Final agenda decisions

Recent final IFRS Interpretations Committee agenda decisions are summarised below.

This summary also includes matters where the IASB has decided to undertake standard setting with respect to the matter discussed by the IFRS Interpretations Committee.

Links to the full agenda decision (or the IASB’s decision to undertake standard setting) are provided below.

We encourage you to read the agenda decisions and consider whether and how these may affect your financial statements.


Final agenda decisions – no standard-setting activity

Date published: 21 July 2022

The Committee received a request asking whether particular measures to encourage reductions in vehicle carbon emissions give rise to obligations that meet the definition of a liability in IAS 37.

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Date published: 21 July 2022

The Committee received a request about whether a special purpose acquisition company (SPAC), in applying IAS 32, classifies public shares it issues as financial liabilities or equity instruments. A SPAC is a listed entity that is established to acquire a yet-to-be-identified target entity.

Read the final agenda decision

Date published: 21 July 2022

The Committee received a request about a group of annuity contracts. The request asked how an entity determines the amount of the contractual service margin to recognise in profit or loss in a period because of the transfer of insurance coverage for survival in that period.

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Date published: May 2022

The Committee was asked whether a reseller of software licences is a principal or agent for the purpose of applying IFRS 15 Revenue from Contracts with Customers.

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Date published: April 2022

The Committee was asked whether a demand deposit should be included within ‘cash and cash equivalents’ in the financial statements, if that demand deposit is subject to contractual restriction on use as agreed with a third party. 

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Date published: March 2022

TLTRO III refers to the third programme of the targeted longer-term refinancing operations (TLTROs) of the European Central Bank (ECB). When a bank borrows from the ECB under this programme, the amount that the bank can borrow and the interest rate on each tranche of borrowings are linked to the volume and amount of loans that this bank advances to non-financial corporations and households.

The Committee received several questions on how the borrowing bank accounts for the amounts borrowed under TLTRO III.

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Date published: December 2021

The Committee was asked whether a certain arrangement between a windfarm electricity generator (‘supplier’) and an electricity retailer gives the retailer the right to “obtain substantially all the economic benefits” from use of a windfarm over the term of the arrangement – and therefore, whether the arrangement contains a lease under IFRS 16 Leases.   

The retailer and supplier operate in a market where electricity can be bought and sold only from/to the market’s grid, at a spot price set by the market operator. The retailer and supplier have entered into the following arrangement. 

  1. For the next 20 years, the retailer will pay the supplier the difference between the spot price and an agreed fixed price per megawatt supplied to the grid.  
  2. In return, the supplier will transfer to the retailer all renewable energy credits that the supplier receives for using the windfarm during the term of the arrangement.  

The Committee noted that the economic benefits from using the windfarm include electricity, which is the primary output, and renewable energy credits, which is a by-product. The abovementioned arrangement gives the retailer the right to obtain the renewable energy credits from the use of the windfarm, but not the right to obtain electricity produced by the windfarm. Therefore, the Committee concluded that in this arrangement, the retailer does not obtain substantially all the economic benefits from the use of the windfarm over the term of the arrangement. Consequently, this arrangement does not contain a lease under IFRS 16.  

The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision. 

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Date published: October 2021

The Committee was asked how a lessee accounts for non-refundable value added tax (VAT) charged on lease payments. In the question received by the Committee, the lease agreement requires the lessee to make rent payments to the lessor on a VAT-inclusive basis. The lessee can recover from the government some, but not all, of the VAT that is pays to the lessor. The Committee was asked whether, in applying IFRS 16 Leases, the lessee includes non-refundable VAT in the lease payments (e.g. when calculating the lease liability).  

The Committee conducted outreach on this matter and did not find evidence that this matter has widespread effect or that it is expected to have material impact on affected entities.

The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision.

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Date published: October 2021

The Committee received a request about the application of IAS 32 Financial Instruments: Presentation to the reclassification of warrants. The question related to a warrant that gives the holder the right to buy a fixed number of the issuer’s equity instruments, for an exercise price that will be fixed at a future date. At initial recognition, the issuer classifies the warrant as a financial liability, rather than equity – because at that stage the warrant’s exercise price is not fixed, therefore the ‘fixed-for-fixed’ condition in IAS 32 is not met. The Committee was asked whether the issuer reclassifies the warrant as an equity instrument following the fixing of the exercise price after initial recognition.

The Committee observed that IAS 32 does not contain general requirements for reclassifying financial liabilities and equity instruments after initial recognition, when the instrument’s contractual terms are unchanged. Reclassification of instruments by the issuer is one of the matters to be considered by the IASB as part of its current project on Financial Instruments with Characteristics of Equity (FICE). The Committee considers that the abovementioned question should be considered by the IASB as part of the FICE project.

The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision.

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Date published: June 2021

IAS 2 defines the net realisable value of inventory (NRV) as the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. The Committee was asked whether, the ‘estimated costs necessary to make the sale’ include all costs necessary to make the sale, or only those that are incremental to the sale.

The Committee agreed that while the standard does not specify which costs to include when estimating the costs necessary to make the sale, an entity cannot limit the costs it includes to those that are only incremental. They considered that incremental costs are often the starting point before considering whether additional costs need to be included. The Committee noted that including only incremental costs could fail to achieve the objective of writing inventories down in IAS 2.

IAS 2 does not specify or further define the estimated costs necessary to make the sale, other than stating the objective of writing inventories down to NRV is to avoid inventories being carried ‘in excess of the amounts expected to be realised from their sale’.

Entities will need to use judgement, considering the specific facts and circumstances (including the nature of inventories) to determine which of costs are necessary to sell inventories.

The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision.

We understand that some New Zealand entities currently have a policy of using incremental costs only to estimate the costs necessary to sell inventories and these entities may need to change their accounting policy for inventories in light of the Committee’s agenda decision.

For those entities that have material inventory balances we encourage you to review your accounting policy for determining the net realisable value of inventories (which includes the estimated costs necessary to make the sale). The accounting for any changes to the accounting policy for inventories should be discussed with an accounting advisor.

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Date published: June 2021

The Committee received a request about the accounting applied by an entity that is no longer a going concern. The request asked whether such an entity:

  • can prepare financial statements for prior periods on a going concern basis, if it was a going concern in those periods and has not previously prepared financial statements for those periods; and
  • restates comparative information to reflect the basis of accounting used in preparing the current period’s financial statements, if it had previously issued financial statements for the comparative period on a going concern basis.

With respect to the first question, the Committee concluded that under the requirements on going concern in IAS 1 and IAS 10, an entity that is not a going concern cannot prepare financial statements on a going concern basis – including for prior periods where the financial statements have not yet been authorised for issue.

With respect to the second question on the restatement of comparatives, the Committee did not observe diversity in practice in this regard, and concluded that this matter does not have a widespread effect.

 The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision with explanatory guidance material.

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Date published: May 2021

The Committee received a request about applying the hedge accounting requirements in IFRS 9 when the risk management objective is to ‘fix’ cash flows in real terms.

The request referred to an entity that has a floating rate instrument and enters into an ‘inflation swap’ – to swap the variable interest cash flows from a floating rate instrument for variable cash flows adjusted for inflation. The request asked whether the inflation swap can be designated in a cash flow hedging relationship, to hedge changes in the variable interest payments arising from changes in the real interest rate.

The variable payments on the floating rate instrument are based on a nominal market interest rate. The Committee observed that nominal interest rates (such as LIBOR) generally do not change as a direct result of changes in inflation or the real interest rate. That is, changes in the real interest rate are not an identifiable pricing element when setting the nominal interest rate.

The Committee therefore concluded that the real interest rate risk component in the proposed cash flow hedging relationship does not meet the requirements in IFRS 9 to be designated as an eligible hedged item.

The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision with explanatory guidance material.

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Date published: May 2021

The Committee was asked how an entity attributes benefits to periods of service for a particular defined benefit plan. The plan has the following terms:

  • employees are entitled to a lump sum benefit payment when they reach a specified retirement age (for example, age 62), provided they are still employed by the entity; and
  • the retirement benefit amount that the employee is entitled to depends on the employee’s length of service with the entity before the retirement age – but it is capped at a specified number of years (for example, 16 years).

The Committee concluded that under the requirements of IAS 19, the entity would attribute retirement benefit to each year in which an employee renders service from the age of 46 to the age of 62 (due to the 16-year cap on the retirement benefit). Services rendered by the employee before the age of 46 (or after the age of 62) do not give rise to retirement benefits under the plan. If employment commenced on or after the age of 46, the entity attributes retirement benefit to each year from the date the employee first renders service to the age of 62.

The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision with explanatory guidance material.

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Date published: April 2021

The Committee considered how an entity should account for costs incurred in configuring and customising software in cloud-based software as a service arrangements – should these costs be capitalised or expensed?

This question related to a cloud-based software as a service arrangement (often referred to as SaaS), where an entity typically pays a fee to receive access to the supplier’s application software in the cloud over a contract term. In the type of arrangement considered by the Committee, the right to access the software does not provide the entity with a software asset.

The Committee observed that in this type of arrangement, the costs of configuring or customising the software would often not meet the requirements for capitalisation as an intangible asset. This is because the entity does not control the software being configured or customised, and the configuration or customisation do not create a resource controlled by the customer that is separate to the software. However, an entity may in certain circumstances be able to capitalise costs incurred configuring or customising the application software.

 The Committee concluded that no standard-setting activity is required and instead published a final Agenda Decision with explanatory guidance material.

Final Decision 

XRB Staff Q&A's


Standard-setting projects arising from IFRS Interpretations Committee discussions

Date project added to IASB’s work plan: June 2021

The Committee recently considered questions concerning how to classify debt and other financial liabilities (i.e. loans) as current or non-current in particular circumstances.

Specifically, the Committee discussed how an entity determines whether it has the right to defer settlement of a liability for at least twelve months after the reporting period when:

  • the right to defer settlement is subject to the entity complying with specified conditions; and
  • compliance with the specified conditions is tested at a date after the end of the reporting period.

The Committee reached a tentative decision that in certain circumstances, the liability would be classified as current.

In April 2021, the Committee confirmed its agreement with the conclusion that it reached in its tentative agenda decision. However, the Committee agreed to report back to the IASB on the feedback it received, before finalising the Agenda Decision.

Given the feedback received by the Committee, in June 2021 the IASB decided to add to its work plan a project to propose amendments to IAS 1 Presentation of Financial Statements. The IASB tentatively decided to amend IAS 1 with respect to classification (as current or non-current), presentation and disclosures of liabilities for which an entity’s right to defer settlement for at least 12 months is subject to the entity complying with conditions after the reporting period.

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