IASB Issues Exposure Draft for Acquiring Comments on Proposed Amendments to IFRS 11

Friday, December 14, 2012 Print Email

The IASB has issued an exposure draft on ‘Acquisition of an Interest in a Joint Operation’. This is the latest ED that has been issued on the proposals for amendments to International Financial Reporting Standards. The ED proposes amendment of IFRS 11- Joint Arrangements, for the purpose of clarifying that a joint operator is the one who takes into account the acquiring of interest in a joint operation, which is basically a business, by utilizing IFRS 3 as well as other standards that are relevant.

The International Financial Reporting Standard 11 and International Accounting Standard 31 at present do not specifically offer any guidance with regard to the manner in which joint operator must take interest acquisition into account in case of a joint operation.

This has given rise to diverse practices, in which accounting results depend on the manner in which the transaction is being treated i.e. whether it is considered as acquiring of an asset group or business combinations. The two different treatments adopt two distinct approaches including, recognizing and non-recognizing of taxes that have been deferred and goodwill and the expensing or capitalization of costs associated with acquisition.

This matter was taken into consideration initially by the IFRS Interpretations Committee and therefore they proposed the incorporation of improvements to IFRS on an annual basis or designing application related guidance before coming to any conclusion on amendments that have been proposed to IFRS 11.

Amending IFRS 3 and other accounting standards would help in clarifying whether they would or would not be utilized for accounting of interest acquisition in joint operations, which are primarily businesses. Thus, these acquisitions will be recorded utilizing the acquisition procedure laid down by IFRS 3.

These amendments would be applicable to the acquiring of interest in a current joint operation as well as on the acquiring of interest in a joint operation as and when it is formed.

The exposure draft has also proposed amending the IFRS 1 consequentially. This would help in extending and clarifying the operating of the exemptions of the business combination, listed in Appendix C. The ED is available for posting comments only till the 23rd of April 2012.

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