UITF Draft Abstract 'Hedges of a Net Investment in a Foreign Operation'

On 1 October, the UITF issued Information Sheet 84, setting out a draft UITF Abstract 'Hedges of a Net Investment in a Foreign Operation', which is based on draft Interpretation D22 issued by the IFRIC. It provides a consensus on what constitutes a hedged risk when hedging the exposure from a net investment in a foreign operation and the location of the hedging instrument within the group. The Information Sheet can be accessed at: http://www.frc.org.uk/asb/uitf/pub1409.html and comments are requested by Friday 9 November 2007.

The UITF's response to IFRIC on D22 can be accessed at: http://www.frc.org.uk/asb/publications/other.cfm.

Draft interpretation on revenue recognition from real estate sales

As reported in Inside Track 52, in July, IFRIC issued draft Interpretation IFRIC D21 'Real Estate Sales'. D21 provides guidance on when revenue should be recognised on real estate sales when properties (mainly residential) are sold 'off plan', i.e. before construction is complete. It sets out features that indicate whether a sale agreement is a construction contract (when IAS 11 'Construction Contracts' applies and revenue is recognised as construction progresses) or a sale of goods (when IAS 18 'Revenue' applies and revenue is recognised on completion).

The UITF's response to IFRIC can be accessed at the website reference above. In summary, while the UITF supports the consensus reached by the IFRIC for the sale of real estate it has two particular concerns. The first relates to the wider implication of the consensus for areas other than real estate sales. The second relates to how the draft Interpretation attempts to identify when a sales agreement meets the definition of a construction contract by setting requirements.