Exposure Draft ED/2012/6 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Proposed amendments to IFRS 10 and IAS 28)

The International Accounting Standards Board (IASB) has published for comment ED/2012/6, an Exposure Draft of proposed amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures (2011). The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28 (2011), in dealing with the sale or contribution of a subsidiary.

The ED proposes to amend IAS 28 (2011) so that:

  • the current recognition requirements for the partial gain or loss for transactions between an investor and its associate or joint venture only apply to the gain or loss resulting from the sale or contribution of assets that do not constitute a business (as defined in IFRS 3 Business Combinations); and
  • the gain or loss resulting from the sale or contribution of assets that constitute a business (as defined in IFRS 3) between an investor and its associate or joint venture is recognised in full.

The ED also proposes to amend IFRS 10 so that the gain or loss resulting from the sale or contribution of a subsidiary that does not constitute a business (as defined in IFRS 3) between an investor and its associate or joint venture is recognised only to the extent of the unrelated investors’ interests in the associate or joint venture. The consequence is that a full gain or loss would be recognised on the loss of control of a subsidiary that constitutes a business, including cases in which the investor retains joint control of, or significant influence over, the investee.

The IASB also proposes to specify that when determining whether a group of assets that is sold or contributed is a business (as defined in IFRS 3), an entity should consider whether that sale or contribution is part of multiple arrangements that should be accounted for as a single transaction in accordance with the current requirements in paragraph B97 of IFRS 10.

Comments can be made to the New Zealand Accounting Standards Board (NZASB) addressed to the Chairman, New Zealand Accounting Standards Board, PO Box 11250, Manners Street Central, Wellington 6142, or by email to submissions@xrb.govt.nz. Comments can also be made electronically to the IASB website (www.ifrs.org), using the ‘Comment on a proposal’ page.

Comments are due to the NZASB by 28 March 2013 and to the IASB by 23 April 2013.

Read IASB Exposure Draft 2012/6

 

Date: 17 December 2012

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