilities IFRS 9 4 Modification exchange of gains losses on financial

    Original URL path: http://www.iasplus.com/en/meeting-notes/ifrs-ic/2015/november/admin-session (2016-02-10)
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  • IFRS Interpretations Committee meetings (2015)
    testing of financial instruments that are in substance part of an entity s net investment in an associate or joint venture Tuesday 11 35 12 15 The Interpretations Committee finalised one agenda decision and considered five new issues For all of the new issues the recommendation was not to take the item onto the agenda 10 Nov 2015 11 Nov 2015 IFRS Interpretations Committee meeting 8 9 September 2015 The IFRS Interpretations Committee met at the IASB s offices in London on 8 9 September 2015 The Committee 1 continued discussion of issues arising on IAS 16 IAS 16 IAS 38 IFRIC 12 IAS 32 IFRS 5 and IFRS 11 2 discussed the agenda consultation and 3 considered new issues on IAS 39 and IFRS 9 08 Sep 2015 09 Sep 2015 IFRS Interpretations Committee meeting 14 July 2015 The IFRS Interpretations Committee met at the IASB s offices in London on 14 July 2015 The Committee 1 discussed comments received for IFRS 2 2 continued discussion of issues arising on IAS 2 IAS 38 IAS 23 and IFRS 11 3 considered finalising a tentative agenda decision on IFRIC 14 and 4 considered new issues on IAS 12 14 Jul 2015 14 Jul 2015 IFRS Interpretations Committee meeting 12 May 2015 The IFRS Interpretations Committee met at the IASB s offices in London on 12 May The Committee 1 continued discussion of issues arising on IAS 21 IAS 16 IFRS 5 IFRS 13 and IFRS 10 2 considered finalising a tentative agenda decision on IAS 24 and 3 considered new issues on IFRS 12 and IAS 23 12 May 2015 12 May 2015 IFRS Interpretations Committee meeting 24 March 2015 The IFRS Interpretations Committee will meet at the IASB s offices in London on 24 March The Committee will 1

    Original URL path: http://www.iasplus.com/en/meeting-types/ifrs-ic/2015 (2016-02-10)
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  • Leases
    already included in the contract or it was subsequently included in the reassessment process The staff recommended that a lease modification should be treated as a new lease only if the modification increases the scope of the lease by adding the right to use one or more underlying assets because the lessee does not have control of the underlying asset until the underlying asset is available for use Reassessment of the discount rate for floating interest rate leases The draft does not require to the discount rate to be updated when lease payments are revised due to changes in an index or a rate however IFRS 9 paragraph B5 4 5 requires that the effective interest rate should be remeasured when future cash flows are re estimated One of the concerns identified was that a finance lease and a loan both with floating rates would be accounting for differently Accordingly the staff recommended that a lessee should be required to update the discount rate when the lease payments changes due to changes in the interest rate Cost associated with returning an underlying asset at the end of a lease The draft lease standard does not include any specific requirements associated with a lessee s obligations to return the asset in a specified condition or to dismantle or remove the asset In contrast IAS 16 IAS 37 and IFRIC 1 deal with these issues The staff recommended that i the initial estimate of the costs to be incurred should be included in the initial measurement of the right of use assets and the liability should be accounted for under IAS 37 i e it should not be considered a lease liability and ii the liabilities within the scope of IFRIC 1 should be recognised by adjusting the right of use of the asset Short term leases and leases of low value assets in a business combination IFRS 3 requires an acquirer to recognise an intangible asset or a liability if the terms of an operating lease are favourable or unfavourable respectively relative to market terms However the draft lease standard an acquirer would not be required to recognise a lease if the lease term is for 12 months or less Accordingly the staff recommended that the in IFRS 3 for short term lease and leases of low value assets be removed Disclosure requirements for leases within the scope of IFRS 5 see Agenda Paper 3C IFRS 5 specifies that disclosure requirements in other IFRS do not apply to assets in scope of IFRS 5 unless those IFRSs contain specific requirements The staff recommended that the new lease standard should not require specific disclosures in respect of leases that are in scope of IFRS 5 beyond what was already required by IFRS 5 The main reason was that additional disclosures would not provide valuable information since assets in scope of IFRS 5 were already measured at the lower of their carrying amount and fair value less cost to sell IASB discussion and

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/october/leases (2016-02-10)
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  • Pollutant pricing mechanisms
    is helpful The discussion that followed dealt with a number of issues and the staff made use the examples in the agenda papers to illustrate key aspects of the schemes Economic drivers for the schemes The Project Lead highlighted that the main economic driver is reduced pollution Governments planned to reduce the cap on emissions over time The effect would be to make the cost of polluting more expensive because the reduced supply of allowances would lead to an increase in the unit cost of an allowance A related consequence would be that allowances held by an entity which should be able to be traded on a market become more valuable Accounting for the financial effects Board members were walked through the different components of the cap and trade schemes using the examples in the agenda paper These schemes were compared and contrasted with baseline and credit type schemes to highlight similarities and differences that would need to be considered in developing accounting requirements The staff used the definitions of assets and liabilities as proposed in the Conceptual Framework ED to analyse the examples in the agenda paper Some members questioned whether it would not be better to wait until the Conceptual Framework project had been completed so as not to require updates to any models proposed should these definitions change However the overall feeling of members was that the PPM project was one that was to be used to test the proposed definitions and therefore the project could and should run concurrently to the Conceptual Framework project Whether and when an entity has a present obligation a liability by participating in a scheme was discussed at length Board members were asked to consider whether the present obligation occurs when the participant becomes party to the scheme and has no practical ability to avoid emissions or because emission happens over time the obligation arises as this occurs or the obligation only exists once the participant has emitted more pollutants than its allocated allowances A few board members focused on the consideration of practical ability to avoid the obligation and others highlighted that existing IFRS standards and interpretations if consulted would provide contrasting views these include IFRS 2 IAS 19 IAS 12 and IFRIC 21 In response to these queries the staff once more emphasised the need to develop new principle based models that could apply in a number of scenarios The discussion then turned to the accounting treatment of the allowances granted to the participant Primarily whether these would constitute assets of the participant whether they can be recognised as such and what type of assets they are The staff noted that previous IASB projects had suggested that the allowances were similar to intangible assets If the allowances are assets initial recognition poses a number of questions Recognising them initially at cost would mean an asset of zero Recognising them initially at fair value requires consideration of whether the resulting credit is an immediate gain or a liability On the

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/october/pollutant-pricing-mechanisms (2016-02-10)
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  • Update on Impairment Transition Group
    credit facilities It related to how an entity should estimate future drawdowns on undrawn lines of credit when an entity has a history of allowing customers to exceed their contractually set credit limits on their overdrafts and other revolving credit facilities such as credit cards In particular it was discussed whether the potential exposure at default that is used to determine expected credit losses should include potential exposures beyond the contractual credit limit The staff had analysed that it would not be appropriate to extend the specific exception relating to the contractual commitment period to the contractual credit limit The ITG confirmed that IFRS 9 does not permit an entity to increase the amount of the exposure beyond the contractually committed amount Consequently amounts in excess of the maximum contractually agreed credit limits are not taken into account The staff is not proposing any further action and asked if the Board members had any views on the issue As anticipated the Board discussion focused on expected credit losses for revolving credit facilities The Board generally supported the view established by the ITG Diverging from this view would take behaviour into account which was not intended by the Board when drafting IFRS 9 even when this behaviour occurred between the balance sheet date and the date of authorisation for issue of the financial statements IAS 10 is clear on this point No decisions were made Related Topics Resources Transition Resource Group for Impairment of Financial Instruments Quick links Access to the agenda papers for the meeting on the IASB website Related news ITG discusses implementation of impairment requirements in IFRS 9 18 Dec 2015 Agenda posted for the December ITG meeting 04 Nov 2015 ITG discusses implementation of impairment requirements in IFRS 9 18 Sep 2015 Agenda posted for the September

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/october/itg (2016-02-10)
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  • Insurance contracts
    or OCI presentation election for equity investments The mirroring approach paper 2C Agenda paper summary The 2013 revised Insurance ED proposed a mirroring approach to the measurement and presentation of contracts that meet specified criteria In this session the staff asked the IASB to decide whether that approach should be retained in the proposed insurance contracts Standard The staff paper explains that although there was sympathy for the intention of removing mismatches the specific proposal was widely criticised It was viewed as being too complex and potentially inconsistent for some participating contracts The variable fee approach was developed in response to these concerns The staff recommendation was that the mirroring approach should not be permitted or required in the proposed insurance contracts Standard They note however that some mutual insurers might be concerned about that recommendation IASB discussion and decisions There was a unanimous agreement to abandon the mirroring approach for the reasons set out in the paper The discussion considered entities with potentially no equity including mutual entities and the possible presentation of financial statements available to them but the Board members felt this was outside the scope of the insurance project Presentation and disclosure paper 2D Agenda paper summary The paper summarised the impacts on disclosure of all the redeliberations and developments since publishing the 2013 revised Insurance ED In particular it considered the IASB decision to introduce the variable fee approach for contracts with direct participating features the modification of the presentation of interest expense in OCI and the impact of the publication of the revenue standard IFRS 15 IASB discussion and decisions There was a lively discussion on the various disclosure requirements their usefulness to users the comparability across and within entities and the difficulty of producing them The Staff clarified that an entity would need to keep track of and disclose the movement in the financial assets designated as related to insurance contracts at the date of transition when that entity had made the election for those insurance contracts to disaggregate between profit or loss and OCI their interest expense and it also used the simplified approach at transition setting to zero the accumulated balance of OCI for those insurance contracts The Board agreed to confirm the 2013 revised Insurance ED proposals for presentation of insurance contract line items in the financial statements The Board members considered the need to present separately insurance contracts measured using different methods Some felt that the measurement simply reflects different features of the contracts and therefore presenting them in one line would still give comparable information Others argued that the contracts profitability may unfold differently over time Overall the Board members felt that the reference to the IAS 1 requirement to present separately items of different nature or with different features should be emphasised more strongly There was a lively debate on the onerousness and the usefulness of the Staff proposed need to provide two CSM roll forward calculations with and without the guarantee for entities using the variable

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/october/insurance-contracts (2016-02-10)
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