The Committee noted that:
- because the transaction is not a business combination, paragraph 2(b) of IFRS 3 requires the acquiring entity, in its consolidated financial statements, to allocate the purchase price to the assets acquired and liabilities assumed; and
- paragraph 15(b) of IAS 12 says that an entity does not recognise a deferred tax liability for taxable temporary differences that arise from the initial recognition of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither accounting profit or loss nor taxable profit (tax loss).
Accordingly, on acquisition, the acquiring entity recognises only the investment property and not a deferred tax liability in its consolidated financial statements. The acquiring entity therefore allocates the entire purchase price to the investment property.
The Committee concluded that the requirements in IFRS Standards provide an adequate basis for an entity to determine how to account for the transaction. The Committee also concluded that any reconsideration of the initial recognition exception in paragraph 15(b) of IAS 12 is something that would require a Board-level project.
Consequently, the Committee decided not to add this matter to its standard-setting agenda.
The Committee noted that the Board had recently considered whether to add a project on IAS 12 to the Board’s agenda but had decided not to do so. Consequently, the Committee did not recommend that the Board consider adding a project to its agenda on this topic.