IASB February 2008

The Board discussed

a summary of a preliminary analysis of comments received on the exposure draft of proposed improvements to IFRSs
the project plan for redeliberations.

The Board also discussed general comments received on the project, including the need to reconsider the scope of proposed amendments for inclusion, early adoption and transitional provisions, consequential amendments, and due process for future improvements projects. The Board will consider early adoption and transitional provisions standard by standard as it deliberates the specific amendments. The Board will consider the scope and due process for future improvements projects after the publication of the first set of finalised improvements.

Noting the large number of proposed amendments and comments received, the Board approved the project plan and a timetable for publication in May 2008. To keep to this timetable, the Board will exclude the following proposals from its current redeliberations:

Restructuring of IFRS 1
Statement of compliance with IFRSs (IAS 1)
Current/non-current classification of convertible instruments (IAS 1)
Classification of leases of land and buildings (IAS 17)
Contingent rent (IAS 17)
Definition of derivatives (IAS 39)
Treating loan prepayment penalties as closely related embedded derivatives (IAS 39)

The Board will issue the amended IFRS 1 as a single stand-alone standard, separately from the other improvements. Redeliberations of the other excluded proposals will be deferred until after the other proposed amendments are issued, either because a significant amount of staff work remains that cannot be completed in time or because the Board may consider treating them separately from the annual improvements project.

The Board reaffirmed 16 of the proposed amendments without redeliberation; all had either received broad support subject to minor changes or had attracted little or no comment. These proposed amendments are:

Dividends declared after the end of the reporting period (IAS 10)
Recoverable amount (IAS 16)
Cost of originating a loan (IAS 18)
Plan administration costs (IAS 19)
Guidance on contingent liabilities (IAS 19)
Consistency of terminology with other IFRSs (IAS 20)
Consistency of terminology with other IFRSs (IAS 29)
Earnings per share disclosure in interim financial reports (IAS 34)
Definition of a financial instrument classified as held for trading (IAS 39)
Reclassification into or out of the fair value through profit or loss category (IAS 39)
Designating and documenting hedges at the segment level (IAS 39)
Applicable effective interest rate on cessation of fair value hedge accounting (IAS 39)
Consistency of terminology with IAS 8 (IAS 40)
Investment property held under a lease (IAS 40)
Discount rate for fair value calculations (IAS 41)
Examples of agricultural produce and products (IAS 41)

The Board also redeliberated eight of the other proposals and tentatively decided to issue final amendments, subject to additional drafting changes, as summarised below. The Board will review the comment analysis for the remaining ten proposals at the March Board meeting.

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Plan to sell the controlling interest in a subsidiary

The Board tentatively decided:

to add a paragraph in the section ‘Presenting discontinued operations’ that would require the parent to disclose information for discontinued operations when the subsidiary to be disposed of meets the definition of a discontinued operation in accordance with IFRS 5;
to clarify in the amendment that the criteria for classification as held for sale in paragraphs 6─8 of IFRS 5 need to be met;
to align the effective date of the amendments to IFRS 5 with that of the January 2008 amendment to IAS 27.

IAS 16 Property, Plant and Equipment – Sale of assets held for rental

The Board tentatively decided to clarify that IFRS 5 does not apply when assets are transferred to inventories which are held for sale in the ordinary course of business.

IAS 19 Employee Benefits – Curtailments and negative past service cost

The Board tentatively decided to amend its proposals on the distinction between a curtailment and negative past service cost to clarify that a change in the extent to which benefit promises are affected by future salary increases is a curtailment. In addition, IAS 19 will be amended to clarify that a negative past service cost occurs when there is a reduction in the present value of the defined benefit obligation.

The Board also tentatively decided that the amendments will apply to changes to benefit promises made on or after the effective date of the final amendment.

IAS 19 Employee Benefits – Replacement of term ‘fall due’

The Board amended its proposals on the distinction between short-term and long-term benefits to clarify that the distinction is determined by whether the employee benefits are due to be settled within twelve months after the end of the period in which the employee renders the related service.

IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures – Required disclosures when investments in associates or interests in jointly controlled entities are accounted for at fair value through profit and loss

The Board tentatively decided to explain in the basis for conclusions the reason for limiting the disclosures to those in paragraph 37(f) of IAS 28 and paragraphs 55 and 56 of IAS 31, in addition to the disclosures required by IFRS 7 Financial Instruments: Disclosures and IAS 32 Financial Instruments: Presentation.

IAS 28 Investments in Associates – Impairment of investment in associate

The Board tentatively decided to explain in the basis for conclusions why, after applying the equity method, any additional impairment recorded by the investor with respect to its investment in an associate should not be allocated to any assets, including goodwill, that constitute the carrying amount of the investment. The Board also affirmed the proposal to require such an impairment loss to be subsequently reversed to the extent that the recoverable amount of the investment increases.

IAS 38 Intangible Assets – Advertising and promotional activities

The proposed amendment to IAS 38 would require an entity to recognise an expense in respect of advertising and promotional activities when it receives services or, in the case of a supply of goods, when it receives access to those goods. The Board tentatively decided:

to modify the proposed change to require that, in the case of a supply of goods, an entity should recognise an expense when it has the right to access those goods.
to add an explanatory paragraph to IAS 38 stating that when an expense should be recognised depends on the terms of the contract to supply the related goods or services:

- in the case of services, the entity recognises the expense as the services are performed in accordance with the terms of the contract.

- in the case of goods, a right to access is received when the goods have been completed by the supplier in accordance with the terms of the contract and have been made available to the entity.

to explain in the basis for conclusions that one reason why advertising and promotional material cannot be recognised as an asset is that it has no alternative use. Thus, stationery to be used for advertising may be recognised as an asset until such time as it is printed on, at which point it no longer has an alternative use.
to state that catalogues are a form of advertising.

IAS 40 Investment Property – Treatment of investment property under construction

Some respondents had observed that, if entities were unable to measure reliably the fair value of an item of investment property under construction, including it within the scope of IAS 40 might result in the investment property being required to be carried at cost even after construction was completed.

The Board tentatively decided that, in addition to including within the scope of IAS 40 investment property under construction, it would amend IAS 40 to state that, if an entity has a policy of measuring investment property at fair value and is unable to determine reliably the fair value of an item of investment property under construction then it may use cost as a proxy for fair value until such time as construction is complete. The change will be applied prospectively except to the extent that fair values have previously been determined for investment property under construction.

Location: London UK

Date: 20/02/2008