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Thursday 22 August 2019

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The Interpretations Committee tentatively decided not to add this issue on to its agenda

 10 November 2015


The Interpretations Committee received a request to address the accounting for variable payments to be made for the purchase of an item of property, plant and equipment or an intangible asset outside of a business combination. The Interpretations Committee discussed this issue over several meetings between 2011 and 2013. Because the accounting for variable payments was being considered by the IASB as part of its projects on Leases and a revised Conceptual Framework, the issue was put on hold pending completion of the redeliberations on the proposals in the Exposure Draft Leases (published in May 2013). Subsequently, the Interpretations Committee revisited this issue at its meetings in September and November 2015.

The Interpretations Committee could not reach a consensus on whether the variable payments that depend on the purchaser’s future activity should be recognised as a liability until that activity is performed and what the initial measurement of this liability should be. Some members of the Interpretations Committee were of the view that all variable payments met the definition of a liability and should be initially recognised and measured at fair value. Other members did not think that variable payments that depend on the purchaser’s future activity met the definition of a liability for the purchaser until the activity occurs.

The Interpretations Committee considered the additional concepts proposed for the definition of a liability in the Conceptual Framework Exposure Draft (published in May 2015) and also observed that during the deliberations on the proposals in the Exposure Draft Leases, members of the IASB had expressed mixed views on whether variable payments linked to future performance or use of the underlying asset in a lease met the definition of a liability. Some members of the IASB did not think that such payments met the definition of a liability for the lessee until the performance or use occurs while other members were of the view that all variable lease payments met the definition of a liability for the lessee. The Interpretations Committee noted that the IASB did not conclude on whether these variable payments met the definition of a liability.

The Interpretations Committee observed that this issue is too broad for the Interpretations Committee to address within the confines of existing IFRSs and consequently [decided] not to add this issue to its agenda.


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