IFRIC exposure drafts
The UITF has responded to two draft Interpretations issued in January by the IASB's International Financial Reporting Interpretations Committee (IFRIC).

D3 Determining whether an Arrangement contains a Lease
This IFRIC proposal provides guidance that would require some arrangements that are leases in substance but not in form to be treated as leases under IAS 17 Leases. Outsourcing and take-or-pay contracts are examples of such arrangements that would need to be examined.

There are two important consequences. First, the guidance will ensure that any finance leases contained in such arrangements are identified and reported as such. Secondly, arrangements that are deemed to contain operating leases will be subject to the considerable disclosures about operating lease commitments required by IAS 17.

The UITF does not currently intend to issue IFRIC's proposal as an addition to UK accounting standards because many of the arrangements would be covered by FRS 5, for which there is no equivalent international standard. The UITF has supported IFRIC's proposal in the context of IASB's existing literature.

D4 Decommissioning, Restoration and Environmental Rehabilitation Funds
D4 provides guidance for entities that contribute to funds established to finance future decommissioning liabilities. The proposals include guidance on when an entity should recognise separate assets (for rights to reimbursement from the fund) and liabilities (to pay decommissioning costs).

The UITF believes that UK accounting standards are sufficiently robust in this area and does not consider that it is necessary, at present, to issue an equivalent addition. The UITF has supported IFRIC's proposals, subject to some clarifications of the consensus.

Waste Electrical and Electronic Equipment
The UITF has considered a draft Interpretation issued by the German Accounting Standards Committee (GASC) concerning the recognition of liabilities arising from the EU Directive on Waste Electrical and Electronic Equipment. The Directive, which is expected to be implemented into UK law by the summer of 2004, will make producers of electrical and electronic equipment responsible for most of the costs of end-of-life collection, recycling and environmentally-friendly disposal. The UITF has commented to GASC and welcomed its initiative and its intention to share its work with IFRIC.

The UITF will monitor developments and the forthcoming legislation before deciding whether to issue equivalent proposals and any additional UK-specific guidance that it might wish to include.

Emission Rights
In May 2003 the UITF issued a draft Abstract on accounting for emission rights schemes (Information Sheet 61). It presented the text of a draft Interpretation from IFRIC, together with the changes that the UITF proposed to reflect accounting requirements in the UK where they differed from international accounting standards. The UITF reported its reservations about the lack of symmetry in the proposed accounting model, and these were shared by many respondents. IASB has since announced that it intends to amend IAS 38 Intangible Assets (so that emissions allowances can be measured at fair value with changes in value recognised in profit or loss) and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance; both standards are important references for accounting for an emission rights scheme. IFRIC is expected to issue revised proposals reflecting the proposed changes to those standards. The UITF will consider its next steps in the light of IFRIC's and IASB's decisions.