Narrow-scope amendments (Annual Improvements)

The IFRS Interpretations Committee observed that there was uncertainty about whether paragraph 2(a) of IFRS 3, which excludes the formation of joint ventures from the scope of IFRS 3, should have been amended to refer to joint arrangements when IFRS 11 Joint Arrangements was issued. The IASB did not change the wording of the scope exclusion in paragraph 2(a) of IFRS 3 for ‘the formation of a joint venture’ when it replaced IAS 31 Interests in Joint Ventures with IFRS 11, although the Interpretations Committee understood that the IASB intended not to change the scope of IFRS 3.

There was also uncertainty about whether the scope exclusion in paragraph 2(a) of IFRS 3 only addresses:

1. the accounting by the joint arrangements themselves in their financial statements; or
2. the accounting by the parties to the joint arrangement for their interests in the joint arrangement.

The IASB concluded that paragraph 2(a) of IFRS 3 should be amended to address all types of joint arrangements and to remove uncertainty about the financial statements to which it applies. Consequently, the IASB proposes to amend paragraph 2(a) of IFRS 3 to:

1. exclude the formation of all types of joint arrangements from the scope of IFRS 3 by replacing ‘joint venture’ with ‘joint arrangement’; and
2. clarify that it only excludes the accounting for the formation of a joint arrangement in the financial statements of the joint arrangement itself from the scope of IFRS 3.

This proposed amendment will be included as part of the Annual Improvements Cycle 2011-2013.