IASB Update October 2017

The International Accounting Standards Board (IASB) has published its October 2017 edition of Update, which highlights preliminary decisions made at its October 2017 meeting.

Accounting Policy Changes (Amendments to IAS 8)

The Board tentatively decided that the comment period for the proposed amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors should be at least 120 days.

Definition of a Business

The board discussed the proposed amendments to IFRS 3 Business Combinations dealing with the definition of a business and tentatively decided to:

• clarify the description of the screening test as follows:
  • an entity is permitted, but not required, to carry out the screening test;
  • if the screening test identifies an asset purchase, no further assessment is needed (although the entity is not prohibited from carrying out such further assessment); and
  • if the screening test does not identify an asset purchase, the entity must carry out a further assessment. (If the entity elected not to apply the screening test, it must carry out that same assessment.);
• remove the proposed Illustrative Example J Acquisition of oil and gas operations.
• specify that the gross assets considered in the screening test exclude cash and cash equivalents acquired, and confirm the Board’s tentative decision in April that those gross assets also exclude:
  • goodwill resulting from the effects of deferred tax liabilities; and
  • deferred tax assets;
• confirm all the other tentative decisions made at its April 2017 meeting (see IFS News here) and June 2017 meeting (see IFRS News here);
• not to re-expose the amendments to IFRS 3; and
• that the amendments to IFRS 3 should apply for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning or after 1 January 2020, with earlier application permitted.

Business Combinations under Common Control

The Board tentatively decided to clarify that the scope of the project includes transactions in which a reporting entity obtains control of one or more businesses, regardless of whether IFRS 3 Business Combinations would identify the reporting entity as the acquirer.

Conceptual Framework

Concerning concepts supporting the definition of a liability the Board tentatively decided to:

• clarify in the introduction to the ‘definition of a liability’ section of the Conceptual Framework that each of the three criteria listed in that introduction must be satisfied to meet the definition of a liability;
• clarify that an entity does not yet have a present obligation to transfer an economic resource if it has not yet received economic benefits, or taken an action, that will or may require it to transfer that resource. This is true even if it already has no practical ability to avoid receiving those benefits or taking that action in the future;
• clarify that before an entity has received those benefits or taken that action, it may have an executory contract; and
• omit the phrase ‘or simply being in existence’ from the list of actions that could give rise to a present obligation.

The Board also tentatively decided that it was unnecessary to include a flowchart to illustrate the link between the objective of general purpose financial reporting and the information needed to meet that objective.

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