April IASB Update Available

The International Accounting Standards Board (IASB) has published its April edition of Update, which summarises its meeting that took place on 24 and 27 April 2017.

A summary of the decisions made by the IASB are discussed below.

Insurance Contracts

The Board plans to issue IFRS 17 in the second half of May 2017.

Implementation and maintenance of IFRS Standards

The Board tentatively decided that:

• as part of the next Annual Improvements cycle, it should amend IFRS 9 Financial Instruments to clarify that when applying the ‘10% test’ for assessing whether to derecognise a financial liability, an entity should include only fees paid or received between the entity and the lender (including fees paid or received by either the entity or the lender on the other’s behalf);
• entities should apply this amendment only to modifications or exchanges of financial liabilities that occur on or after the beginning of the annual reporting period in which the entity first applies the amendment.

The Board agreed with the Interpretations Committee recommendations on proposed amendments to IAS 19 Employee Benefits and IFRIC 14 IAS The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, and tentatively decided not to exclude minor plan amendments from the scope of the amendments to IAS 19.  The Board also agree with the Committee’s recommendations on the transition requirements for the amendments to IAS 19 and IFRIC 14 and tentatively decided that

• an entity should apply the amendments to IFRIC 14 retrospectively (with an exemption for adjustments to the carrying amount of assets outside the scope of IAS 19)
• an entity should apply the amendments to IAS 19 prospectively to plan events occurring on or after the effective date; and
• the amendment as should provide no transition relief for first-time adopters.

The Board tentatively decided to proceed with amendments to:

• IFRS 3 Business Combinations to clarify that when an entity obtains control of a business that is a joint operation, it remeasures previously held interests in that business, and to further clarify that it remeasures its overall previously held interest in that business; and
• IFRS 11 Joint Arrangements to clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

Definition of a Business

Regarding Exposure Draft2016/1 Definition of a Business and Accounting for Previously Held Interests. The Board tentatively decided to:

• ma the screening test optional on a transaction-by-transaction basis. Thus an entity could on a transaction-by-transaction basis elect to bypass the screening test and assess directly whether a substantive process has been acquired.
• confirm that the screening test is determinative. This means that if an entity has carried out the screening test and concluded that a concentration exists, the entity should treat the transaction as an asset purchase. There is no further assessment that might change that conclusion. If no concentration exists, the entity then should assess whether it has acquired a substantive process.
• specify that the gross assets considered in the screening test exclude goodwill resulting from the effects of deferred tax liabilities and red tax assets.
• clarify that guidance on 'a single asset' for the screening test also applies when one of the acquired assets is a right-of-use asset, as described in IFRS 16 Leases (for example leasehold land and the building on it are a single asset for the screening test).
• clarify that when assessing whether assets are 'similar' for the screening test, an entity should consider the nature of each single asset and the risks associated with managing and creating outputs from the assets.
• clarify that the new guidance on what assets may be considered a single asset or a group of similar assets is not intended to modify the existing guidance on similar assets in paragraph 36 of IAS 38 Intangible Assets and the term 'class' in IAS 16 Property, Plant and Equipment, IAS 38 and IFRS 7 Financial Instruments: Disclosures

The full copy of IASB Update is available from the IASB web site here.