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30 January 2013

EFRAG: Draft Comment Letter on sale or contribution of assets between an investor and its associate or joint venture


EFRAG issued its draft comment letter on the IASB's Exposure Draft, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Proposed amendments to IFRS 10 and IAS 28). Comments are invited on the letter by 20 March, 2013.

In December 2012, the IASB issued an Exposure Draft: 'Sale or Contribution of Assets between an Investor and its Associate or Joint Venture' ('the ED'). The ED intends to address the acknowledged inconsistency between the requirements in IFRS 10 'Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures' (2011), in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or a joint venture.

EFRAG agrees with the IASB that there is perceived inconsistency between the guidance in IAS 27 'Consolidated and Separate Financial Statements' (as issued in 2008) dealing with the accounting for loss of control of a subsidiary, and the requirements in SIC-13 'Jointly Controlled Entities – Non-Monetary Contributions by Venturers', which restricts a gain or loss arising from contributions of non-monetary assets to an associate or a joint venture. This inconsistency remained when IFRS 10 'Consolidated Financial Statements' replaced IAS 27 (as issued in 2008) and SIC-13 was withdrawn and incorporated into IAS 28 'Investments in Associates and Joint Ventures' (as revised in 2011). Therefore, EFRAG supports the IASB’s efforts to address the issue.

EFRAG considers that the proposed amendments have the merit of being a short-term pragmatic solution to address diversity in practice. However, EFRAG is concerned that the proposed amendments would require an entity to determine whether the assets being sold or contributed meet the definition of a business under IFRS 3 'Business Combinations' and it would raise further issues within IFRS 10 and IAS 28.

In addition, EFRAG believes that the IASB should address in the proposed amendments the accounting treatment in the separate financial statements, sales or contributions to joint operations and the reclassification of gains or losses previously recognised in other comprehensive income.

Press release

Draft comment letter



© EFRAG - European Financial Reporting Advisory Group


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