ASCG comments on the IASB’s Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12

On 10 May 2021, the ASCG sent their comment letter  on the Post-implementation Review of IFRS 10, IFRS 11 and IFRS 12 to the IASB.

Overall, we believe that IFRS 10 provides a robust set of principles and requirements that enable an investor to determine whether it controls an investee. We acknowledge that in some situations, assessing whether an investor controls an investee can be challenging in practice. However, we believe that most of the application issues encounter in practice due to the complexity of contractual arrangements and are not caused by any fundamental deficiencies in the principles and requirements of IFRS 10.

Further, although the initial application of IFRS 11 proved challenging in practice (e.g., regarding the classification of joint arrangements), we observe that solutions have been developed for these issues.

Notwithstanding our general statement that we believe that IFRS 10 and IFRS 11 are working effectively in general, we observe that in practice some application issues persist for which IFRS Standards are still lacking guidance. These issues primarily relate to how the scope of IFRS 10 and IFRS 11 interact with other IFRS Standards, such as:

• the accounting for put/call options on non-controlling interests,
• the sale or contribution of a subsidiary (or a group of assets) between an investor and its associate or joint venture,
• whether the legal form of a transaction should result in any difference in accounting for the transaction (e.g., the sale of an equity interest in a single-asset entity rather than a direct sale of the asset within that entity), and
• the accounting from the perspective of an agent, i.e., how do the requirements on ‘principals and agents’ in IFRS 10 interact with IAS 28.

We believe that these cross-cutting issues should be addressed by the IASB through standard setting.

Further, we recommend the IASB develop principle-based guidance on the accounting for (all possible) transactions that alter the relationship between an investor and an investee. We note that IFRS Standards are still lacking guidance for a number of transactions, and many of these transactions involve changes in interests in joint operations.

Details are outlined in the ASCG comment letter, which is available on the ASCG’s website.