Post-implementation Review of IFRS 3 Business Combinations
The IASB considered an updated version of the tentative questions to
be included in the Request for Information (RfI).
The IASB was also informed about the input received from the
Accounting Standards Advisory Forum (ASAF) on those tentative
questions, and noted that the ASAF members generally agreed with the
areas covered and with the tentative questions suggested.
The IASB plans to publish the RfI by the
end of January 2014.
The IASB received an update from the November 2013 meeting of the
IFRS Interpretations Committee. Details of this meeting were
published in the IFRIC Update,
which is available by clicking
Equity Method: Share of Other Net Assets Changes
(proposed amendment to IAS 28)
In November 2012 the IASB published an Exposure Draft of proposed
amendments to IAS 28. The IASB proposed in the ED that:
a. an investor should recognise, in the
investor’s equity, its share of the changes in the net assets of the
investee that are not recognised in profit or loss or OCI of the
investee, and that are not distributions received (‘other net asset
b. the investor should reclassify to
profit or loss the cumulative amount of equity that the investor had
previously recognised when the investor discontinues the use of the
At this meeting, the IASB continued
its discussions on this topic in the light of the comments received
on the ED. The IASB acknowledges that a number of respondents are
concerned that the proposals in the ED would cause a departure from
some aspects of current IFRS literature. The IASB considered four
different models as alternatives to the proposals in the ED. The IASB
observed that each model presented has challenges for the accounting
for the investor’s share of the investee’s other net asset changes.
The IASB noted that the proposed amendments are a short-term solution
to address diversity in practice until the IASB revisits the
principles of the equity method of accounting. Consequently, the IASB
tentatively decided to finalise the amendments on the basis of the
proposals in the ED, subject to reviewing a further analysis of the
application of those requirements to some specific fact patterns.
Eleven members agreed with this decision.
The IASB will consider an analysis of the application of the proposed
amendments to a selection of fact patterns at a future meeting.
Clarification of Acceptable Methods of Depreciation
and Amortisation (Proposed amendments to IAS 16 Property, Plant and
Equipment and IAS 38 Intangible
The IASB staff explained the due process steps undertaken by the IASB
in completing the narrow-scope amendments to IAS 16 and IAS 38 on the
Acceptable Methods of Depreciation and Amortisation’.
Agenda Paper 12B:
Narrow-scope amendment: IAS 16 and IAS 38
All IASB members agreed that:
a. the amendments to IAS 16 and IAS 38
should be finalised without re-exposure;
b. the effective date of the amendments
should be 1 July 2015 and earlier application should be permitted;
c. the due process requirements to date
have been complied with.
No IASB members indicated that they
intend to dissent to the publication of the final amendments to IAS
16 and IAS 38.
The IASB plans to publish the final amendments to IAS 16 and IAS 38
in Q1 2014.
Actuarial Assumptions: Discount Rate (Proposed
amendments to IAS 19)
The IASB received an update on the IFRS Interpretations Committee’s
discussions and decisions on the determination of the discount rate
for post-employment benefit obligations. In November 2013, the
Interpretations Committee finalised its decision not to add this
issue to its agenda and recommended that this issue should be
addressed in the IASB’s research project on discount rates.
The IASB noted that its research project on discount rates is not
likely to address the issue of determining the discount rate for
post-employment benefit obligations directly, but the results of that
project may be helpful in addressing that issue.
The IASB will discuss the scope of its research project on discount
rates in a future meeting. No further work is currently planned on
the issue of determining the discount rate for post-employment
Annual Improvements—IFRS 1 First-time Adoption of International Financial
Reporting Standards—Short term exemptions from IFRSs
The IASB discussed whether some of the short-term exemptions in
Appendix E of IFRS 1 First-time
Adoption of International Financial Reporting Standards
should be deleted, after those short-term exemptions have served
their intended purpose.
The IASB tentatively decided to propose the deletion of the
short-term exemptions in paragraphs E3-E7 of IFRS 1 with an effective
date of annual periods beginning on or after 1 July 2016. It also
tentatively decided to propose the deletion of the short-term
exemption relating to the amendment to IFRS 7 Financial Instruments:
Disclosures that was proposed in the Exposure Draft Annual Improvements
2012-2014 Cycle published in December 2013, but with an
effective date of annual periods beginning on or after 1 January
2018. The IASB decided to include these proposed amendments in the
Exposure Draft Annual
Improvements 2013-2015 Cycle.
All IASB members agreed with these decisions.
The IASB plans to publish the Exposure Draft Annual Improvements
2013–2015 Cycle for comment in the third quarter of 2014.
Financial Instruments: Impairment
The IASB met on 12 December 2013 to continue its redeliberations
on the clarifications and enhancements to the proposals in the
Exposure Draft Financial
Instruments: Expected Credit Losses (the Exposure Draft).
The IASB will decide at a future meeting whether to proceed to
finalise the Exposure Draft.
At this meeting, the IASB considered the following specific aspects
of the proposals in the Exposure Draft:
commitment and financial guarantee contracts; and
and effect analysis
Agenda Paper 5A: Loan commitments
and financial guarantee contracts
The IASB discussed whether the tentative decision that expected credit
losses for revolving credit facilities should be estimated for the
period over which an entity is exposed to credit risk and over which
future drawdowns cannot be avoided, should be extended to other loan
commitments and financial guarantees.
The IASB tentatively:
the proposals in the Exposure Draft that the maximum period over
which expected credit losses should be estimated for loan
commitments and financial guarantee contracts, other than
revolving credit facilities, is the contractual period over which
the entity is committed to provide credit;
that an entity should apply the same discount rate when
estimating expected credit losses on the drawn amount and the
undrawn balance, unless the effective interest rate cannot be
determined, in which case the discount rate should be determined
as proposed in the Exposure Draft; and
- decided that an entity should present the provision
for the expected credit losses on the undrawn balance together
with the loss allowance for expected credit losses on the drawn
amount if the entity cannot separately identify the expected
credit losses associated with the undrawn balance.
Sixteen IASB members agreed with
Agenda Paper 5B:
Transition and Effect Analysis
The IASB discussed the proposed transition requirements that an
entity should apply on initial application of the proposed expected
credit loss model. The IASB tentatively confirmed that:
requirements should be applied retrospectively in accordance
with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors;
order to assist entities to apply the proposals retrospectively,
entities may apply the low credit risk exception (as proposed in
paragraph C2(a) of the Exposure Draft) to identify financial
instruments for which the credit risks have not significantly
The IASB also tentatively decided to
clarify that an entity could approximate the credit risk on initial
recognition by considering the best available information that is
available without undue cost or effort. The best available
information is information that is:
available and does not require the entity to undertake an
exhaustive search for information; and
- relevant in determining or approximating the credit
risk at initial recognition.
The IASB tentatively confirmed that
if an entity is not able to determine or approximate the credit risk
on initial recognition, the entity should measure the loss allowance
based on the credit quality at each reporting date until that
financial instrument is derecognised.
Furthermore, the IASB tentatively decided that it would in drafting,
by the use of application guidance or by the use of examples,
entity would consider the significant increases in credit risk
on transition using the rebuttable presumption for contractual
payments that are more than 30 days past due, if the entity
identifies increases in credit risk according to days past due;
entity could assess whether there have been significant
increases in credit by comparing the credit risk at the date of
transition to the initial maximum credit risk that is accepted
for a particular portfolio (by product type and/or region).
Sixteen IASB members agreed with
Financial Instruments: Classification and Measurement
The IASB discussed the fair value option and tentatively decided to
confirm the proposal in its recent Exposure Draft to extend the
current fair value option in IFRS 9
Financial Instruments to financial assets that would
otherwise be mandatorily measured at fair value through other
comprehensive income. Thus an entity may measure these financial
assets at fair value through profit or loss if doing so would
eliminate or significantly reduce a measurement or recognition
inconsistency (sometimes referred to as an ‘accounting mismatch’).
That designation would be permitted only at initial recognition and
would be irrevocable.
Fifteen members agreed. One member was absent.
The IASB will consider the remaining aspects of its proposals at a
future meeting with the aim of issuing the limited amendments to IFRS
9 in the first half of 2014.
Fair Value Measurement: Unit of Account
The IASB discussed the application of the portfolio exception as set
out in IFRS 13 Fair
Value Measurement for portfolios that comprise only Level
1 financial instruments whose market risks are substantially the
The IASB tentatively decided that the measurement should be the one
resulting from multiplying the net position by the Level 1 prices.
The IASB also tentatively decided that the Exposure Draft that
clarifies the fair value measurement of quoted investments in
subsidiaries, joint ventures and associates should include a
non-authoritative example to illustrate the application of the
portfolio exception for a portfolio that comprises only Level 1
financial instruments whose market risks are substantially the same.
Fifteen members agreed. One member was absent.
Work plan—projected targets as at 17