IASB Publishes Proposed Amendment to IFRS 1
The IASB has published Exposure Draft ED/2011/5 Government Loans (Proposed amendments to IFRS 1) for public comment. The proposed amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRSs.
Under amendments made to IAS 20 Accounting for Government Grants and Disclosure of Government Assistance in 2008, an entity is required to measure government loans with a below-market rate of interest at fair value on initial recognition. The proposed amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards would require that first-time adopters apply this requirement in IAS 20 prospectively to loans entered into on or after the date of transition to IFRSs. However, if an entity obtained the information necessary to apply the requirements to a government loan as a result of a past transaction at the time of initially accounting for that loan, then it may choose to IAS 20 retrospectively to that loan.
The proposed requirements mirror the requirements for existing IFRS preparers in relation to the application of the IAS 20 amendments.
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