The UITF will next meet on 1 February 2012 when it will continue its discussion of a potential item addressing the accounting for residential service charges.
The UITF issued on 17 December 2010 Abstract 48.
Abstract 48 ‘Accounting implications of the replacement of the Retail Prices Index with the Consumer Prices Index for Retirement Benefits’ provides guidance on the accounting implications of the government decision that Consumer Prices Index (CPI) should replace the Retail Prices Index (RPI) as the inflation measure to use in determining the minimum pension increases which must be applied to the statutory index-linked features of retirement benefits.
In summary the Abstract states that:
- whether there is a reduction in Scheme liabilities
This depends on the facts and circumstances.
- how the effect of a reduction in Scheme liabilities should be presented
The UITF reached a consensus that the presentation of a reduction in Scheme liabilities is dependent on whether the obligation is to pay benefits with increases based on RPI, or more generally with inflation–linked increases.
Where the obligation is to pay benefit increases based on RPI the UITF reached a consensus that the change in Scheme liabilities is a change in benefit and gives rise to a past service cost in accordance with FRS 17.
Where there is no obligation to pay benefit increases based on RPI then a change to CPI is a change in the financial assumption about inflation used to measure the Scheme liabilities and represents an actuarial gain or loss in accordance with FRS 17.
- when the effect of a reduction in Scheme liabilities should be recognised
Where there is a reduction in the obligation is to pay benefit increases based on RPI the past service cost should be recognised in the accounting period when any necessary consultations have been concluded or employees’ valid expectations have been changed.
If there is no obligation to pay benefit increases based on RPI an entity should use financial assumptions to measure Scheme liabilities that reflect market expectations at the balance sheet date.
The UITF issued a draft Abstract on 13 October 2010 as
Information Sheet 90. Responses to Information Sheet 90 can be downloaded here:
The UITF has no other active projects.
The UITF also monitors the project of the IFRS Interpretations Committee.
Draft IFRIC Interpretation ‘Stripping Costs in the Production Phase of a Surface Mine’
The UITF has responded to the Draft IFRIC Interpretation ‘Stripping Costs in the Production Phase of a Surface Mine’. The UITF:
- questioned the need for an Interpretation;
- noted that if an Interpretation was to be issued it should consider the capitalisation of all stripping costs as assets and the amortisation thereof over specific parts of the production, where possible, or over the whole life of the mine otherwise. The UITF agrees that it would be inappropriate simply to use the life of mine averaging method in all cases; and
- questioned the effects of the transitional provisions.
Current IFRS Interpretation Committee Projects
Share based Payments: Vesting and Non-vesting conditions
The IFRIC is responding to a request to clarify the basis on which vesting conditions, especially performance conditions, can be distinguished from non-vesting conditions. Specifically, the Committee was asked how to distinguish between a service condition, a performance condition and a non-vesting condition. Additionally, the Committee was asked for clarification on the interaction of multiple conditions.
At the November 2010 meeting the Committee decided to propose clarification to the definitions of service conditions and performance conditions through the next Annual Improvements cycle. The Committee identified the following as higher priority issues to be addressed in this way:
- the correlation between an employee’s responsibility and the performance target
- whether a share market index target may constitute a performance condition
- whether a performance target that refers to a longer period than the required service period may constitute a performance condition
- whether termination of employment is a forfeiture or cancellation event.
The Committee concluded that the following issues, however, should be referred to the IASB for consideration in a future agenda proposal for IFRS 2:
- classification of a non-compete provision
- accounting for the interaction of multiple vesting conditions.
IAS 32 Financial Instruments: Presentation - Put options written over non-controlling interests
The Committee received a significant number of comment letters on the September 2010 tentative agenda decision relating to the request for guidance on how an entity should account for changes in the carrying amount of a financial liability for a put option, written over shares held by a non-controlling interest shareholder (‘NCI put’), in the consolidated financial statements of a parent entity.
These comment letters highlighted the significant diversity in practice that exists in accounting for NCI puts and expressed support for either the Committee, or the Board, providing additional guidance on a timely basis.
The Committee also noted that in October 2010 the Board acknowledged that it currently does not have the capacity to devote the time necessary to deliberate issues relating to the Financial Instruments with Characteristics of Equity (FICE) project.
Consequently, the Committee decided to add this issue to its agenda, with the objective of addressing on a timely basis the current significant diversity that exists in practice. The Committee requested that the staff work with the FICE project team and consider potential alternative models for the accounting for NCI puts. In connection with this, the Committee asked the staff to seek the Board’s views before the next meeting as to whether it should pursue alternatives, including applying derivative accounting for NCI puts, which might require an amendment to other IFRSs in order to implement.
The status of IFRIC projects is located on IFRIC Projects.
