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  • TRG Snapshot — Joint meeting on revenue: July 2015
    to use the portfolio practical expedient the assessment need not be quantitative 2 an entity can consider evidence from similar contracts and 3 doing so is not equivalent to using the portfolio practical expedient In addition stakeholders have questioned whether a transaction price estimated under the expected value approach can be an amount that is not a possible outcome for an individual contract The staffs discussed this question in the context of an example but did not include a recommendation As described in TRG Agenda Paper 38 TRG members had the following two views View A The transaction price should be constrained to the highest amount that is both a possible outcome of the contract and a probable highly probable outcome i e the transaction price can only be one of the possible outcomes View B The transaction price is not automatically reduced by the constraint on variable consideration i e the transaction price may be an amount that is not one of the possible outcomes Supporters of View A noted that ASC 606 10 10 4 paragraph 4 of IFRS 15 specifies the accounting for an individual contract and that an entity therefore cannot recognize revenue for an amount that is not one of the potential outcomes of the individual contract Supporters of View B believe that 1 application of the constraint should not automatically negate the result of the estimation technique when the expected value approach permits a better prediction of the consideration to which the entity expects to be entitled and 2 if the expected value method permits a better prediction of the transaction price it is not necessary for the amount to be one of the potential outcomes See TRG Agenda Paper 38 for additional information Summary TRG members generally agreed with the staffs view that an entity is not necessarily applying the portfolio practical expedient when it considers evidence from other similar contracts to develop an estimate under the expected value method Further certain TRG members indicated a general preference for View B in the estimation of the transaction price under the expected value approach While some TRG members expressed concern that under View B in the example a recorded amount may not be a possible outcome others agreed that when an entity has a portfolio of contracts or contracts with a range of many possible outcomes it would be appropriate to use the expected value method A FASB Board member believed that rather than determining whether a transaction price estimated under the expected value approach can be an amount that is not a possible outcome for an individual contract the more appropriate issue is to identify when an entity should use the expected value method He asked the staffs to draft guidance including related considerations on that issue in the minutes to the July 2015 meeting The staffs agreed to summarize their views and will ask for the TRG s feedback on the the summary As a result depending on the TRG s input the issue may be discussed at the next TRG meeting Topic 4 Completed Contracts at Transition Background Under the modified retrospective transition method entities will apply the new revenue standard only to contracts that are not completed as of the date of initial application The new revenue standard states that a contract is considered completed if the entity has transferred all of the goods or services identified in accordance with current GAAP The FASB and IASB staffs explored the following issues identified by stakeholders which pertain primarily to U S GAAP although the staffs noted that similar issues could arise under IFRSs Issue 1 When a contract is considered completed for purposes of applying the transition guidance under the modified retrospective method Under the new revenue standard a performance obligation is satisfied when the entity has transferred control of the good or service promised that comprises the performance obligation to the customer Under current U S GAAP however completion occurs when the risks and rewards have passed to the customer The control principle is therefore new and it has led to questions about when a contract is complete for transition purposes For example there could be contracts under which all goods or services have been transferred as described under the new revenue standard but a portion of the contract revenue is deferred as of the transition date in accordance with current U S GAAP Issue 2 How to account for completed contracts after adoption of the new revenue standard Stakeholders have questioned whether contracts that are completed for transition purposes should continue to be accounted for under existing U S GAAP after adoption of the new standard if the accounting for the transaction has not been completed e g not all revenue has been recognized under current U S GAAP because collectibility is not reasonably assured or revenue is not fixed or determinable That is it is unclear whether entities should record the remaining portions of such contracts as revenue or through equity The staffs did not provide conclusions for either issue Rather they presented several examples and offered two views on each For additional details see TRG Agenda Paper 42 Summary TRG members generally agreed that in a manner consistent with the modified transition guidance in the new revenue standard entities should assess whether goods and services have been transferred in accordance with the current guidance on revenue recognition In addition TRG members generally agreed that such an assessment should be made regardless of whether the accounting for the contract has been completed i e regardless of whether the entity has received all cash under the contract or earned all revenue for cash that has been received TRG members did not agree on whether subsequent transition accounting for completed contracts should be performed under the current revenue guidance or the new revenue guidance TRG members in London supported the use of existing IFRSs and TRG members in the United States favored using the new revenue standard Specifically some U S TRG members indicated the following For completed contracts as of the transition date for which revenue has not yet been recognized any deferred revenue should be written off as part of the cumulative effect adjustment Further entities should record any future cash payments made after the transition date that would have been recognized as revenue under current GAAP as an adjustment to retained earnings rather than recognizing those payments in the income statement thereby avoiding the use of a mixed revenue recognition model after the adoption of the new revenue standard The TRG acknowledged that as a result of this process certain revenues and costs might never be recognized in the income statement but a TRG member mentioned that entities would most likely specify the transition impact under the disclosure requirements in ASC 606 Certain contracts should be excluded from the transition guidance in ASC 606 e g warranties or loyalty programs even though they are contemplated under the new standard if the entity has determined that such contracts were not revenue elements under ASC 605 Therefore as of the transition date the existing liability would remain on the entity s balance sheet until it is paid and any subsequent warranties issued or loyalty points earned would be accounted for under ASC 606 including performance obligations if applicable Because of the divergent views the staffs agreed to apply the TRG s feedback to some fact patterns After soliciting further views from the TRG the staffs will determine whether to discuss this topic at a future TRG meeting Topic 5 Application of the Series Provision and Allocation of Variable Consideration Background To simplify the application of its guidance the new revenue standard includes a provision akin to a practical expedient that allows an entity to identify as a performance obligation a promise to transfer a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer the series guidance Under ASC 606 10 25 15 paragraph 23 of IFRS 15 a series of distinct goods or services has the same pattern of transfer to the customer if 1 each distinct good or service would meet the criteria to be a performance obligation satisfied over time and 2 the same method for measuring progress toward satisfaction of the performance obligation would be applied to each distinct good or service Acknowledging that there is some overlap between the issues discussed in TRG Agenda Paper 39 and those addressed in TRG Agenda Papers 40 see Topic 6 below and 41 see Topic 7 below the FASB and IASB staffs noted in TRG Agenda Paper 39 that stakeholders have raised various implementation issues related to whether performance obligations in long term contracts meet the criteria to be accounted for under the series guidance Specifically the staffs considered the following three stakeholder questions In applying the series guidance how should entities determine whether distinct goods or services are substantially the same If a contract provides for a fixed price per unit of output but the quantity of outputs is undefined is the consideration variable Should variable consideration be allocated on the basis of the relative stand alone selling price of each performance obligation or distinct good or service In examining these issues the staffs provided the following examples all of which are presumed to meet the requirements for recognizing revenue over time Example A A buyer and seller enter into a 10 year information technology IT outsourcing contract under which the seller promises to deliver continuous IT services for the duration of the contract The IT seller performs various activities in providing IT outsourcing The price per service is fixed and deceases over the term of the contract However the quantity of services is not fixed Example B Under a 10 year transaction processor TP contract a TP seller promises to provide continuous access to its system for the duration of the contract The TP seller receives an up front fee at the inception of the contract a fixed fee per transaction and a percentage of total dollars processed as consideration However the quantity of transactions is not fixed Example C A provider of hotel management services enters into a 20 year contract to manage a customer s properties The service provider receives consideration based on 1 percent of monthly rental revenue reimbursement of labor costs incurred and an annual incentive fee of 8 percent of gross operating profit Example D A franchisor provides a franchisee with a license to use the franchisor s trade name and sell its products for the duration of the parties 10 year contract The franchisor receives a fixed fee and 5 percent of the franchisee s sales While TRG Agenda Paper 39 includes the staffs analysis and related conclusions for each of the examples above the staffs framework for analyzing the implementation issues is discussed below in relation to 1 steps 2 3 4 and 5 of the new revenue recognition model and 2 Example C discussed in the agenda paper as applicable Step 2 Identifying a Performance Obligation The staffs believed that an entity would need to determine 1 the nature of the services promised to the customer and 2 whether the promised services are distinct and substantially the same Stakeholders have questioned how broadly or narrowly to interpret substantially the same The staffs believed that in Example C the nature of the promised service is a single integrated management service comprising distinct activities e g management of hotel employees accounting services training and procurement They noted that while these activities could vary from day to day the nature of the service is providing an integrated management service Therefore the staffs believed that the integrated management service is a single performance obligation instead of more performance obligations for each underlying activity or different combinations of activities Step 3 Determining the Transaction Price The staffs noted that a contractual agreement to provide an unknown quantity of services throughout the contract term contains variable consideration i e total consideration is contingent on the quantity of services provided to the customer In Example C the annual incentive fee and monthly revenue rental fee constitute variable consideration since the amount is not fixed Further reimbursable labor hours are not fixed given the nature of the service and therefore represent variable consideration Step 4 Allocating the Transaction Price to the Performance Obligations The objective in step 4 is to allocate the transaction price to each distinct good or service in an amount that depicts the amount of consideration to which the entity expects to be entitled in transferring the good or service to the customer on the basis of the relative stand alone selling price of each distinct good or service However if the criteria in ASC 606 10 32 39 through 32 41 paragraphs 84 through 86 of IFRS 15 are met variable consideration is excluded from this allocation method Consequently the staffs believed that entities should use judgment in determining the appropriate allocation method for meeting the allocation objective With respect to Example C the staffs believed that allocating variable consideration to each month could meet the allocation objective because the amount corresponds to the value provided to the customer each month Similarly the staffs noted that the variable consideration related to the reimbursement of labor costs could be allocated to each day although it may be allocated on a monthly basis for practical reasons Further the staffs believed that the annual incentive fee could reflect the value delivered to the customer and therefore could be allocated to the annual period Step 5 Recognizing Revenue as the Entity Satisfies the Performance Obligation In analyzing Example C the staffs noted that the provider of hotel management services would recognize the monthly variable fee and reimbursement of labor costs as the monthly services are provided Further the entity would estimate subject to the constraint for variable consideration the annual incentive fee and recognize the fee over the annual period on the basis of the common measure of progress The staffs further noted that the revenue recognition pattern in each of the examples discussed does not represent multiple attribution recognition see Topic 7 for additional information but instead is the result of step 4 s allocation process See TRG Agenda Paper 39 for additional information Summary TRG members generally agreed with the staffs analysis and believed that day to day activities do not need to be identical to be substantially the same While noting that the types of service contracts discussed in TRG Agenda Paper 39 can be considerably more complex in practice they acknowledged that the staff paper and examples provide a framework for applying the guidance Some TRG members noted their belief that the franchise license example should be excluded from Topic 5 because the new revenue standard has specific implementation guidance on licenses In addition several TRG members expressed concern that the facts in the agenda paper s examples could raise questions about the accounting for optional purchases i e in the context of determining and allocating variable consideration under Topic 5 The staffs acknowledged TRG members concerns and noted that implementation issues related to optional purchases are expected to be discussed at the November 2015 TRG meeting Topic 6 Practical Expedient for Measuring Progress Toward Complete Satisfaction of a Performance Obligation Background If any of the criteria 10 for recognizing revenue over time are met entities need to determine the appropriate method for measuring progress toward satisfaction of the performance obligation Two types of methods are available 1 the output method which is based on the value of goods or services transferred to the customer and 2 the input method which is based on an entity s efforts or inputs in transferring goods or services to customers In applying the output method an entity may use a practical expedient that allows it to recognize revenue in the amount it has the right to invoice the invoice practical expedient However this option is available only if the invoice amount represents the amount that corresponds directly with the value to the customer of the entity s performance completed to date for example a service contract in which an entity bills a fixed amount for each hour of service provided 11 Stakeholders have asked whether the invoice practical expedient may be used for contracts in which the unit price or rate varies during the contract period In analyzing the question the FASB and IASB staffs discussed two examples 1 a modified version of the IT outsourcing contract considered in TRG Agenda Paper 39 in which the prices decrease over the contract period and 2 a six year contract in which an electric power company sells energy to a buyer at rates that increase every two years As described in TRG Agenda Paper 40 while the staffs reiterated that an entity must apply judgment and that conclusions are likely to vary depending on the facts and circumstances they believed that the invoice practical expedient could be used for both contract examples because the respective price and rate changes reflect the value to the customer of each incremental good or service that the entity transfers to the customer 12 For the energy contract the changing prices reflect the value to the customer because the rates are based on one or more market indicators and the changing prices in the IT outsourcing contract reflect the value to the customer which is corroborated through 1 the benchmarking market adjustment and 2 declining costs and level of effort of providing the tasks that correspond with the declining pricing of the activities Further implementation questions have been raised about the interplay between the new revenue standard s requirement to disclose certain information related to unsatisfied performance obligations 13 and when an entity may use the practical expedient that provides relief from this requirement if certain conditions are met the disclosure practical expedient 14 Specifically stakeholders have questioned whether

    Original URL path: http://www.iasplus.com/en/publications/us/trg-snapshot/revenue-july-2015 (2016-02-10)
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  • Disclosure initiative
    would also change the way the IASB discussed disclosures including the timing of such discussions within the context of a project He agreed with some earlier comments with respect to the need to retain some structure highlighting the fact that preparers liked structure so they knew what information to gather from business units etc He further noted that good preparers knew what information their analysts and other users would be likely to ask for and preferred to give it once in the annual report Another IASB member highlighted two negative experiences that the IASB should remember when looking at how to move forward on this The first was with encouraged but not required disclosures which had resulted in virtually no disclosures in response and stressed the importance of the IASB making it clear that what was being proposed were disclosure requirements not encouraged disclosures The second was the overarching requirement in IAS 1 to disclose significant estimates and judgements noting that this had only been used in extremes rather than considered regularly largely because of its placement in the literature She noted she believed that the IASB needed to provide more of their workings in the actual standard so people had the underlying thinking to judge against Like others she also acknowledged that the IASB needed to figure out how to get the right balance between a principles based and a structured approach and that she preferred the idea of field testing being performed on one standard and an assessment made based on the practice that had developed before the approach was applied to all standards Referring to earlier comments made by several IASB members the Vice Chairman agreed that large multinationals could well have different problems from smaller companies in applying this type of approach and highlighted the need to ensure that there was a broad range of companies included in the field testing so that different situations could be taken into account Another IASB member noted that he believed the definition of materiality should be entirely focused on the omission of material information and expressed concern with respect to the direction the practice bulletin on materiality was going whereby if an entity provided information that could be considered immaterial it could be asserted that the inclusion of said information clouded the signals and was actually misleading He noted that investors could choose to ignore information and that overload of information should not be considered a violation of the materiality principle All thirteen IASB members present agreed to field test the proposed approach prior to publication of the Discussion Paper Agenda Paper 11E Principles of Disclosure Content of the notes The Visiting Fellow introduced the Agenda Paper and said that the paper addressed the contents of a general disclosure Standard to replace IAS 1 as well as the objectives of such a Standard The first staff recommendation was to reconfirm the current role of the notes which was to explain the information stated in the primary financial statements and to supplement the primary financial statements with additional information not depicted in the statements but necessary to meet the objective of financial statements One Board member said that the role was described too briefly in the agenda paper She would like to see some examples as to what explain and supplement meant One Board member asked whether there would be a different threshold of recognition between the primary financial statements and the notes The Visiting Fellow confirmed that He said that liabilities not recognised in the balance sheet could still have to be disclosed The Visiting Fellow continued with the objective of the notes The staff recommended that a general disclosure Standard should have a set of objectives The staff had developed two different approaches to objectives The first approach was to develop a central set of disclosure objectives based on types of useful information The second approach was to reflect how information in financial statements was commonly analysed and to reflect the disclosures that were mainly relevant for an assessment of management s stewardship One Board member expressed concern about existing detailed disclosure requirements in the Standards that would not link in with the objectives set in the general disclosure Standard The Visiting Fellow said that staff had considered this issue but constituents expressed the wish for a more fundamental approach to disclosures She said that the fact that the objectives would be a Standard instead of a Framework could add to the issue The Vice Chairman said that to him the first approach was principles based whilst the second approach was more structured However he said that the structure proposed in the agenda paper i e operating investing financing would go too far for an objective The Chairman disagreed with the statement that the first approach was principles based A Board member said that to him the approaches were not mutually exclusive One Board member said that the table in the agenda paper presenting types of useful information in financial statements for the first approach was missing key events and transactions that had a significant impact on the financial statements A Board member said that he supported the second approach He conceded that the current approach i e standard oriented disclosures was convenient for the standard setter however it was not useful to users or preparers of financial statements He preferred an objective based approach which he conceded would be difficult to achieve A fellow Board member disagreed and said that the second approach was too ambitious He said that the Framework IAS 1 and IAS 8 for example provided general principles for comparability with some transition relief as an exception to comparability He said that this would be the same with a disclosure Standard One Board member suggested including both alternatives in the Discussion Paper however they should be more clearly distinguished She expressed concern that the table presented in the agenda paper for the first approach started with results and then developed the objectives from those

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/april/disclosure-initiative (2016-02-10)
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  • Financial instruments with characteristics of equity
    required settlement The type and amount of economic resources required were secondary features Assessment B was an assessment of the extent to which an entity had sufficient economic resources to satisfy the total claims against the entity at a point in time The primary feature of this assessment was the amount of resources required The timing of required settlement was irrelevant The assessment distinguished between claims that were independent of the availability of the entity s actual resources and those that were not The classification was different depending on which assessment should be satisfied One Board member found the approach interesting and suggested to continue on this basis however he warned that it should not be forgotten what the reason behind this analysis was Another Board member said that the probability of events occurring needed to be taken into account This could in turn put emphasis on different relevant features The Technical Manager agreed and said that for example the probability of whether an instrument is settled in cash or in shares was relevant Several Board members touched on shares redeemable at fair value One Board member asked what would happen if the share price went up solely on the basis of internally generated goodwill In this case there would not be enough liquidity for redemption He agreed with the staff s conclusion that this would be equity under assessment B as it should not be remeasured If it were classified as a liability the remeasurement would increase the liability without a corresponding increase in assets This could however be addressed by recognition of the remeasurement in OCI One Board member referred to the analysis of cumulative preference shares under assessment B which resulted in a classification as liabilities She agreed that it was technically an obligation However this assessment would change if economic compulsion was taken into account As long as the entity did not go into liquidation there was no obligation to pay for those instruments The Technical Manager replied that not just one assessment should be selected He said that regardless of the classification information needed to be presented A Board member agreed with the staff conclusion that under assessment B claims that specified an amount independent of the availability of the entity s resources should be liabilities She said that the question was whether instruments needed to be remeasured or not The ensuing question was where the remeasurement should go e g P L OCI etc One Board member asked which assessment was more important The Technical Manager replied that it depended on the circumstances The Technical Manager went on to the assessments made on the financial performance Assessment X was an assessment of the components of changes in economic resources other than changes that resulted from issuing claims or distribution from settling claims Assessment Y was a comparison of the returns on the entity s economic resources to the promised returns of the entity s claims One Board member agreed that shares redeemable at fair

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/july/fi-equity (2016-02-10)
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  • IFRS Interpretations Committee meeting — 8-9 September 2015
    Login Name Password Login Register Forgot password Welcome My account Logout IAS Plus Global English Global English Global Deutsch Canada English Canada Français United Kingdom English United States English Toggle navigation Search site Toggle navigation Home News Publications Meetings Standards Projects Jurisdictions Resources My IAS Plus Topics Communications Toggle navigation Search site Info Site map Jurisdictions Africa Americas Asia Europe Oceania News 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Projects Major projects Narrow scope amendments Research projects Post implementation reviews Agenda consultations Completed projects Items not added to the agenda IFRIC Resources IFRS Foundation and the IASB Use and adoption of IFRS Global organisations Regional organisations Topics in financial reporting Research and education Sustainability and integrated reporting Standards International Financial Reporting Standards International Accounting Standards IFRIC Interpretations SIC Interpretations Other pronouncements Meeting notes Important IASB Dates IASB IFRS Foundation Trustees IFRS Interpretations Committee 2015 IFRS Interpretations Committee meeting 8 9 September 2015 IFRS Advisory Council Accounting Standards Advisory Forum ASAF Contact us About Legal Privacy FAQs Material on this website is 2015 Deloitte Global Services Limited or a member firm of Deloitte Touche Tohmatsu Limited or one of their related

    Original URL path: http://www.iasplus.com/en/meeting-notes/ifrs-ic/2015/september/sitemap (2016-02-10)
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  • IAS 16 — Property, plant and equipment
    that it would not be necessary to change the scope of IFRIC 20 He also mentioned that the staff considered whether the scope paragraph of IFRIC 20 should be expanded to accommodate application to both deep mines and to the development phase of a mine but the staff considered that this was not necessary because paragraph 11 a of IAS 8 required management to refer the requirements in IFRSs dealing with similar and related issues when there was not specific guidance for a particular transaction or circumstance He then opened the discussion to the Committee There was general concern expressed by the Committee members about changing existing practices in the extractive industries Some members indicated that IFRIC 20 was scoped particularly to include only surface mining and more discussion would be needed in order to change the interpretation Some Committee members indicated that the issue was broader than extractive industries and that IAS 16 was not clear enough for this particular issue and that the scope should be expanded because the relevant issue was cost attribution On the other hand other Committee members expressed concern that the staff paper was not answering the specific question raised by the constituent and would prefer that the Committee would first try to answer the question rather than expanding the project The Implementations Director said that the focus should be in clarifying IAS 16 paragraph 17 e although it was difficult to clarify the topic without expanding it He said that in order to analyse the cost attribution issue it would require to expand the project Some Committee members pointed out that there was diversity in practice and there were several issues surrounding this topic One Board member suggested dividing the project in two tiers the first step would be to answer the specific question and the second step to broaden the project The Chairman suggested the following alternatives Conclude that focusing only on IAS 16 paragraph 17 e would not be feasible i e drop from the agenda the proposal was approved by only 5 Committee members Request the staff to analyse the topic again on a broader basis including an analysis of what should be included in cost and cost attribution the proposal was approved by only 5 Committee members To take one more pass through the analysis on defining testing and discuss it at the next meeting The proposal was approved by the majority of the Committee members The Chairman then clarified that if this option would not work the committee would discuss option A again The chairman then asked for direction to be given to the staff Some members suggested to focus also on paragraph 20 and 21 of IAS 16 including how functioning properly relates to operating as intended by management avoid focusing too much on volume explore further the cost attribution issue and the impact on the depreciation of the asset and clarify the need of judgement The Chairman also asked whether the remaining issues of the paper

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  • IAS 16 — Property, Plant and Equipment, IAS 38 — Intangible Assets and IFRIC 12 — Service Concession Arrangements
    with the proposed leases analogy as the leases discussions were much broader The main objective of the leases project was to bring leases on the balance sheet and she expressed strong concerns about using the rationales developed as a starting point for all assets She also warned about potential knock on effects on other topics like hedge accounting In addition it would be difficult to scope the project Another observing IASB member expressed support for the proposed inclusion of subsequent adjustment of variable payments in the cost of the asset as the cost definition was met in his view Several Committee members agreed with the proposal but expressed a desire for a conceptual basis Many were unhappy with the leases analogy as leases were a special case One Committee member mentioned that the accounting requirements for leases scoped out all other kinds of transactions Others expressed concern about the message sent to constituents when postponing a project to wait for the outcome of the leases project and then stating afterwards that leases were unrelated to the project One Committee member said that the project should be put on hold until the final leases document would be published The Chairman replied that the leases document was in pre ballot stage and that it was unlikely that there would be major changes during the ballot process A Committee member suggested focusing on the submission which only concerned service concessions Some Committee members requested to link the accounting for the liability to the proposed Conceptual Framework where one feature of a liability was no practical ability to avoid the obligation One Committee member said that the rationale applied in IFRIC 1 should also be applied here A fellow Committee member highlighted the fact that the accounting treatment would be different if the asset was part of a business acquired A Committee member added that constituents had proposed analogising IFRS 3 However the IFRS 3 rationale for not including subsequent changes in the acquisition price was that pre combination and post combination parts of subsequent changes could usually not be distinguished This would not be the case with a single asset Some Committee members suggested focusing on the question of what the variable payments were for One Committee member said that they might be variable but that did not mean automatically that they were uncertain An observing IASB member indicated that these payments could be a form of financing A Committee member suggested differing between payments that were financing and payments that were dependent on external events One Committee member said that it should be considered that the vendor could have an asset depending on revenue recognition requirements The Chairman proposed that the staff should bring back a paper in which they present an analysis of why the Interpretations Committee should consider the implications of using the leases rationale for this issue Agenda Paper 6B Payments made by an operator to a grantor The Senior Technical Manager introduced the agenda paper and said that

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  • IFRS 11 — Joint arrangements
    could change the rights and obligations to the parties The Chairman concluded that there was general support for the staff recommendation and the staff would consider the concerns discussed in the meeting Agenda paper 5A IFRS 11 Joint Arrangements Remeasurement of previously held interests Acquisition of control over a joint operation The project manager introduced the agenda paper He explained that in developing the proposal the staff applied the principles outlined in agenda paper 5 He said that the transaction obtaining control of a joint operation either from having joint control in or being a party to a joint operation prior to the transaction hereafter referred to as the acquisition of control over a joint operation represented a significant economic event and the fair value measurement model of IFRS 3 should be applied and previously held interests should be remeasured to fair value on the date control is acquired He then said that the structure of the entity whether or not it was a legal entity should not lead to a different accounting treatment and finally that the staff proposed to amend IFRS 3 to clarify this issue He then opened the discussion to the Committee There was general support for the staff recommendation One Committee member suggested not defining what equity interest meant One Committee requested clarification as to the meaning of prospective application The Project manager indicated that it would be applicable to transactions entered into after the effective date Another Committee member asked to consider whether having interest in an entity for example debt interest rather than equity interest would have any implication Another Committee member asked the staff to analyse paragraph 42 of IFRS 3 because that paragraph mentioned remeasurement though P L and OCI The Chairman concluded that there was general support for the staff recommendation Agenda paper 5B Remeasurement of previously held interests Loss of control transaction The Project manager introduced the agenda paper He said that in applying the principles identified in agenda paper 5 the staff concluded that the transaction was a significant economic event the staff also concluded that the structure of the entity did not matter and in their view retained interests should be remeasured with the resulting gain or loss being recognised in profit or loss in loss of control transactions involving a business However the staff acknowledged that the wording in paragraph 25 of IFRS 10 could provide a technical basis for reaching different conclusions depending on whether or not the business was structured through a separate legal entity The staff concluded that given potential conflicts that were identified by the Board between IFRS 10 and IAS 28 the Committee should deferred discussions until a final decision was made by the IASB He then opened the discussion to the Committee There was some concern raised by the Committee members about not taking this project further The Implementations Director suggested presenting the conclusion to the Board and then asking the Board for advice as to how the Committee should

    Original URL path: http://www.iasplus.com/en/meeting-notes/ifrs-ic/2015/september/ifrs-11-1 (2016-02-10)
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  • IFRS 5 — Non-current assets held for sale and discontinued operations
    the staff were in View 1 Adjustments that were in line with View 2 would be permitted to be disclosed in the notes However the staff felt it would be an improvement if the Standard was amended to permit presentation of those adjustments on the face of the income statement A Committee member said that he would agree from an analyst perspective He also agreed that information was more relevant but he was uncertain about it being more comparable as stated in the agenda paper The Visiting Fellow said that it would be more comparable across reporting periods Another Committee member disagreed with View 1 He expressed a preference for View 3 as this would be in line with IFRS 8 presentation of intersegment transactions Several Committee member disagreed with that and expressed a preference for View 1 One Committee member said that he saw the need for disclosures An observing IASB member said that she leaned towards View 2 but she was concerned about requiring as if disclosures Her concern was about situations where it was not yet decided whether the entity would purchase output from its former operation or from an external party She said it would be interesting to see what happened if the entity changed to purchasing from an external party One committee member said that this would be difficult as financial statements should reflect what had actually occurred The Chairman concluded that there was an agreement amongst Committee members that IFRS 5 did not have any guidance that overruled IFRS 10 Also none of the Committee members supported View 2 He asked the Committee if in that case they would still like to forward the issue to the Board since View 2 was the only view that would require an amendment of IFRS 5 The Visiting Fellow said that the IASB could still require disclosures in line with View 2 The Chairman replied that this would be a pro forma disclosure The discussion however had revealed that the Committee did not want a pro forma disclosure One Committee member said he saw it rather as continuing involvement than pro forma One Committee member suggested issuing an agenda decision pointing out that IFRS 10 required elimination of intragroup transactions and IFRS 5 required disclosures that enabled users of financial statements to evaluate the financial effects of discontinued operations No decision was taken Agenda Paper 3C Disclosure relating to non current assets or disposal group within the scope of IFRS 5 The Visiting Fellow noted that IFRS 5 stated that disclosures in other IFRSs did not apply to assets held for sale or disposal groups unless they were explicitly required by those Standards IFRS 12 clarified that the summarised financial information for subsidiaries joint ventures and associates was not required for assets held for sale The submitter had asked whether the exemption would apply to this section of IFRS 12 only or whether it would apply to all of IFRS 12 The staff concluded that all of

    Original URL path: http://www.iasplus.com/en/meeting-notes/ifrs-ic/2015/may/ifrs-5 (2016-02-10)
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