IFRIC Update: Processes, Progress and Plans

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IFRIC UpdateProcesses, Progress and Plans

• Provided to Deloitte/FSA Faculty Consortium
• Courtesy of Tricia OMalley, IFRIC Coordinator
  IASB

The views expressed in this presentation are
those of the presenter, not necessarily those of
the IASB or the IFRIC
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IFRIC members

• 14 voting members
• Appointed by the Trustees
• From Australia, France, Germany, Italy, Japan,
  New Zealand, South Africa, UK, and US

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IFRIC members
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Due Process Handbook

• Identification of issues
• Setting the agenda
• Meetings and voting
• Development of a draft interpretation
• Comment period and redeliberation

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Agenda setting

• No Agenda Committee
• All issues submitted discussed by IFRIC in public
  based on staff analysis
• Publish reasons for not adding issue to agenda

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Meetings and voting

• Public meetings approx 6 per year
• Consensus requires not more than 4 votes against
  draft Interpretation or Interpretation

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Communication

• Observer notes all IFRIC papers
• Webcasting live and archived
• IFRIC Update
• Decision summary published one week after meeting
  
• Website project summaries

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Requests for interpretation

• Financial instruments
• Revenue recognition
• Employee benefits
• Share based payments
• Business combinations and consolidation
• Income taxes
• Others

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Agenda criteria

• Widespread and practical relevance
• Significant divergence (existing or emerging)
• Improved financial reporting
• Efficient, cost-effective resolution
• Reach consensus on a timely basis
• No current IASB project will be completed before
  IFRIC could respond

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Possible solutions

• Explain via agenda decision reasons for not
  adding issue to IFRIC agenda
• Interpret
• Recommend change to standard
• Annual improvements project
• Include in a current IASB project

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Agenda decisions

• Tentative decision published in IFRIC Update,
  including reasons
• Open for comment for 30 days
• Final decisions and reasons published
• Cumulative list on website by standard
• For information
• Not an Interpretation, not authoritative

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Annual improvements

• For non-urgent, minor amendments
• Resolve inconsistencies between standards
• Clarify fuzzy wording
• Process
• Website notification, annual ED, 90 day exposure
• Benefits
• Improved use of IASB time
• Less burdensome for constituents

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Authority of Interpretations

• Final Interpretations must be approved by normal
  vote of IASB
• Interpretations are mandatory for financial
  statements prepared in accordance with IFRSs
• Agenda decisions have no authority

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2007 Interpretations

• IFRIC 13 Customer loyalty programmes
• IFRIC 14 Defined benefit assets and minimum
  funding requirements

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IFRIC 13Customer loyalty programmes

• Accounting by entities that grant loyalty award
  credits
• Such as points, travel miles, etc.
• Obligation to provide free or discounted goods
  and services (awards) to customers

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IFRIC 13 Consensus

• Allocate some of the consideration from the
  initial sale to awards
• By reference to amount for which awards could be
  sold separately
• Recognise as revenue only when they have
  fulfilled their obligations
• By supplying awards themselves
• Engaging (and paying) a third party

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Draft Interpretations

• D21 Real estate sales
• D22 Hedging a net investment
• Comment period closed October 2007
• Being redeliberated
• Final Interpretations expected June 2008

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D21 -- Real estate sales

• Real estate developments
• Agreement to sell before construction completed
• ISSUE Is sale agreement
• a construction contract (IAS 11)? or
• a sale of goods (IAS 18)?

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D22 Hedging a net investment

• ISSUES
• Which entity(s) can hedge a net investment?
• Where within the group can the hedging instrument
  be held?
• How to measure ineffectiveness

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Draft Interpretations/ED

• IFRS 2 and IFRIC 11 Group Cash-settled
  Share-based Payments
• D23 Non-cash Distributions to Owners
• D24 Customer Contributions
• Comment periods recently closed
• Preliminary comment letter analysis to IFRIC in
  May

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Other recent topics

• Agency arrangements (AIP 2008)
• IAS 39 exception for business combination
  contracts
• Capitalisable borrowing costs
• Several IAS 19 issues
• Deposits on returnable containers
• IFRS 5 disclosures (AIP 2008)

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Outputs Interpretations
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Outputs Draft interpretations
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Outputs Agenda rejections
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Reasons for not adding issues to the agenda
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Agenda Decisions
by IAS/IFRS
4 Other IFRS
8 Other IAS
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5
10
15
20
25
30
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IFRIC UpdateProcesses, Progress and Plans