Proposed Changes—Narrow-scope amendments to IFRS Standards

At its meeting in September 2015, the Interpretations Committee noted that:

1. the feedback received from the outreach indicated that there are divergent views on how to account for the impairment of long-term interests and that the issue is widespread; and
2. the interaction between the requirements of IFRS 9 and IAS 28 in relation to this issue was unclear.

Consequently, the Interpretations Committee considered that an amendment to IFRS would be required in order to clarify the interaction between the requirements in IFRS 9 and IAS 28 in the context of long-term interests that, in substance, form part of the ‘net investment’ and therefore decided to add the issue to its agenda.

At its meeting in November 2015, the Interpretations Committee continued its discussions, and discussed measurement alternatives along with the interaction issues that would arise under each alternative, but it did not reach a consensus.

The Interpretations Committee noted that:

1. the key difference arising from the alternatives is whether the long-term interests are subject to the IFRS 9 impairment requirements; and
2. the scope exception in IFRS 9 is not clear in this respect.

Consequently, the Interpretations Committee decided to consult the International Accounting Standards Board (‘the Board’) about whether and how the Board would expect the scope exception in IFRS 9 to apply to such long-term interests in associates and joint ventures.

At its meeting in December 2015, the Board discussed a request from the Interpretations Committee for input on this issue. Specifically, the Board considered whether long-term interests that, in substance, form part of the net investment in an associate or joint venture should be tested for impairment by applying IAS 28, IFRS 9 or a combination of both. No decisions were made.

At is meeting in February 2016, the Board continued its discussion of the issue, specifically addressing the questions raised by the Interpretations Committee, which were:

1. whether the scope exception in paragraph 2.1(a) of IFRS 9 applies to long-term interests in an associate or a joint venture; and
2. if not, how the requirements of IFRS 9 and IAS 28 Investments in Associates and Joint Ventures interact with respect to such long-term interests.

The Board discussed a staff analysis of IFRS Standards as follows:

1. the scope exception in paragraph 2.1(a) of IFRS 9 does not apply to long-term interests because:


1. the scope exception in that paragraph applies only to interests in an associate or a joint venture that an entity accounts for using the equity method; and
2. long-term interests are not accounted for using the equity method.


2. an entity would account for long-term interests as follows:


1. the entity would recognise and measure the long-term interests applying the requirements of IFRS 9, including the impairment requirements of IFRS 9;
2. in allocating any losses of the associate or joint venture, the entity would then include the carrying amount of those long-term interests (determined applying IFRS 9) as part of the net investment to which the losses are allocated; and
3. the entity would assess the net investment for impairment applying the requirements in paragraphs 40 and 41A-43 of IAS 28.

12 Board members agreed with the staff analysis and 2 Board members disagreed.

At its meeting in March 2016, the Interpretations Committee continued its discussion on the issue. During the discussion, the Interpretations Committee raised some further questions about the accounting for long-term interests, specifically relating to the interaction between the measurement requirements of IFRS 9 and the loss allocation and impairment requirements in IAS 28.

At its meeting in May 2016, the Interpretations Committee agreed with the staff analysis that had been presented to the Board at its meeting in February 2016 (for details please see above). The Interpretations Committee tentatively decided to develop a draft Interpretation, which would explain how to account for long-term interests.

At its meeting in September 2016, the Interpretations Committee completed its discussion of the issue and directed the staff to prepare the ballot draft of the draft interpretation.

At its meeting in September 2016, the Board objected to the release of the draft Interpretations, and instead instructed the staff to explore whether there is a more effective way of clarifying which Standards apply to long-term interests.

At its meeting in October 2016, the Board tentatively decided to propose amendments to IAS 28 to clarify that an entity applies IFRS 9, in addition to IAS 28, to long-term interests.

At this meeting, November 2016, the Board tentatively decided that the comment period for the proposed amendments to IAS 28 should be no less than 90 days.  The Board also confirmed that it had complied with the necessary due process requirements in developing the proposed amendments.

The Exposure Draft of Annual Improvements to IFRS Standards 2015-2017 Cycle was published in January 2017. The comment period ends on 12 April 2017.

At its meeting in May 2017, the Board discussed feedback received on the proposed amendments and tentatively decided to reaffirm those amendments.