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Basis for conclusion on IFRS 11 transition

Basis for conclusion on IFRS 11 transition

Basis for conclusion on IFRS 11 transition

Transition

The exposure draft proposed retrospective application of the requirements. In its redeliberation of ED 9, the Board observed that entities affected by the changes introduced by the IFRS would have enough time to prepare to apply the new requirements retrospectively. The Board was informed of a few cases in which entities, on the basis of their analysis of the proposals in ED 9, had already changed their accounting for interests in joint arrangements retrospectively, taking advantage of the accounting option that IAS 31 offered to jointly
controlled entities

However, in its discussions, the Board considered the views of some respondents to ED 9 who had expressed their concern about applying the requirements retrospectively, because of undue cost and effort. In response to these concerns, the Board decided that in the case of changing from proportionate consolidation to the equity method, an entity should not adjust retrospectively any differences between the accounting methods of proportionate consolidation and equity method, but should instead aggregate the carrying amounts of the assets and liabilities, including any goodwill arising from acquisition, that the entity had previously proportionately consolidated into a single line investment as at the beginning of the earliest period presented.

The Board also decided that the opening balance of the investment should be tested for impairment in accordance with paragraphs 40–43 of IAS 28 (as amended in 2011), with any resulting impairment loss being adjusted against retained earnings at the beginning of the earliest period presented.

Basis for conclusion on IFRS 11 transition

The Board also considered the case when an arrangement that was previously proportionately consolidated has a negative net asset position on transition. In such a case, an entity should assess whether it has legal or constructive obligations in relation to those negative net assets. The Board concluded that if the entity does not have legal or constructive obligations in relation to the negative net assets, it should not recognise the corresponding liability but it should adjust retained earnings at the beginning of the earliest period presented. The entity should also be required to disclose this fact along with its cumulative unrecognised share of losses of the joint venture as at the beginning of the earliest period presented and at the date at which the IFRS is first applied.

The Board also considered requiring disclosures to help users of financial statements to understand the consequences of the accounting change for those joint arrangements that would be changing from proportionate consolidation to the equity method. To address this need, the Board decided that an entity IFRS 11 BCshould disclose a breakdown of the assets and liabilities that have been aggregated into the single line investment as at the beginning of the earliest period presented.

Basis for conclusion on IFRS 11 transition

The Board redeliberated the transition requirements for entities changing from the equity method to accounting for assets and liabilities in respect of their interest in a joint operation. The Board decided to require an entity to recognise each of the assets, including any goodwill arising from acquisition, and the liabilities relating to its interest in the joint operation at its carrying amount on the basis of the information used by the entity in applying the equity method, instead of requiring the entity to remeasure its share of each of those assets and liabilities at the date of transition. The Board did not believe that the costs of requiring entities to remeasure the assets and liabilities relating to the joint operation as a result of the accounting change would outweigh the benefits

Basis for conclusion on IFRS 11 transition

The International Financial Reporting Standards Foundation, or IFRS Foundation, is a nonprofit accounting organization. Its main objectives include the development and promotion of the International Financial Reporting Standards (IFRSs) through the International Accounting Standards Board (IASB), which it oversees.[1][3]

The foundation was formerly named the International Accounting Standards Committee (IASC) Foundation until a renaming on 1 July 2010, and as of 2012 is governed by a board of 22 trustees.

The IFRS Foundation also develops and maintains the IFRS Taxonomy, which is the representation of the IFRSs in eXtensible Business Reporting Language (XBRL), via its XBRL team. The team is supported by the XBRL Advisory Council and the XBRL Quality Review Team, which respectively provide strategic advice and reviews developed taxonomies.Additionally, in 2012 the foundation issued a call for industry participants in a project to develop “common industry practice concepts” for the taxonomy.

XBRL provides a “common, electronic format for business and financial reporting”, which will contribute to the global convergence of accounting standards towards IFRS; the director of XBRL activities at the IFRS Foundation, Olivier Servais, hopes that “everybody will be using it” in future.As of March 2012, the IFRS Taxonomies have “considerably fewer” tags than GAAP taxonomies, and the Security and Exchange Commission has not approved the IFRS Taxonomy for use in XBRL filings in the United States.

Basis for conclusion on IFRS 11 transition

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