IFRIC March 2007

The IFRIC continued its discussions about the treatment of advertising and promotional costs in accordance with IAS 38. The staff presented draft wording to amend paragraph 70 of IAS 38 to permit payments made in respect of future training or advertising and promotional activities to be recognised as an expense when those activities first take place rather than as expenditure is incurred.

The staff also presented consequential amendments to SIC-32 Intangible Assets—Web Site Costs which would change that Interpretation to require that the costs of advertising to be displayed on a Website should be recognised as an expense when the content is first displayed.

Some IFRIC members expressed concerns that the changes lacked a conceptual basis and would merely modify an arbitrary rule that was already inconsistent with the general principles of IAS 38.

However, the majority of the IFRIC members responded that, between the time that an entity received goods or services and the time at which it first used them, it had an asset in the right to use those goods or services.

The majority of the IFRIC members therefore agreed with the staff’s proposed amendments subject to minor drafting changes and asked the staff to present them to the Board with a request that they be addressed as part of the Board’s annual improvements process.