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Improvements To Ifrss: Exposure Draft Ed/2009/11

Comments on the Exposure Draft and the Basis for Conclusions should be submitted in writing so as to be received by 24 November 2009. All responses will be put on the public record unless the respondent requests confidentiality, such as commercial confidence. The IASB, the IASCF, the authors and the publishers do not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this publication.

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Improvements To Ifrss: Exposure Draft Ed/2009/11

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August 2009

Exposure Draft ED/2009/11

Improvements to IFRSs
Comments to be received by 24 November 2009
IMPROVEMENTS TO IFRSs
(Proposed amendments to
International Financial
Reporting Standards)
Comments to be received by 24 November 2009

ED/2009/11
Improvements to IFRSs (an exposure draft of proposed amendments to International
Financial Reporting Standards) is published by the International Accounting
Standards Board (IASB) for comment only. The proposals may be modified in the
light of the comments received before being issued in final form as amendments to
IFRSs. Comments on the exposure draft and the Basis for Conclusions should be
submitted in writing so as to be received by 24 November 2009. Respondents are
asked to send their comments electronically to the IASB Website (www.iasb.org),
using the ‘Open to Comment’ page.
All responses will be put on the public record unless the respondent requests
confidentiality. However, such requests will not normally be granted unless
supported by good reason, such as commercial confidence.
The IASB, the International Accounting Standards Committee Foundation
(IASCF), the authors and the publishers do not accept responsibility for loss caused
to any person who acts or refrains from acting in reliance on the material in this
publication, whether such loss is caused by negligence or otherwise.
Copyright © 2009 IASCF®
ISBN: 978-1-907026-33-1
All rights reserved. Copies of the draft amendments and the accompanying
documents may be made for the purpose of preparing comments to be submitted
to the IASB, provided such copies are for personal or intra-organisational use only
and are not sold or disseminated and provided each copy acknowledges the
IASCF’s copyright and sets out the IASB’s address in full. Otherwise, no part of this
publication may be translated, reprinted or reproduced or utilised in any form
either in whole or in part or by any electronic, mechanical or other means, now
known or hereafter invented, including photocopying and recording, or in any
information storage and retrieval system, without prior permission in writing
from the IASCF.

The IASB logo/the IASCF logo/‘Hexagon Device’, the IASC Foundation Education
logo, ‘IASC Foundation’, ‘eIFRS’, ‘IAS’, ‘IASB’, ‘IASC’, ‘IASCF’, ‘IASs’, ‘IFRIC’, ‘IFRS’,
‘IFRSs’, ‘International Accounting Standards’, ‘International Financial Reporting
Standards’ and ‘SIC’ are Trade Marks of the IASCF.
Additional copies of this publication may be obtained from:
IASC Foundation Publications Department,
1st Floor, 30 Cannon Street, London EC4M 6XH, United Kingdom.
Tel: +44 (0)20 7332 2730 Fax: +44 (0)20 7332 2749
Email: [email protected] Web: www.iasb.org
ANNUAL IMPROVEMENTS TO IFRSS—EXPOSURE DRAFT AUGUST 2009

CONTENTS
pages

PROPOSED IMPROVEMENTS TO IFRSs

INTRODUCTION AND INVITATION TO COMMENT
APPROVAL OF EXPOSURE DRAFT BY THE BOARD
IFRS 1 First-time Adoption of International Financial Reporting
Standards 9
IFRS 3 Business Combinations 15
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations 25
IFRS 7 Financial Instruments: Disclosures 28
IAS 1 Presentation of Financial Statements 35
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors 39
IAS 27 Consolidated and Separate Financial Statements 43
IAS 28 Investments in Associates 50
IAS 34 Interim Financial Reporting 53
IAS 40 Investment Property 59
IFRIC 13 Customer Loyalty Programmes 63

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ANNUAL IMPROVEMENTS TO IFRSS—EXPOSURE DRAFT AUGUST 2009

Improvements to IFRSs

Introduction

The International Accounting Standards Board has published this exposure draft
of proposed amendments to International Financial Reporting Standards (IFRSs)
as part of its annual improvements project.

The project provides a streamlined process for dealing efficiently with a collection
of non-urgent but necessary amendments to IFRSs.

Structure of exposure draft

The exposure draft includes a chapter for each IFRS for which an amendment is
proposed. Each chapter includes:

(a) an explanation of the proposed amendment;

(b) when necessary, any specific additional question unique to that proposed
amendment;

(d) the proposed effective date of each proposed amendment; and

(e) the basis for the Board’s conclusions in proposing the amendment.

Some proposed amendments involve consequential amendments to other IFRSs.

Those consequential amendments are included in the chapter that sets out the
proposed amendment for the IFRS.

Invitation to comment

The Board invites comments on the proposed amendments. It would particularly

welcome answers to the questions set out below. Comments are most helpful if
they:

(a) answer the question as stated;

(b) indicate the specific paragraph or paragraphs to which they relate;

(c) contain a clear rationale;

(d) describe any alternative the Board should consider.

Respondents need not comment on all of the proposed amendments or all of the
questions for any amendment. The Board is not requesting comments on matters
in the IFRSs not addressed in the exposure draft.

The Board will consider all comments received in writing by 24 November 2009.
In considering the comments, the Board will base its conclusions on the merits of
the arguments for and against each alternative, not on the number of responses
supporting each alternative.

General questions (applicable to all proposed amendments)

Question 1
Do you agree with the Board’s proposal to amend the IFRS as described in the
exposure draft? If not, why and what alternative do you propose?

Question 2
Do you agree with the proposed transition provisions and effective date for the
issue as described in the exposure draft? If not, why and what alternative do you
propose?

Specific questions

Question 3
The Board proposes changes to IAS 34 Interim Financial Reporting to emphasise its
disclosure principles. It also adds to the guidance to illustrate better how to apply
these principles. The Board published an exposure draft Fair Value Measurement in
May 2009. In that exposure draft, the Board proposes that all of the fair value
measurement disclosures required in IFRS 7 Financial Instruments: Disclosures for
annual financial statements should also be required for interim financial
statements.

Do you agree that this proposed amendment is likely to lead to more useful
information being made available to investors and other users of interim
financial reports? If not, why? What would you propose instead and why?

Question 4
The Board proposes changes to IAS 34 Interim Financial Reporting. Do you agree that
amending IAS 34 to require particular disclosures to be made in interim financial
statements is a more effective way of ensuring that users of interim financial
statements are provided with useful information? If not, why? What approach
would you propose instead and why?

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ANNUAL IMPROVEMENTS TO IFRSS—EXPOSURE DRAFT AUGUST 2009

Question 5
The Board proposes to amend IAS 40 Investment Property to remove the requirement
to transfer investment property carried at fair value to inventory when it will be
developed for sale, to add a requirement for investment property held for sale to
be displayed as a separate category in the statement of financial position and to
require disclosures consistent with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations. Do you agree that the proposed amendment should be
included within Improvements to IFRSs or should a separate project be undertaken
to address this issue? If you believe a separate project should be undertaken,
please explain why.

IFRSs addressed

The following table shows the topics addressed by these proposed amendments.

IFRS Subject of amendment

IFRS 1 First-time Adoption of Accounting policy changes in the year
International Financial Reporting of adoption
Standards
Revaluation basis as deemed cost
IFRS 3 Business Combinations Transition requirements for contingent
consideration from a business
combination that occurred before the
effective date of the revised IFRS
Measurement of non-controlling
interests
Un-replaced and voluntarily replaced
share-based payment awards
IFRS 5 Non-current Assets Held for Application of IFRS 5 to loss of
Sale and Discontinued Operations significant influence over an associate
or a jointly controlled entity
IFRS 7 Financial Instruments: Clarifications of disclosures
Disclosures
IAS 1 Presentation of Financial Clarification of statement of changes in
Statements equity
IAS 8 Accounting Policies, Changes in Change in terminology to the qualitative
Accounting Estimates and Errors characteristics

IAS 27 Consolidated and Separate Impairment of investments in

Financial Statements associates in the separate financial
statements of the investor
Transition requirements for
amendments made as a result of
IAS 27 (as amended in 2008) to
IAS 21, IAS 28 and IAS 31
IAS 28 Investments in Associates Partial use of fair value for
measurement of associates
IAS 34 Interim Financial Reporting Significant events and transactions
IAS 40 Investment Property Change from fair value model to cost
model
IFRIC 13 Customer Loyalty Fair value of award credit
Programmes

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Approval by the Board of Improvements to IFRSs

(proposed amendments to International Financial
Reporting Standards)

Improvements to IFRSs (proposed amendments to International Financial Reporting

Standards) was approved for publication by twelve of the fifteen members of the
International Accounting Standards Board. Messrs Finnegan and Gomes and
Ms McConnell abstained from voting in view of their recent appointment to the
Board.

Sir David Tweedie Chairman

Stephen Cooper
Philippe Danjou
Jan Engström
Patrick Finnegan
Robert P Garnett
Gilbert Gélard
Amaro Luiz de Oliveira Gomes
Prabhakar Kalavacherla
James J Leisenring
Patricia McConnell
Warren J McGregor
John T Smith
Tatsumi Yamada
Wei-Guo Zhang

Introduction

The Board proposes the following amendments to IFRS 1 First-time Adoption of

International Financial Reporting Standards.

Accounting policy changes in the year of adoption

The Board proposes to amend IFRS 1 to clarify that if a first-time adopter changes
its accounting policies or its use of the exemptions in IFRS 1 after it has published
an interim financial report in accordance with IAS 34 Interim Financial Reporting it
explains those changes and updates the reconciliations required by
paragraph 24(a) and (b).

Revaluation basis as deemed cost

The Board proposes to amend IFRS 1 to clarify the scope of the exemption in
paragraph D8 that permits a first-time adopter to use a revaluation basis as
‘deemed cost’ when an event such as a privatisation triggered a revaluation at or
before the date of transition to IFRSs. The proposal reflects the Board’s conclusion
that its reasons for granting that exemption were equally valid for similar
revaluations that occurred after the date of transition to IFRSs but during the
periods covered by the first IFRS financial statements.

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Proposed amendments to
IFRS 1 First-time Adoption of International Financial
Reporting Standards

Paragraphs 27 and 32 are amended (new text is underlined and deleted text is
struck through). Paragraphs 27A and 39B are added.

Presentation and disclosure

27 IAS 8 does not deal with apply to the changes in accounting policies that
occur when an entity makes when it first adopts IFRSs or to changes in
those policies until it presents its first IFRS financial statements.
Therefore, IAS 8’s requirements for disclosures about changes in
accounting policies do not apply in an entity’s first IFRS financial
statements.

27A If during the period covered by its first IFRS financial statements an entity
changes its accounting policies or its use of the exemptions contained in
this IFRS, it shall explain the changes in accordance with paragraph 23
and update the reconciliations required by paragraph 24(a) and (b).

32 To comply with paragraph 23, if an entity presents an interim financial

report in accordance with IAS 34 for part of the period covered by its first
IFRS financial statements, the entity shall satisfy the following
requirements in addition to the requirements of IAS 34:

(a) Each such interim financial report shall, if the entity presented an
interim financial report for the comparable interim period of the
immediately preceding financial year, include:

(i) a reconciliation of its equity in accordance with previous

GAAP at the end of that comparable interim period to its
equity under IFRSs at that date; and

(ii) a reconciliation to its total comprehensive income in

accordance with IFRSs for that comparable interim period
(current and year to date). The starting point for that
reconciliation shall be total comprehensive income in
accordance with previous GAAP for that period or, if an entity
did not report such a total, profit or loss in accordance with
previous GAAP.

(b) In addition to the reconciliations required by (a), an entity’s first

interim financial report in accordance with IAS 34 for part of the
period covered by its first IFRS financial statements shall include
the reconciliations described in paragraph 24(a) and
(b) (supplemented by the details required by paragraphs 25 and 26)
or a cross-reference to another published document that includes
these reconciliations.

(c) If during the period covered by its first IFRS financial statements,
an entity changes its accounting policies or its use of the
exemptions contained in this IFRS, it shall explain the changes in
accordance with paragraph 23 and update the reconciliations
required by this paragraph.

Effective date

39B Improvements to IFRSs issued in [date] added paragraph 27A and amended
paragraphs 27, 32 and D8. An entity shall apply those amendments for
annual periods beginning on or after 1 January 2011. If an entity had first
applied IFRSs in an earlier period, the entity is permitted to apply the
amendment to paragraph D8 in the first annual period after the
amendment is effective as if it had been available in that earlier period.
Earlier application is permitted. If an entity applies the amendments for
an earlier period it shall disclose that fact.

In Appendix D paragraph D8 is amended (new text is underlined and deleted text

is struck through).

Fair value or revaluation as deemed cost

D8 A first-time adopter may have established a deemed cost in accordance
with previous GAAP for some or all of its assets and liabilities by
measuring them at their fair value at one particular date because of an
event such as a privatisation or initial public offering. If the
measurement date is before the end of the first IFRS reporting period,* the
first-time adopter It may use such event-driven fair value measurements
as deemed cost for IFRSs at the date of that measurement. If the
measurement date is after the first-time adopter’s date of transition to

* Note for readers of the exposure draft: IFRS 1 defines the first IFRS reporting period as
the period covered by an entity’s first IFRS financial statements.

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IFRSs, the entity may elect a deemed cost at the date of transition that
meets the criteria in paragraphs D5–D7. The event-driven fair value
measurement within the entity’s first IFRS reporting period is recognised
as deemed cost when the event occurs.

Basis for Conclusions on

proposed amendments to
IFRS 1 First-time Adoption of International Financial
Reporting Standards
This Basis for Conclusions accompanies, but is not part of, the proposed amendments.

Accounting policy changes in the year of adoption

BC1 The Board received a request to clarify whether a first-time adopter is

exempt from all the requirements of IAS 8 for the interim and annual
periods presented in its first IFRS financial statements. If IAS 8 does not
apply, the Board was asked what, if any, requirements apply when an
entity changes its accounting policies between the first interim financial
statements it presents in accordance with IFRSs and its first annual
financial statements. A similar question arises with respect to changes an
entity might make in the IFRS 1 exemptions it chooses to apply.

BC2 The Board noted that IFRS 1 requires an entity to explain how transition
from a different accounting framework to IFRSs affected its reported
financial position, results and cash flows. In particular, IFRS 1 requires
reconciliations of profit or loss and of equity reported under previous
GAAP to those under IFRSs at both the date of transition to IFRSs and the
end of the latest period presented in the entity’s most recent annual
financial statements under previous GAAP. If an entity presents interim
financial reports in accordance with IAS 34, its first interim financial
report for part of the period covered by its first IFRS financial statements
must include those reconciliations.

BC3 The Board concluded that to comply with IFRS 1’s requirement to explain
its transition to IFRS, an entity should be required to explain any changes
in its accounting policies or IFRS 1 exemptions it applied between its first
IFRS interim financial report and its first IFRS annual financial
statements. The Board decided that the most useful information it could
require was updated reconciliations between previous GAAP and IFRSs.

Revaluation basis as deemed cost

BC4 As part of its annual improvements project in 2009, the Board

reconsidered the scope of paragraph D8. At that time, paragraph D8 was
applicable to events such as a privatisation or initial public offering that
took place before the date of transition to IFRSs, but not if the event was

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later. The Board concluded that its reasons for granting the exemption in
paragraph D8 were equally valid for such events that occurred after the
date of transition to IFRSs but during the periods covered by the first-time
adopter’s first IFRS financial statements. Therefore, the Board proposes
to amend paragraph D8 to reflect that conclusion.

BC5 When deliberating comparative presentation for the proposed

amendment, one option the Board considered requires an entity to
establish the deemed cost on the date of transition to IFRSs using the
revaluation amounts subsequently obtained on the date of measurement,
adjusted to exclude any depreciation, amortisation or impairment
between the date of transition to IFRSs and the date of that measurement.
That would result in the balances on the date of measurement
approximating the revaluation amounts. Although some believe that
this presentation gives better comparability throughout the first IFRS
reporting period, others object to it on the basis that making such
adjustments requires hindsight and the computed carrying amounts on
the date of transition are neither the revalued assets’ historical costs nor
their fair values on that date.

BC6 Therefore, the Board decided to require an entity to establish the deemed
cost as of the event-driven fair value measurement date and, for the
periods before that date, present historical costs or other amounts
already permitted by IFRS 1. The Board notes that this proposed
presentation overcomes the use of hindsight. It also presents supportable
carrying amounts for such assets on the date of transition that are
broadly consistent with the existing requirements of IFRS 1 and with the
principle of the transition. Because any significant adjustments related
to an event that triggers such a revaluation would already be highlighted
in the first IFRS financial statements and disclosures, the proposed
presentation clearly identifies the effects of any significant difference in
depreciation or amortisation between the periods before and after the
date of measurement.

Proposed amendments to
IFRS 3 Business Combinations (as revised in 2008)

Introduction

The Board proposes the following amendments to IFRS 3 Business Combinations

(as revised in 2008).

Measurement of non-controlling interests

The Board proposes to amend paragraph 19 of IFRS 3 to clarify that the choice of
measuring non-controlling interest either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s identifiable net assets applies only
to instruments that are currently entitled to a proportionate share of the
acquiree’s net assets. Other instruments that meet the definition of
non-controlling interest should be measured at fair value or in accordance with
applicable IFRSs.

Un-replaced and voluntarily replaced share-based payment

awards
The Board proposes to amend the application guidance in IFRS 3 (to require the
acquirer to apply paragraphs B57–B62 to all share-based payment transactions
that are part of a business combination). Therefore, the application guidance
would also apply to share-based payment transactions of the acquiree that the
acquirer chooses not to replace and share-based payment transactions that the
acquirer chooses to exchange for share-based payment transactions of the
acquiree, even though they would not expire as a consequence of the business
combination.

In addition, the Board proposes to align the terminology in IFRS 3 with that of
IFRS 2 Share-based Payment. Therefore, the Board proposes replacing the term
‘share-based payment award’ in paragraph 30 of IFRS 3 with ‘share-based payment
transaction’.

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Transition requirements for contingent consideration from a

business combination that occurred before the effective
date of the revised IFRS
The Board proposes to amend the effective date paragraph in the amendments
made to IFRS 7 Financial Instruments: Disclosures, IAS 32 Financial Instruments:
Presentation and IAS 39 Financial Instruments: Recognition and Measurement to clarify
that those standards do not apply to contingent consideration that arose from
business combinations whose acquisition dates preceded the application of
IFRS 3.

Proposed amendments to
IFRS 3 Business Combinations (as revised in 2008)

Paragraph 19, the heading before paragraph 30 and paragraph 30 are amended
(new text is underlined and deleted text is struck through) and paragraph 64A is
added.

The acquisition method

Measurement principle
19 For each business combination, the acquirer shall measure any
non-controlling interest in the acquiree either at fair value or other
measurement basis as required by IFRSs, except for the components of
non-controlling interest that are present ownership instruments and
entitle their holders to a pro rata share of the entity’s net assets in the
event of liquidation. The acquirer shall measure those components of
non-controlling interest either at fair value or at the present ownership
instruments’ non-controlling interest’s proportionate share of the
acquiree’s identifiable net assets.

Exceptions to the recognition or measurement principles

Exceptions to the measurement principle

Share-based payment awards transactions

30 The acquirer shall measure a liability or an equity instrument related to

share-based payment transactions of the acquiree or the replacement of
an acquiree’s share-based payment awards transactions with share-based
payment awards transactions of the acquirer in accordance with the
method in IFRS 2 Share-based Payment. (This IFRS refers to the result of that
method as the ‘market-based measure’ of the award share-based payment
transaction.)

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Effective date and transition

Effective date
64A Improvements to IFRSs issued in [date] amended paragraph 19, the heading
before paragraph 30 and paragraphs 30 and B56 and added a new heading
after paragraph B62 and paragraphs B62A, B62B, C3A, C7A and C13A.
An entity shall apply those amendments for annual periods beginning on
or after 1 July 2010. Earlier application is permitted. If an entity applies
the amendments for an earlier period it shall disclose that fact.

Application guidance

In Appendix B, paragraph B56 is amended (new text is underlined and deleted

text is struck through) and a footnote to paragraph B56, a heading after
paragraph B62 and paragraphs B62A and B62B are added.

Determining what is part of the business combination

transaction (application of paragraphs 51 and 52)

Acquirer share-based payment awards exchanged for

awards held by the acquiree’s employees (application
of paragraph 52(b))
B56 An acquirer may exchange its share-based payment awards* (replacement
awards) for awards held by employees of the acquiree. Exchanges of share
options or other share-based payment awards in conjunction with a
business combination are accounted for as modifications of share-based
payment awards in accordance with IFRS 2 Share-based Payment. If the
acquirer is obliged to replace the acquiree awards, either all or a portion
of the market-based measure of the acquirer’s replacement awards shall
be included in measuring the consideration transferred in the business
combination. The acquirer is obliged to replace the acquiree awards if the
acquiree or its employees have the ability to enforce replacement.
For example, for the purposes of applying this requirement, the acquirer
is obliged to replace the acquiree’s awards if replacement is required by:

(a) the terms of the acquisition agreement;

(b) the terms of the acquiree’s awards; or

(c) applicable laws or regulations.

The acquirer shall apply the principles in paragraphs B57–B62 in

accounting for acquiree awards it chooses to replace in a business
combination as well as those it is obliged to replace. However, in In some
situations, acquiree awards may expire as a consequence of a business
combination. If the acquirer replaces those awards even though it is not
obliged to do so, all of the market-based measure of the replacement
awards shall be recognised as remuneration cost in the post-combination

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financial statements. That is to say, none of the market-based measure of

those awards shall be included in measuring the consideration
transferred in the business combination.

* In paragraphs B56–B62B the term ‘share-based payment awards’ refers to

vested or unvested share-based payment transactions.

Share-based payment transactions of the acquiree

B62A The acquiree may have outstanding share-based payment transactions
that the acquirer does not exchange for its share-based payment
transactions. If vested, those acquiree share-based payment transactions
are part of the non-controlling interest in the acquiree and are measured
at their fair value. If unvested, they are measured at their market-based
measure as if the acquisition date were the grant date in accordance with
paragraphs 19 and 30.

B62B The market-based measure of unvested share-based payment transactions

is allocated to the non-controlling interest on the basis of the ratio of the
portion of the vesting period completed to the total vesting period of the
share-based payment transaction. The balance is allocated to
post-combination service.

Appendix to proposed amendments to IFRS 3

Amendments to other IFRSs

IFRS 7 Financial Instruments: Disclosures

Paragraph 44B is amended (new text is underlined) and paragraph 44H is added.

Effective date and transition

44B IFRS 3 (as revised in 2008) deleted paragraph 3(c). An entity shall apply that
amendment for annual periods beginning on or after 1 July 2009. If an
entity applies IFRS 3 (revised 2008) for an earlier period, the amendment
shall also be applied for that earlier period. The amendment does not apply
to contingent consideration that arose from a business combination whose
acquisition date preceded the application of IFRS 3 (revised 2008).
Such contingent consideration is accounted for in accordance with the
requirements in paragraphs 32–35 of IFRS 3 (as issued in 2004).

44H Paragraph 44B was amended by Improvements to IFRSs issued in [date].

An entity shall apply that amendment for annual periods beginning on or
after 1 July 2010. Earlier application is permitted. If an entity applies the
amendment before 1 July 2010 it shall disclose that fact.

IAS 32 Financial Instruments: Presentation

Paragraph 97B is amended (new text is underlined) and paragraph 97E is added.

Effective date and transition

97B IFRS 3 (as revised in 2008) deleted paragraph 4(c). An entity shall apply
that amendment for annual periods beginning on or after 1 July 2009.
If an entity applies IFRS 3 (revised 2008) for an earlier period, the
amendment shall also be applied for that earlier period. The amendment
does not apply to contingent consideration that arose from a business
combination whose acquisition date preceded the application of IFRS 3
(revised 2008). Such contingent consideration is accounted for in
accordance with the requirements in paragraphs 32–35 of IFRS 3
(as issued in 2004).

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97E Paragraph 97B was amended by Improvements to IFRSs issued in [date].

An entity shall apply that amendment for annual periods beginning on or
after 1 July 2010. Earlier application is permitted. If an entity applies this
amendment before 1 July 2010 it shall disclose that fact.

IAS 39 Financial Instruments: Recognition and Measurement

Paragraph 103D is amended (new text is underlined) and paragraph 103L is

added.

Effective date and transition

103D IFRS 3 (as revised in 2008) deleted paragraph 2(f). An entity shall apply
that amendment for annual periods beginning on or after 1 July 2009.
If an entity applies IFRS 3 (revised 2008) for an earlier period, the
amendment shall also be applied for that earlier period. The amendment
does not apply to contingent consideration that arose from a business
combination whose acquisition date preceded the application of IFRS 3
(revised 2008). Such contingent consideration is accounted for in
accordance with the requirements in paragraphs 32–35 of IFRS 3
(as issued in 2004).

103L Paragraph 103D was amended by Improvements to IFRSs issued in [date].

Basis for Conclusions on

proposed amendments to
IFRS 3 Business Combinations (as revised in 2008)
This Basis for Conclusions accompanies, but is not part of, the proposed amendments.

Measurement of non-controlling interests

BC1 The Board proposes to limit the measurement choice to non-controlling

interests that are present ownership instruments and entitle their
holders to a pro rata share of the entity’s net assets in the event of
liquidation. The acquirer should measure other components of
non-controlling interest at fair value or other measurement bases as
required by IFRSs. For example, a share-based payment transaction that
is classified as equity shall be measured in accordance with IFRS 2
Share-based Payment and the equity component of a convertible instrument
shall be measured in accordance with IAS 32 Financial Instruments:
Presentation. The Board observed that without this amendment, if the
acquirer chooses to measure NCI at its proportionate share of the
acquiree’s identifiable net assets, the acquirer might measure some
equity instruments at nil. In the Board’s view, this would result in not
recognising economic interests that other parties have in the acquiree.
Therefore, the Board proposes to amend IFRS 3 to limit the choice of
measuring non-controlling interest at its proportionate share of the
acquiree’s identifiable net assets to those components of non-controlling
interests that are present ownership instruments that entitle their
holders to a pro rata share of the entity’s net assets in the event of
liquidation.

Un-replaced and voluntarily replaced share-based payment

awards

BC2 After the revised IFRS was issued, some constituents raised concerns
about the lack of explicit guidance with respect to share-based payment
awards of the acquiree that the acquirer chooses to replace, even though
they either are unaffected by the business combination or for which
vesting is accelerated as a consequence of the business combination.
In addition, some constituents were concerned that the measurement
guidance for share-based payment awards applies only to replacement
awards but not to acquiree awards that the acquirer chooses not to

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replace. In response to those concerns, the Board proposes to add explicit

guidance in paragraphs B56 and B62A to clarify that those awards should
be accounted for in the same way as acquiree awards that the acquirer is
obliged to replace.

Effective date and transition

BC3 Paragraph 3(c) of IFRS 7 Financial Instruments: Disclosures, paragraph 4(c) of

IAS 32 Financial Instruments: Presentation and paragraph 2(f) of IAS 39
exempted contingent consideration arrangements from the scope of
IAS 39. To allow the acquirer to account for contingent consideration as
required by the revised IFRS 3 Business Combinations, the Board proposes to
delete those scope exceptions in the second phase of its project on
business combinations.

BC4 The deletion of the scope exception meant that IAS 39 would apply to all
contingent consideration including contingent consideration from
business combinations with an acquisition date earlier than the
application date of the revised IFRS 3. The Board noted that this
consequence is inconsistent with the requirement in paragraph 65 of
IFRS 3 that assets and liabilities that arose from business combinations
whose acquisition dates preceded the application of the revised IFRS are
not adjusted upon application of the revised IFRS.

BC5 Therefore, the Board proposes to amend paragraph 44B of IFRS 7,

paragraph 97B of IAS 32 and paragraph 103D of IAS 39 to clarify that the
requirements in IAS 39 do not apply to contingent consideration that
arose from a business combination whose acquisition date preceded the
application of the revised IFRS 3. Rather, an entity accounts for such
contingent consideration in accordance with the requirements in
paragraphs 32–35 of IFRS 3 (as issued in 2004). The Board does not believe
that the proposed amendments will affect the convergence of IFRS 3
(as revised in 2008) and SFAS 141(R).

Proposed amendment to
IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations

Introduction

The Board proposes the following amendment to IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations.

Application of IFRS 5 to loss of significant influence over an

associate or loss of joint control in a jointly controlled entity
The Board proposes to clarify that an entity classifies as held for sale its interest
in an associate or a jointly controlled entity when it is committed to a sale plan
involving loss of significant influence or joint control.

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Proposed amendment to
IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations

Paragraphs 8A and 44C are amended (new text is underlined).

Classification of non-current assets (or disposal groups) as

held for sale or as held for distribution to owners

8A An entity that is committed to a sale plan involving loss of control of a

subsidiary or loss of significant influence of an associate or loss of joint
control of a jointly controlled entity shall classify all the assets and
liabilities of that subsidiary or all the interests in an associate or a jointly
controlled entity as held for sale when the criteria set out in
paragraphs 6–8 are met, regardless of whether the entity will retain a
non-controlling interest in its former subsidiary or an interest in the
former associate or jointly controlled entity after the sale.

Effective date

44C Paragraphs 8A and 36A were added by Improvements to IFRSs issued in May
2008. An entity shall apply those amendments for annual periods
beginning on or after 1 July 2009. Paragraph 8A was also amended by
Improvements to IFRSs issued in [date]. An entity shall apply the amendment
to paragraph 8A for annual periods beginning on or after 1 January 2010.
Earlier application is permitted. However, an entity shall not apply the
amendments for annual periods beginning before 1 July 2009 unless it
also applies IAS 27 (as amended in May 2008). If an entity applies the
amendments before 1 July 2009 it shall disclose that fact. An entity shall
apply the amendments prospectively from the date at which it first
applied IFRS 5, subject to the transitional provisions in paragraph 45 of
IAS 27 (amended May 2008).

Basis for Conclusions on

proposed amendment to
IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

Disclosures of non-current assets (or disposal groups)

classified as held for sale or discontinued operations

BC1 In 2009 the Board considered the applicability of IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations to situations when an entity is
committed to a sale plan involving loss of significant influence of an
associate or joint control of a jointly controlled entity.

BC2 The Board concluded in the second phase of its project on business
combinations that the loss of control of an entity and the loss of
significant influence/joint control over an entity are economically
similar events and thus they should be accounted for similarly
(see paragraph BC21 of the Basis for Conclusions on IAS 28 Investments in
Associates). The Board therefore clarified that all the interest an entity has
in an associate or jointly controlled entity is classified as held for sale if
the entity is committed to a sale plan involving loss of significant
influence or joint control. The Board also concluded that an entity shall
not classify as held for sale its investment in an associate or a jointly
controlled entity in accordance with IFRS 5 when it is highly probable
that control will be obtained because there will be no sale.

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Proposed amendment to
IFRS 7 Financial Instruments: Disclosures

Introduction

The Board proposes the following amendment to IFRS 7 Financial Instruments:

Disclosures.

Disclosures about the nature and extent of risks arising from

financial instruments
The Board proposes an amendment to IFRS 7 that:

• states that the qualitative disclosures in paragraph 33 should support and

enhance the quantitative disclosures in paragraphs 34–42;

• removes the reference to materiality from paragraph 34(b);

• clarifies that the requirement in paragraph 36(a) applies to financial assets

whose carrying amounts do not reflect the reporting entity’s maximum
exposure to credit risk and off balance sheet exposures;

• requires disclosure of the financial effect of collateral held as security and

other credit enhancements in paragraph 36(b);

• removes the requirement in paragraph 36(d) related to financial

instruments renegotiated to avoid becoming past due or impaired;

• removes the requirement in paragraph 37(c) related to collateral held as

security or other credit enhancements, and

• clarifies that the requirement in paragraph 38 applies only to foreclosed

collateral held at the reporting date.

Proposed amendment to
IFRS 7 Financial Instruments: Disclosures

Paragraph 33A is added. Paragraphs 34 and 36–38 are amended (new text is
underlined and deleted text is struck through). Paragraphs 33 and 35 are not
proposed for amendment, but are included for ease of reference. Paragraph 44H
is added.

Qualitative disclosures
33 For each type of risk arising from financial instruments, an entity shall
disclose:

(a) the exposures to risk and how they arise;

(b) its objectives, policies and processes for managing the risk and the
methods used to measure the risk; and

(c) any changes in (a) or (b) from the previous period.

33A The disclosures provided in accordance with paragraph 33 shall support

and enhance the disclosures required by paragraphs 34 and 35.

Quantitative disclosures
34 For each type of risk arising from financial instruments, an entity shall
disclose:

(a) summary quantitative data about its exposure to that risk at the
end of the reporting period. This disclosure shall be based on the
information provided internally to key management personnel of
the entity (as defined in IAS 24 Related Party Disclosures), for example
the entity’s board of directors or chief executive officer.

(b) the disclosures required by paragraphs 36–42, to the extent not

provided in accordance with (a), unless the risk is not material
(see paragraphs 29–31 of IAS 1 for a discussion of materiality).

(c) concentrations of risk if not apparent from the disclosures made in

accordance with (a) and (b).

35 If the quantitative data disclosed as at the end of the reporting period are
unrepresentative of an entity’s exposure to risk during the period, an
entity shall provide further information that is representative.

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Credit risk
36 An entity shall disclose by class of financial instrument:

(a) the amount that best represents its maximum exposure to credit
risk at the end of the reporting period without taking account of
any collateral held or other credit enhancements (eg netting
agreements that do not qualify for offset in accordance with
IAS 32); this disclosure is not required for financial instruments
whose carrying amount best represents the maximum exposure to
credit risk.;

(b) in respect of the amount disclosed in (a), a description and the

financial effect of collateral held as security and other credit
enhancements (eg a description of the extent to which collateral
and other credit enhancements mitigate credit risk) in respect of
the amount that best represents the maximum exposure to credit
risk (whether disclosed in accordance with (a) or represented by the
carrying amount of a financial instrument).;

(d) [deleted] the carrying amount of financial assets that would

otherwise be past due or impaired whose terms have been
renegotiated.

Financial assets that are either past due or impaired

37 An entity shall disclose by class of financial asset:

(a) an analysis of the age of financial assets that are past due as at the
end of the reporting period but not impaired; and

(b) an analysis of financial assets that are individually determined to

be impaired as at the end of the reporting period, including the
factors the entity considered in determining that they are
impaired.; and

(c) [deleted] for the amounts disclosed in (a) and (b), a description of
collateral held by the entity as security and other credit
enhancements and, unless impracticable, an estimate of their fair
value.

Collateral and other credit enhancements obtained

38 When an entity obtains financial or non-financial assets during the
period by taking possession of collateral it holds as security or calling on
other credit enhancements (eg guarantees), and such assets meet the
recognition criteria in other Standards, an entity shall disclose for such
assets held at reporting date:

(a) the nature and carrying amount of the assets obtained; and

(b) when the assets are not readily convertible into cash, its policies for
disposing of such assets or for using them in its operations.

Effective date and transition

44H Improvements to IFRSs issued in [date] added paragraph 33A and amended
paragraphs 34 and 36–38. An entity shall apply the amendment for
annual periods beginning on or after 1 January 2011. Earlier application
is permitted. If an entity applies the amendment for an earlier period it
shall disclose that fact.

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Basis for Conclusions on

proposed amendment to
IFRS 7 Financial Instruments: Disclosures
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

BC1 The Board proposes to emphasise the interaction between qualitative and
quantitative disclosures about the nature and extent of risks arising from
financial instruments. The Board noted that providing qualitative
disclosures in the context of quantitative disclosures enables users to link
related disclosures and hence form an overall picture of the nature and
extent of risks arising from financial instruments. The Board concluded
that an explicit emphasis on the interaction between qualitative and
quantitative disclosures will contribute to disclosure of information in a
way that better enables users to evaluate an entity’s exposure.

BC2 The Board proposes to remove the reference to materiality in

paragraph 34(b) of IFRS 7. The Board noted that the reference could imply
that disclosures in IFRS 7 are required even if those disclosures are
not material, which was not the Board’s intention.

BC3 The Board proposes to clarify that the disclosure requirement in

paragraph 36(a) applies only to financial assets whose carrying amounts
do not show the reporting entity’s maximum exposure to credit risk.
The Board noted that such an approach is consistent with the approach
taken in paragraph 29(a), which states that disclosure of fair value is not
required when the carrying amount is a reasonable approximation of fair
value. Moreover, the Board concluded that the requirement might be
duplicative for assets that are presented in the statement of financial
position because the carrying amount of these assets often represents the
maximum exposure to credit risk. In the Board’s view, the disclosure
requirement should focus on the entity’s exposure to credit risk that is
not already reflected in the statement of financial position.

BC4 The Board proposes to delete the requirement in paragraph 36(d) to

disclose the carrying amount of financial assets that would otherwise be
past due or impaired whose terms have been renegotiated. The Board
considered the difficulty in identifying financial assets whose terms have
been renegotiated to avoid becoming past due or impaired (rather than
for other commercial reasons). The Board noted that the current
requirement was unclear about whether the requirement applies only to
financial assets that were renegotiated in the current reporting period or
whether past negotiations of those assets should be considered.

Moreover, the Board was informed that commercial terms of loans are
often renegotiated regularly for reasons that are not related to
impairment. In practice it is difficult, especially for a large portfolio of
loans, to ascertain which loans were renegotiated to avoid becoming past
due or impaired. Hence, the Board proposes to delete the disclosure
requirement in paragraph 36(d).

BC5 The Board considered the usefulness of disclosure of the fair value of
collateral and other credit enhancements required in paragraph 37(c).
The Board considered that within a class of assets some might be
over-collateralised while others might be under-collateralised.
Hence, aggregate disclosure of the fair value might be misleading.
Therefore, the Board proposes to remove the requirement in
paragraph 37(c) to disclose the fair value of collateral and other credit
enhancements. However, the Board believes that information on the
financial effect of such assets is useful to users. Hence, the Board
proposes to require disclosure of the financial effect of collateral held as
security and other credit enhancements in paragraph 36(b).

BC6 The Board proposes clarifying that entities need disclose only the amount
of foreclosed collateral held at the reporting date in paragraph 38.
The Board noted that this is consistent with the objective in IFRS 7 to
disclose information that enables users to evaluate the nature and extent
of risks arising from financial instruments to which the entity is exposed
at the end of the reporting period.

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Proposed amendment to
guidance on implementing
IFRS 7 Financial Instruments: Disclosures

A heading and paragraphs IG3 and IG4 are deleted (new text is underlined and
deleted text is struck through).

Introduction

Materiality
IG3–IG4 [Deleted] IAS 1 Presentation of Financial Statements notes that a specific
disclosure requirement in an IFRS need not be satisfied if the
information is not material. IAS 1 defines materiality as follows:
Omissions or misstatements of items are material if they could, individually
or collectively, influence the economic decisions that users make on the basis
of the financial statements. Materiality depends on the size and nature of the
omission or misstatement judged in the surrounding circumstances.
The size or nature of the item, or a combination of both, could be the
determining factor.
IG4 IAS 1 also explains that definition as follows:
Assessing whether an omission or misstatement could influence economic
decisions of users, and so be material, requires consideration of the
characteristics of those users. The Framework for the Preparation and Presentation
of Financial Statements states in paragraph 25 that ‘users are assumed to have a
reasonable knowledge of business and economic activities and accounting
and a willingness to study the information with reasonable diligence.’
Therefore, the assessment needs to take into account how users with such
attributes could reasonably be expected to be influenced in making
economic decisions.

Proposed amendment to
IAS 1 Presentation of Financial Statements

Introduction

The Board proposes the following amendment to IAS 1 Presentation of Financial

Statements.

Clarification of statement of changes in equity

The Board proposes to amend IAS 1 to state explicitly that an entity shall present
the components of changes in equity either in the statement of changes in equity
or in the notes to the financial statements.

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Proposed amendment to
IAS 1 Presentation of Financial Statements

Paragraphs 106 and 107 are amended (new text is underlined and deleted text is
struck through). Paragraph 139D is added.

Structure and content

Statement of changes in equity

106 An entity shall present a statement of changes in equity showing in the
statement or in the notes:

(a) total comprehensive income for the period, showing separately the
total amounts attributable to owners of the parent and to
non-controlling interests;

(b) for each component of equity, the effects of retrospective

application or retrospective restatement recognised in accordance
with IAS 8; and

(d) for each component of equity, a reconciliation between the

carrying amount at the beginning and the end of the period,
separately disclosing changes resulting from:

(i) profit or loss;

(ii) each item of other comprehensive income; and

(iii) transactions with owners in their capacity as owners, showing

separately contributions by and distributions to owners and
changes in ownership interests in subsidiaries that do not
result in a loss of control.

107 An entity shall present, either in the statement of equity or in the notes,
the amounts of dividends recognised as distributions to owners during
the period and the related amount per share of dividends recognised as
distributions to owners.

Transition and effective date

139D Paragraphs 106 and 107 were amended by Improvements to IFRSs issued in
[date]. An entity shall apply that amendment for annual periods
beginning on or after 1 January 2011. Earlier application is permitted.
If an entity applies the amendment for an earlier period it shall disclose
that fact.

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Basis for Conclusions on

proposed amendment to
IAS 1 Presentation of Financial Statements
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

Statement of changes in equity

BC1 The Board was asked to clarify its intention in paragraph 106(d) to require
a reconciliation between the carrying amount (beginning and ending
balances) for each component of other comprehensive income.
Some respondents believed this requirement was excessive. In addition,
some pointed out an inconsistency between the current wording of
paragraph 106(d) and the example of the statement of changes in equity
within the guidance on implementing IAS 1 Part I: Illustrative presentation of
financial statements. The Board confirmed its intention to allow flexibility
on the reconciliation requirements for classes of accumulated other
comprehensive income. Therefore, the Board proposes to clarify that
entities are permitted to present the reconciliation requirements for
classes of accumulated other comprehensive income either in the
statement of changes in equity or in the notes to the financial statements.

BC2 The Board also proposes to amend paragraph 107 in IAS 1 to remove a
redundancy based on the amendment to paragraph 106(d).

Proposed amendment to
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors

Introduction

The Board proposes the following amendment to IAS 8 Accounting Policies, Changes
in Accounting Estimates and Errors.

Change in terminology to the qualitative characteristics

The Board proposes to amend IAS 8 to be consistent with the terminology changes
made in the forthcoming conceptual framework that will replace the Framework
for the Preparation and Presentation of Financial Statements.

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Proposed amendment to
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors

Paragraphs 10, 14 and 29 are amended (new text is underlined and deleted text is
struck through). A footnote is added to paragraph 10. Paragraph 54A is added.

Accounting policies

Selection and application of accounting policies

10 In the absence of an IFRS that specifically applies to a transaction, other
event or condition, management shall use its judgement in developing
and applying an accounting policy that results in financial information
that is useful to existing and potential equity investors, lenders and other
creditors in making decisions. To be useful, information shall:

(a) be relevant to the economic decision-making needs of users; and

(b) faithfully represent the transaction, other event or condition.

Faithful representation of an economic phenomenon is attained
when the depiction is complete, neutral and free from error.*
reliable, in that the financial statements:

(i) represent faithfully the financial position, financial

performance and cash flows of the entity;

(ii) reflect the economic substance of transactions, other events

and conditions, and not merely the legal form;

(iii) are neutral, ie free from bias;

(iv) are prudent; and

(v) are complete in all material respects.

* In [date to be determined], the Board amended the terminology in this

paragraph to be consistent with the terminology used in the Framework issued
in 2009.

Changes in accounting policies

14 An entity shall change an accounting policy only if the change:

(a) is required by an IFRS; or

(b) results in the financial statements providing reliable and more

relevant information about that faithfully represents the effects of
transactions, other events or conditions on the entity’s financial
position, financial performance or cash flows.

Disclosure
29 When a voluntary change in accounting policy has an effect on the
current period or any prior period, would have an effect on that period
except that it is impracticable to determine the amount of the
adjustment, or might have an effect on future periods, an entity shall
disclose:

(a) the nature of the change in accounting policy;

(b) the reasons why applying the new accounting policy provides
reliable and more relevant information that faithfully represents
the effects of the transactions, other events or conditions on the
entity’s financial position, financial performance or cash flows;

Effective date and transition

54A Improvements to IFRSs issued in [date] amended paragraphs 10, 14 and 29

and added a footnote to paragraph 10. An entity shall apply the
amendment for annual periods beginning on or after 1 January 2011.
Earlier application is permitted. If an entity applies the amendment for
an earlier period it shall disclose that fact.

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Basis for Conclusions on

proposed amendment to
IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

Change in terminology to the qualitative characteristics

BC1 The Board and the US Financial Accounting Standards Board are jointly
developing a new conceptual framework on financial reporting. As part
of that project, the boards adopted new terminology for some of the
qualitative characteristics of financial reporting. IAS 8 provides guidance
to preparers of financial reports in developing and applying accounting
policies when there are no specifically applicable IFRSs. That guidance is
based on the qualitative characteristics in the Framework. Because this
guidance is essential to the application of IAS 8, the Board decided that
the paragraphs that refer to the qualitative characteristics should be
updated to use the new terminology.

BC2 The Board also decided to review and update other IFRSs to use the new
terminology when those IFRSs are being amended for other reasons.

Proposed amendments to
IAS 27 Consolidated and Separate Financial Statements

Introduction

The Board proposes the following amendments to IAS 27 Consolidated and Separate
Financial Statements.

Impairment of investments in subsidiaries, jointly controlled

entities and associates in the separate financial statements
of the investor
The Board proposes to clarify that in its separate financial statements the investor
shall apply the provisions of IAS 39 Financial Instruments: Recognition and Measurement
to test its investments in subsidiaries, jointly controlled entities and associates for
impairment.

Transition requirements for amendments arising as a result

of IAS 27 (as amended in 2008)
The Board proposes to clarify that the amendments as a result of IAS 27 made to
IAS 21, IAS 28 and IAS 31 require prospective application.

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Proposed amendments to
IAS 27 Consolidated and Separate Financial Statements

Paragraph 38 is amended (new text is underlined and deleted text is struck

through) and paragraphs 38D and 45D are added.

Accounting for investments in subsidiaries, jointly

controlled entities and associates in separate financial
statements

38 When an entity prepares separate financial statements, it shall account

for investments in subsidiaries, jointly controlled entities and associates
either:

(a) at cost, or

(b) at fair value through profit or loss,

each in accordance with IAS 39. The entity shall apply the same
accounting for each category of investments. Investments accounted for
at cost shall be accounted for in accordance with IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations when they are classified as held
for sale (or included in a disposal group that is classified as held for sale)
in accordance with IFRS 5. The measurement of investments accounted
for at fair value through profit or loss in accordance with IAS 39 is not
changed in such circumstances.

38D When an entity prepares separate financial statements, it shall apply the
requirements of IAS 39 for the determination and measurement of
impairment losses on investments in subsidiaries, jointly controlled
entities and associates.

Effective date and transition

45D Paragraph 38 was amended and paragraph 38D added by Improvements to

IFRSs issued in [date]. An entity shall apply the amendment prospectively
for annual periods beginning on or after 1 January 2011. Earlier
application is permitted. If an entity applies the amendment for an
earlier period it shall disclose that fact. If an entity applies the related
amendments in paragraph 2(h)–(j) of IAS 36 for an earlier period, it shall
apply the amendment in this Standard at the same time.

Appendix to proposed amendments to IAS 27

Amendments to other IFRSs

IAS 21 The Effects of Foreign Exchange Rates

Paragraph 60B is amended (new text is underlined) and paragraph 60C is added.

Effective date and transition

60B IAS 27 (as amended in 2008) added paragraphs 48A–48D and amended
paragraph 49. An entity shall apply those amendments prospectively for
annual periods beginning on or after 1 July 2009. If an entity applies
IAS 27 (amended 2008) for an earlier period, the amendments shall be
applied for that earlier period.

60C Paragraph 60B was amended by Improvements to IFRSs issued in [date].

IAS 28 Investments in Associates

Paragraph 41B is amended (new text is underlined and deleted text is struck
through) and paragraph 41D is added.

Effective date and transition

41B IAS 27 (as amended in 2008) amended paragraphs 18, 19 and 35 and added
paragraph 19A. An entity shall apply the amendment to paragraph 35
retrospectively and the those amendments to paragraphs 18, 19 and 19A
prospectively for annual periods beginning on or after 1 July 2009. If an
entity applies IAS 27 (amended 2008) for an earlier period, the
amendments shall be applied for that earlier period.

41D Paragraph 41B was amended by Improvements to IFRSs issued in [date].

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IAS 31 Interests in Joint Ventures

Paragraph 58A is amended (new text is underlined and deleted text is struck
through) and paragraph 58C is added.

Effective date and transition

58A IAS 27 (as amended in 2008) amended paragraphs 45 and 46 and added
paragraphs 45A and 45B. An entity shall apply the amendment to
paragraph 46 retrospectively and the those amendments to paragraphs 45,
45A and 45B prospectively for annual periods beginning on or after 1 July
2009. If an entity applies IAS 27 (amended 2008) for an earlier period, the
amendments shall be applied for that earlier period.

58C Paragraph 58A was amended by Improvements to IFRSs issued in [date].

IAS 36 Impairment of Assets

Paragraphs 2(h) and (i) are amended (new text is underlined and deleted text is
struck through) and paragraphs 2(j) and 140F are added.

Scope

2 This Standard shall be applied in accounting for the impairment of all

assets, other than:

(a) ...

(h) deferred acquisition costs, and intangible assets, arising from an

insurer’s contractual rights under insurance contracts within the
scope of IFRS 4 Insurance Contracts; and

(i) non-current assets (or disposal groups) classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations; and.

(j) investments in subsidiaries, jointly controlled entities and

associates that are accounted for at cost in the separate financial
statements of the investor.

Transitional provisions and effective date

140F Paragraphs 2(h) and (i) were amended and paragraph 2(j) was added by
Improvements to IFRSs issued in [date]. An entity shall apply the amendment
prospectively for annual periods beginning on or after 1 January 2011.
Earlier application is permitted. If an entity applies the related
amendment in paragraphs 38 and 38D of IAS 27 for an earlier period, it
shall apply the amendment in this Standard at the same time.

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Basis for Conclusions on

proposed amendments to
IAS 27 Consolidated and Separate Financial Statements

Impairment of investments in subsidiaries, jointly controlled

entities and associates in the separate financial statements
of the investor

BC1 The Board received a request to clarify whether in its separate financial
statements the investor should apply the provisions of IAS 36 Impairment
of Assets or IAS 39 Financial Instruments: Recognition and Measurement to test its
investments in subsidiaries, jointly controlled entities, and associates for
impairment. Paragraph 38 of IAS 27 permits an entity that prepares
separate financial statements to account for investments in subsidiaries,
jointly controlled entities and associates either at cost or in accordance
with IAS 39. However, IAS 27 is silent on whether testing for impairment
of those investments accounted for at cost should apply the requirements
of IAS 36 or IAS 39.

BC2 The Board noted two views exist in current practice. The first view points
out that if the investor elects to account for its investments in
subsidiaries, jointly controlled entities and associates at cost, then those
investments are not ‘in accordance with IAS 39’. In accordance with this
view, those investments at cost are precluded from applying IAS 39 and
must apply IAS 36. The second view reiterates the Board’s prior
conclusions that the purpose of separate financial statements is on the
performance of the assets as investments. Therefore, those who believe
in the second view argue that in the separate financial statements of the
investor, the testing for impairment of all investments in subsidiaries,
jointly controlled entities and associates should be in accordance with
IAS 39.

BC3 The Board agreed with the second view and concluded that in its separate
financial statements the investor should apply the provisions of IAS 39 to
test its investments in associates for impairment.

Transitional provisions (2008 amendments)

BC4 In the second phase of the Board’s project on business combinations, the
Board made consequential amendments to other standards. Some of
those amendments are silent on transition. Paragraph 19 of IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors requires
retrospective application for amendments that do not provide specific
transition guidance.

BC5 The Board decided that an entity should apply some of the consequential
amendments to other standards prospectively. The Board therefore
proposes to amend paragraph 60B of IAS 21, paragraph 41B of IAS 28 and
paragraph 58A of IAS 31 to require prospective application.

Proposed amendment to
IAS 28 Investments in Associates

Introduction

The Board proposes the following amendment to IAS 28 Investments in Associates.

Partial use of fair value for measurement of associates

The Board proposes to amend IAS 28 to clarify that different measurement bases
can be applied to portions of an investment in an associate when part of the
investment is designated at initial recognition as at fair value through profit or
loss in accordance with the scope exception in paragraph 1 of IAS 28.

Proposed amendment to
IAS 28 Investments in Associates

Paragraphs 1A and 41E are added.

Scope

1A If an entity determines in accordance with paragraphs 6–10 of this

Standard that it has significant influence in an associate, the entity shall
apply this Standard. If a portion of the investment in the associate
qualifies for the scope exclusion in accordance with paragraph 1, the
entity shall apply the scope exclusion only to the portion to which the
scope exclusion applies. The remaining investment in the associate shall
be accounted for in accordance with this Standard.

Effective date and transition

41E Paragraph 1A was added by Improvements to IFRSs issued in [date]. An entity

shall apply the amendment for annual periods beginning on or after
1 January 2011. Earlier application is permitted. If an entity applies the
amendment for an earlier period it shall disclose that fact.

Basis for Conclusions on

proposed amendment to
IAS 28 Investments in Associates
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

Scope exclusion: investments in associates held by venture

capital organisations, mutual funds, unit trusts and similar
entities

BC1 The Board received a request to clarify whether different measurement

bases can be applied to portions of an investment in an associate when
part of the investment is designated at initial recognition as at fair value
through profit or loss in accordance with the scope exemption in
paragraph 1 of the IAS 28. Paragraph 6 of IAS 28 is clear that the
determination of significant influence includes both direct and indirect
holdings. However, IAS 28 is silent on whether both those investments
included in the scope of IAS 28 and those investments excluded from the
scope of IAS 28 should be considered in establishing the existence of
significant influence and the group’s share in the associate.

BC2 The Board noted two views exist in current practice. The first view
identifies all direct and indirect interests held in the associate by either
the parent or any of its subsidiaries and then applies IAS 28 to the entire
investment in the associate. In accordance with this view, there is only
one investment in the associate and it should be accounted for as one
unit. If not all of the investment qualifies for the scope exemption in
paragraph 1 of IAS 28, the entire investment would be accounted for in
accordance with IAS 28. The second view identifies all direct and indirect
interests held in the associate, but then requires use of the scope criteria
in IAS 28 to determine the proper accounting treatment for different
portions of the investment, consistent with the business purposes for
which those portions may be held.

BC3 The Board agreed with the second view and concluded that once an entity
determines it has significant influence it should apply the provisions of
IAS 28. If a portion of the investment in the associate qualifies for the
scope exclusion in accordance with paragraph 1, the entity should apply
the scope exclusion only to the portion to which the scope exclusion
applies. The remaining investment in the associate should be accounted
for in accordance with this Standard.

Proposed amendment to
IAS 34 Interim Financial Reporting

Introduction

The Board proposes the following amendment to IAS 34 Interim Financial Reporting.

Significant events and transactions

Many users of financial statements have asked the Board to consider whether
some disclosure requirements should be mandated in both interim and annual
financial statements. In particular, users proposed mandating some disclosure
requirements within IFRS 7 Financial Instruments: Disclosures for interim financial
reporting.

The Board proposes an amendment to emphasise the disclosure principles in

IAS 34 and to add further guidance to illustrate how to apply these principles.

Proposed amendment to
IAS 34 Interim Financial Reporting

In the rubric, ‘paragraphs 1–48’ is amended to ‘paragraphs 1–49’. A heading and

paragraph 15 are amended (new text is underlined and deleted text is struck
through). Paragraphs 15A, 15B and 15C are added. Paragraphs 16–18 are
deleted. A heading and paragraph 16A are added. Paragraph 49 is added.
Paragraphs 15B and 16A were previously paragraph 17 and 16, respectively, and
have been marked up solely to show changes from the pre-existing text.

Content of an interim financial report

Selected explanatory notes Significant events and

transactions
15 A user of an entity’s interim financial report will also have access to the
most recent annual financial report of that entity. It is unnecessary,
therefore, for the notes to an interim report to provide relatively
insignificant updates to the information that was already reported in the
notes in the most recent annual report. At an interim date, An entity
shall include in its interim report an explanation of events and
transactions that are significant to an understanding of the changes in
financial position and performance of the entity since the end of the last
annual reporting period is more useful. Information disclosed in relation
to those events and transactions should update the equivalent
information presented in the most recent annual report.

15A A user of an entity’s interim financial report will have access to the most
recent annual financial report of that entity. Therefore, it is unnecessary
for the notes to an interim financial report to provide relatively
insignificant updates to the information that was reported in the notes in
the most recent annual report.

15B Examples of the kinds of disclosures that are required by paragraph 16 are
set out below. Individual IFRSs provide guidance regarding disclosures
for many of these items: The types of events or transactions for which
disclosures would be required are set out below. The list is not
exhaustive.

(a) the write-down of inventories to net realisable value and the

reversal of such a write-down;

(b) recognition of a loss from the impairment of financial assets,

property, plant and equipment, intangible assets, or other assets,
and the reversal of such an impairment loss;

(c) the reversal of any provisions for the costs of restructuring;

(d) acquisitions and disposals of items of property, plant and

equipment;

(e) commitments for the purchase of property, plant and equipment;

(f) litigation settlements;

(g) corrections of prior period errors;

(h) [deleted] significant changes in the business or economic

circumstances that affect the fair value of the entity’s financial
assets and financial liabilities, notwithstanding whether these
assets or liabilities are recognised at fair value or amortised cost;

(i) any loan default or breach of a loan agreement that has not been
remedied on or before the end of the reporting period; and

(j) related party transactions;

(k) significant transfers between levels of the fair value hierarchy in

the measurement of the fair value of financial instruments;

(l) changes in the classification of assets as a result of a change in the

purpose or use of those assets; and

(m) changes in contingent liabilities or contingent assets.

[contains text from pre-existing paragraph 17 marked up for

amendments]

15C Individual IFRSs provide guidance regarding disclosure requirements for

many of the items listed in paragraph 15B. When an event or transaction
is significant to an understanding of the changes in an entity’s financial
position or performance since the last annual financial period, its
interim financial report should provide an explanation of and an update
to the relevant information included in the financial statements of the
last annual financial period.

16–18 [Deleted]

Other minimum disclosures

16A Notwithstanding the requirements in paragraphs 15–15C, A an entity
shall include the following information, as a minimum, in the notes to its
interim financial statements, if material and if not disclosed elsewhere in
the interim financial report. The information shall normally be reported
on a financial year-to-date basis. However, the entity shall also disclose
any events or transactions that are material necessary to an
understanding of the current interim period:

(a) a statement that the same accounting policies and methods of

computation are followed in the interim financial statements as
compared with the most recent annual financial statements or, if
those policies or methods have been changed, a description of the
nature and effect of the change.;

(b) explanatory comments about the seasonality or cyclicality of

interim operations.;

(c) the nature and amount of items affecting assets, liabilities, equity,
net income, or cash flows that are unusual because of their nature,
size or incidence.;

(d) the nature and amount of changes in estimates of amounts

reported in prior interim periods of the current financial year or
changes in estimates of amounts reported in prior financial years,
if those changes have a material effect in the current interim
period.;

(e) issuances, repurchases and repayments of debt and equity

securities.;

(f) dividends paid (aggregate or per share) separately for ordinary

shares and other shares.;

(g) the following segment information (disclosure of segment

information is required in an entity’s interim financial report only
if IFRS 8 Operating Segments requires that entity to disclose
segment information in its annual financial statements):

(i) revenues from external customers, if included in the measure

of segment profit or loss reviewed by the chief operating
decision maker or otherwise regularly provided to the chief
operating decision maker.;

(ii) intersegment revenues, if included in the measure of segment

profit or loss reviewed by the chief operating decision maker

or otherwise regularly provided to the chief operating

decision maker.;

(iii) a measure of segment profit or loss.;

(iv) total assets for which there has been a material change from
the amount disclosed in the last annual financial statements.;

(v) a description of differences from the last annual financial

statements in the basis of segmentation or in the basis of
measurement of segment profit or loss.;

(vi) a reconciliation of the total of the reportable segments’

measures of profit or loss to the entity’s profit or loss before
tax expense (tax income) and discontinued operations.
However, if an entity allocates to reportable segments items
such as tax expense (tax income), the entity may reconcile the
total of the segments’ measures of profit or loss to profit or
loss after those items. Material reconciling items shall be
separately identified and described in that reconciliation.;

(h) material events subsequent to the end of the interim period that
have not been reflected in the financial statements for the interim
period.;

(i) the effect of changes in the composition of the entity during the
interim period, including business combinations, obtaining or
losing control of subsidiaries and long term investments,
restructurings, and discontinued operations. In the case of
business combinations, the entity shall disclose the information
required by IFRS 3 Business Combinations. ; and

(j) changes in contingent liabilities or contingent assets since the end

of the last annual reporting period.

[contains text from pre-existing paragraph 16 marked up for amendments]

Effective date and transition

49 A header and paragraph 15 were amended, paragraphs 15A–15C and 16A

were added and paragraphs 16–18 were deleted by Improvements to IFRSs
issued in [date]. An entity shall apply the amendment for annual periods
beginning on or after 1 January 2011. Earlier application is permitted.
If an entity applies the amendment for an earlier period it shall disclose
that fact.

Basis for Conclusions on

proposed amendment to
IAS 34 Interim Financial Reporting
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

Significant events and transactions

BC1 IAS 34 was issued by the Board’s predecessor body, the International
Accounting Standards Committee (IASC), in 1998. In the light of recent
improvements to disclosure requirements, many users of financial
statements asked the Board to consider whether particular disclosures
required by IFRS 7 Financial Instruments: Disclosures for annual financial
statements should also be required in interim financial statements.
The Board noted that although IAS 34 does not require specific
disclosures, it sets out disclosure principles to determine what
information should be disclosed in an interim financial report.
The Board concluded that amending IAS 34 to place greater emphasis on
these principles and the inclusion of additional examples relating to
more recent disclosure requirements ie fair value measurements would
improve interim financial reporting.

Proposed amendment to
IAS 40 Investment Property

Introduction

The Board proposes the following amendment to IAS 40 Investment Property.

Change from fair value model to cost model

The Board proposes to remove the requirement to transfer investment property
carried at fair value to inventory when it will be developed for sale, to add a
requirement for investment property held for sale to be displayed as a separate
category in the statement of financial position and to require disclosures
consistent with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Proposed amendment to
IAS 40 Investment Property

Paragraphs 57–60 are amended (new text is underlined and deleted text is struck
through) and paragraphs 58A and 85C are added.

Transfers

57 Transfers to, or from, investment property shall be made when, and only
when, there is a change in use, evidenced by:

(a) commencement of owner-occupation, for a transfer from

investment property to owner-occupied property;

(b) [deleted] commencement of development with a view to sale, for a

transfer from investment property to inventories;

(c) end of owner-occupation, for a transfer from owner-occupied

property to investment property; or

(d) commencement of an operating lease to another party, for a

transfer from inventories to investment property.

(e) [deleted]

58 Paragraph 57(b) requires an entity to transfer a property from investment

property to inventories when, and only when, there is a change in use,
evidenced by commencement of development with a view to sale.
When an entity decides to dispose of an investment property without
development, it continues to treat the property as an investment property
until it is derecognised (eliminated from the statement of financial
position), and does not treat it as inventory. Similarly, if an entity begins
to redevelop an existing investment property for continued future use as
investment property, the property remains an investment property and is
not reclassified as owner-occupied property during the redevelopment.

58A An entity that decides to dispose of an investment property shall:

(a) apply IFRS 5 if the investment property meets the criteria to be

classified as held for sale (or are included in a disposal group that is
classified as held for sale), or

(b) continue to apply this Standard and shall provide the disclosures
required by paragraphs 38 and 40–42 of IFRS 5 if the investment
property does not meet the criteria to be classified as held for sale.

59 Paragraphs 60–65 apply to recognition and measurement issues that arise

when an entity uses the fair value model for investment property.
When an entity uses the cost model, transfers between investment
property, and owner-occupied property and or inventories do not change
the carrying amount of the property transferred and they do not change
the cost of that property for measurement or disclosure purposes.

60 For a transfer from investment property carried at fair value to

owner-occupied property or inventories, the property’s deemed cost for
subsequent accounting in accordance with IAS 16 or IAS 2 shall be its fair
value at the date of change in use.

Effective date and transition

85C Paragraphs 57–60 were amended and paragraph 58A was added by
Improvements to IFRSs issued in [date]. An entity shall apply the amendment
prospectively to all decisions to dispose of investment property made for
annual periods beginning on or after 1 January 2011. Earlier application
is permitted. If an entity applies the amendment for an earlier period it
shall disclose that fact.

Basis for Conclusions on

proposed amendment to
IAS 40 Investment Property
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

Transfers

BC1 The Board identified potentially inconsistent guidance regarding the

classification of an investment property when management intends to
sell it. Some read the guidance in paragraph 58 as requiring the
investment property to be classified as inventories in accordance with
IAS 2 Inventories, whereas the guidance in paragraph 56 requires the
investment property to be classified in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations.

BC2 The Board noted that the original classification of an asset as either
investment property or inventory depends on the specific fact pattern of
the entity. The Board noted that requiring investment property to
remain within investment property after its initial classification is
consistent with other changes of use for investment property, such as the
treatment of investment property under construction and investment
property that is redeveloped for continued use as investment property.

BC3 The Board concluded that continuing to measure the property using the
measurement model previously selected in accordance with IAS 40
provided the most relevant information. In addition, the Board
concluded that providing disclosures similar to those required by IFRS 5
gave comparable information about the intended sale of investment
property regardless of whether further development was required before
sale.

Proposed amendment to
IFRIC 13 Customer Loyalty Programmes

Introduction

The Board proposes the following amendment to IFRIC 13 Customer Loyalty

Programmes.

Determination of fair value

The Board proposes to amend IFRIC 13 to clarify the meaning of the term ‘fair
value’.

Proposed amendment to
IFRIC 13 Customer Loyalty Programmes

Paragraph 10A is added.

Effective date and transition

10A Paragraph AG2 was amended by Improvements to IFRSs issued in [date].

An entity shall apply that amendment for annual periods beginning on or
after 1 January 2011. Earlier application is permitted. If an entity applies
the amendment for an earlier period it shall disclose that fact.

In the Appendix, paragraph AG2 is amended (new text is underlined and deleted
text is struck through).

AG2 An entity may estimate the fair value of award credits by reference to the
fair value of the awards for which they could be redeemed. The fair value
of these awards would be reduced to take the award credits takes into
account:

(a) the fair value of awards that would be offered to customers who
have not earned award credits from an initial sale; and

(b) the proportion of award credits that are not expected to be

redeemed by customers.

If customers can choose from a range of different awards, the fair value
of the award credits will reflect the fair values of the range of available
awards, weighted in proportion to the frequency with which each award
is expected to be selected.

Proposed amendment to
illustrative examples accompanying IFRIC 13

Paragraph IE1 is amended (new text is underlined and deleted text is struck
through). Paragraphs IE2–IE5 are not proposed for amendment but are included
here for ease of reference.

Example 1 – Awards supplied by the entity

IE1 A grocery retailer operates a customer loyalty programme. It grants

programme members loyalty points when they spend a specified amount
on groceries. Programme members can redeem the points for further
groceries. The points have no expiry date. In one period, the entity grants
100 points. Management estimates that each loyalty point can be
redeemed for 1.25 currency units (CU1.25). Management expects only 80
of these points to be redeemed. Therefore, the fair value of each point is
CU1, being the value of each loyalty point granted of CU1.25 reduced to
take into account points not expected to be redeemed ((80 points/100
points) × CU1.25 = CU1). Accordingly, m Management estimates the fair
value of each loyalty point to be one currency unit (CU1), and defers
recognition of revenue of CU100.

Year 1
IE2 At the end of the first year, 40 of the points have been redeemed in
exchange for groceries, ie half of those expected to be redeemed.
The entity recognises revenue of (40 points/80* points) × CU100 = CU50.

Year 2
IE3 In the second year, management revises its expectations. It now expects
90 points to be redeemed altogether.

IE4 During the second year, 41 points are redeemed, bringing the total
number redeemed to 40† + 41 = 81 points. The cumulative revenue that
the entity recognises is (81 points/90§ points) × CU100 = CU90. The entity

* total number of points to be redeemed

† number of points redeemed in year 1
§ revised estimate of total number of points expected to be redeemed

has recognised revenue of CU50 in the first year, so it recognises CU40 in

the second year.

Year 3
IE5 In the third year, a further nine points are redeemed, taking the total
number of points redeemed to 81 + 9 = 90. Management continues to
expect that only 90 points will ever be redeemed, ie that no more points
will be redeemed after the third year. So the cumulative revenue to date is
(90 points/90* points) × CU100 = CU100. The entity has already recognised
CU90 of revenue (CU50 in the first year and CU40 in the second year). So it
recognises the remaining CU10 in the third year. All of the revenue
initially deferred has now been recognised.

* total number of points still expected to be redeemed.

Basis for Conclusions on

proposed amendment to
IFRIC 13 Customer Loyalty Programmes
This Basis for Conclusions accompanies, but is not part of, the proposed amendment.

Measuring the fair value of award credits

BC1 The Board was made aware that paragraph AG2 could be interpreted to
mean that the fair value of redemption awards is equal to the fair value
of award credits because the term ‘fair value’ is used to refer to both the
value of the award credits and the value of the awards for which the
credits could be redeemed. To address this, the Board proposes to amend
paragraph AG2 and Example 1 in the illustrative examples to clarify that
when the fair value of award credits is measured based on the value of the
awards for which they could be redeemed, the value of the awards for
which they could be redeemed must be adjusted to reflect expected
forfeitures.

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