IFRIC 10 addresses the following issue:
· Should an entity reverse impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets carried at cost if a loss would not have been recognised, or a smaller loss would have been recognised, had an impairment assessment been made only the end of a subsequent reporting period?
IFRIC 10 addresses the interaction between the requirements of IAS 34 Interim Financial Reporting and the recognition of impairment losses on goodwill in IAS 36 Impairment of Assets and certain financial assets in IAS 39 Financial
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IFRIC 12
Service Concession Arrangements
Also refer:
SIC-29 Service Concession Arrangements: Disclosure Periods beginning on or after 1 January 2008Effective Date
Specific quantitative disclosure requirements:
SCOPE
CONSENSUS
· IFRIC 12 gives guidance on the accounting by operators for public-to-private service concession arrangements
· IFRIC 12 applies to public-to-private service concession arrangements if both:
-The grantor controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price
-The grantor controls (through ownership, beneficial entitlement or otherwise) any significant residual interest in the infrastructure at the end of the term of the arrangement.
· IFRIC 12 applies to both:
-Infrastructure that the operator constructs or acquires from a third party for the purpose of the service arrangement
-Existing infrastructure to which the grantor gives the operator access for the purpose of the service arrangement.
· IFRIC 12 does not specify the accounting for infrastructure recognised as PPE by the operator before it entered the service concession agreement
·IFRIC 12 does not specify the accounting by grantors.
Treatment of the operator’s rights over the infrastructure
Infrastructure within the scope of IFRIC 12 is not recognised as property, plant and equipment of the operator because the contractual service arrangement does not convey the right to control the use of the public service infrastructure to the operator. The operator has access to operate the infrastructure to provide the public service on behalf of the grantor in accordance with the terms specified in the contract.
Recognition and measurement of arrangement consideration
Under the terms of contractual arrangements within the scope of IFRIC 12, the operator acts as a service provider. The operator recognises and measures revenue in accordance with IAS 11 Construction Contracts and IAS 18 Revenue for the services it performs.
Construction or upgrade services
The operator accounts for revenue and costs relating to construction or upgrade services in accordance with IAS 11. If the operator provides construction or upgrade services the consideration received or receivable by the operator is recognised at its fair value. The consideration may be rights to:
· A financial asset (as described below) if it has an unconditional right to receive cash or another financial asset. This when the grantor contractually guarantees to pay the operator a specified amounts or the shortfall between amounts received from users and a specified amount
· An intangible asset (IAS 38.45-47 provide guidance) if it receives a right (a licence) to charge user for a public service. Financial asset
The amount due from or at the direction of the grantor is accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement, as:
· A loan or receivable
· An available-for-sale financial asset
· A financial asset at fair value through profit or loss, if so designated upon initial recognition and the conditions for that classification are met. Operation services
The operator accounts for revenue and costs relating to operation services in accordance with IAS 18. Borrowing costs incurred by the operator
In accordance with IAS 23 Borrowing Costs, borrowing costs attributable to the arrangement are recognised as an expense in the period in which they are incurred unless the operator has a contractual right to receive an intangible asset. In this case borrowing costs attributable to the arrangement are capitalised during the construction phase of the arrangement in accordance with IAS 23.
Intangible asset
IAS 38 Intangible Assets applies to any intangible assets recognised. Items provided to the operator by the grantor
Infrastructure items to which the operator is given access by the grantor for the purposes of the service arrangement are not recognised as property, plant and equipment of the operator.
BACKGROUND AND ISSUE
IFRIC 12 sets out general principles on recognising and measuring the obligations and related rights in service concession arrangements. Requirements for disclosing information about service concession arrangements are in SIC-29 Disclosure – Service Concession Arrangements. The issues addressed in IFRIC 12 are:
· Treatment of the operator’s rights over the infrastructure
· Recognition and measurement of arrangement consideration
· Construction or upgrade services
· Operation services
· Borrowing costs
· Subsequent accounting treatment of a financial asset and an intangible asset
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IFRIC 13
Customer Loyalty Programmes
Effective Date Periods beginning on or after 1 July 2008
Specific quantitative disclosure requirements:
SCOPE
CONSENSUS
IFRIC 13 applies to customer loyalty award credits that:
· An entity grants to its customers as part of a sales transaction, i.e. a sale of goods, rendering of services or use by a customer of entity assets; and
· Subject to meeting any further qualifying conditions, the customers can redeem in the future for free or discounted goods or services.
IFRIC 13 addresses accounting by the entity that grants award credits to its customers.
· An entity applies IAS 18 and accounts for award credits as a separately identifiable component of the sales transaction(s) in which they are granted. The fair value of the consideration received or receivable in respect of the initial sale is allocated between the award credits and the other components of the sale
· The consideration allocated to the award credits is measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately – refer to paragraphs AG1 – AG3 for further guidance
· If the entity supplies the awards itself, it recognises the consideration allocated to award credits as revenue when award credits are redeemed and it fulfils its obligations to supply awards. The amount of revenue recognised is based on the number of award credits that have been redeemed in exchange for awards, relative to the total number expected to be redeemed
· If a third party supplies the awards, the entity assesses whether it is collecting the consideration allocated to the award credits on its own account (i.e. as the principal in the transaction) or on behalf of the third party (i.e. as an agent for the third party)
· If the entity is collecting the consideration on behalf of the third party, it:
-Measures its revenue as the net amount retained on its own account, i.e. the difference between the consideration allocated to the award credits and the amount payable to the third party for supplying the awards
-Recognises this net amount as revenue when the third party becomes obliged to supply the awards and entitled to receive consideration for doing so. These events may occur as soon as the award credits are granted. Alternatively, if the customer can choose to claim awards from either the entity or a third party, these events may occur only when the customer chooses to claim awards from the third party.
· If the entity is collecting the consideration on its own account, it measures its revenue as the gross consideration allocated to the award credits and recognises the revenue which has been allocated to the award credits when it fulfils its obligations in respect of the awards
· If at any time the unavoidable costs of meeting the obligations to supply the awards are expected to exceed the consideration received and receivable for them, the entity has an onerous contract. A liability is recognised for the excess in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The need to recognise such a liability could arise if the expected costs of supplying awards increase, for example if the entity revises its expectations about the number of award credits that will be redeemed.
ISSUE
The issues addressed in IFRIC 13 are:
· Whether the entity’s obligation to provide free or discounted goods or services (‘awards’) in the future should be recognised and measured by either:
-Allocating some of the consideration received or receivable from the sales transaction to the award credits and deferring the recognition of revenue (applying IAS 18 Revenue para 13)
-Providing for the estimated future costs of supplying the awards (applying IAS 18 paragraph 19)
· If consideration is allocated to the award credits:
-How much should be allocated to them?
-When should revenue be recognised?
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