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The Interpretations Committee tentatively decided to seek input from the IASB on whether to postpone further discussions on a transaction

 08 September 2015


The Interpretations Committee received a request to clarify whether a previously held interest in the assets and liabilities of a joint operation is remeasured to fair value when the investor’s acquisition of an additional interest results in the investor becoming a joint operator (ie assuming joint control) in the joint operation.

The Interpretations Committee observed at its meeting in May 2015 that it would be useful to analyse other transactions simultaneously with the fact pattern that had been submitted. At its meeting in July 2015, the Interpretations Committee agreed to include within the scope of its project the following transactions:

  1. obtaining control of a joint operation either from having joint control in, or being a party to, a joint operation prior to the transaction (Transaction 1);
  2. loss of control resulting in the party having joint control in, or being a party to, a joint operation subsequent to the transaction (Transaction 2); and
  3. change of interests resulting in a party to a joint operation obtaining joint control in a joint operation (Transaction 3).

At this meeting the staff presented an analysis of the existing guidance relating to the remeasurement of previously held interests. This analysis identified some general principles that were then applied to the analysis of the specific transactions identified as being within the scope of the project.

The Interpretations Committee agreed that the key factors that should be used in assessing whether or not previously held interests should be remeasured are:

  1. the significance of the underlying economic event (for example, obtaining control of a business and loss of control of a subsidiary are characterised as a significant economic events); and
  2. the measurement model applicable to the recognition of the previously held/retained interests (for example, IFRS 3 Business Combinations and IFRS 9 Financial Instruments use fair value-based measurement models which would indicate that previously held interests should be remeasured).

The Interpretations Committee decided that the accounting for previously held interests should be separately analysed for transactions involving assets, or groups of assets, that meet the definition of a business versus those that do not. Several members also noted that the structure of the investment may have a bearing on the analysis and should be a relevant consideration.

Where the asset or group of assets, involved in Transaction 1 and Transaction 3 meets the definition of a business, the Interpretations Committee decided to recommend amendments in the form of annual improvements to reflect its decisions. Accordingly, the details of the discussions on these transactions are presented in the section on Item recommended to the IASB for Annual Improvements.

The Interpretations Committee noted that Transaction 1 and Transaction 3 should not be included in the scope of the project where the asset or group of assets, involved in the transaction did not meet the definition of a business. See section on Interpretations Committee tentative agenda decisions for further information.

Transaction 2: loss of control resulting in the entity having joint control over, or being a party to, a joint operation subsequent to the transaction

The Interpretations Committee discussed whether retained interests should be remeasured in a loss of control transaction that results in an investor having joint control of, or being a party to, a joint operation subsequent to the transaction.

The Interpretations Committee observed that consistent with IFRS 10 Consolidated Financial Statements, loss of control is a significant economic event. A number of Interpretations Committee members expressed a preference for remeasurement of the retained interests in transactions in which the asset, or group of assets, met the definition of a business. However, the Interpretations Committee also noted that this transaction has similarities with a sale or contribution of assets to a joint venture or an associate, which has been the subject of recent discussions by the IASB. The Interpretations Committee therefore decided to consult with the IASB to assess if it should postpone further discussion on this transaction (both for transactions in which the asset, or group of assets, meets the definition of a business and for those where it does not) until the research project on the equity method of accounting is completed.

The staff will present a paper to the IASB at a future meeting to obtain its views on whether or not the Interpretations Committee should postpone further discussions on this transaction or complete its deliberations.



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