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    CH 40 - IFRIC Interpretations

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    Joyce Anne Garduque
    This document summarizes several IFRIC interpretations: 1) IFRIC 1 discusses decommissioning liabilities which are recognized as the present value of costs to dismantle property, plant, and equipment required by law. Changes in the liability are added to or deducted from the asset cost. 2) IFRIC 2 addresses whether members' shares in cooperative entities are equity or liabilities based on redemption terms. Shares are equity if the entity can refuse or prohibit redemption. 3) IFRIC 17 provides that non-cash dividends are recognized as the fair value of distributed assets, with gains/losses on settlement between carrying amounts and initial fair value recognition. Impaired assets are written down

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    CH 40 - IFRIC Interpretations

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    Joyce Anne Garduque
    104 views2 pages
    This document summarizes several IFRIC interpretations: 1) IFRIC 1 discusses decommissioning liabilities which are recognized as the present value of costs to dismantle property, plant, and equipment required by law. Changes in the liability are added to or deducted from the asset cost. 2) IFRIC 2 addresses whether members' shares in cooperative entities are equity or liabilities based on redemption terms. Shares are equity if the entity can refuse or prohibit redemption. 3) IFRIC 17 provides that non-cash dividends are recognized as the fair value of distributed assets, with gains/losses on settlement between carrying amounts and initial fair value recognition. Impaired assets are written down

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    This document summarizes several IFRIC interpretations: 1) IFRIC 1 discusses decommissioning liabilities which are recognized as the present value of costs to dismantle property, plant, and equipment required by law. Changes in the liability are added to or deducted from the asset cost. 2) IFRIC 2 addresses whether members' shares in cooperative entities are equity or liabilities based on redemption terms. Shares are equity if the entity can refuse or prohibit redemption. 3) IFRIC 17 provides that non-cash dividends are recognized as the fair value of distributed assets, with gains/losses on settlement between carrying amounts and initial fair value recognition. Impaired assets are written down

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    104 views2 pages

    CH 40 - IFRIC Interpretations

    Uploaded by

    Joyce Anne Garduque
    This document summarizes several IFRIC interpretations: 1) IFRIC 1 discusses decommissioning liabilities which are recognized as the present value of costs to dismantle property, plant, and equipment required by law. Changes in the liability are added to or deducted from the asset cost. 2) IFRIC 2 addresses whether members' shares in cooperative entities are equity or liabilities based on redemption terms. Shares are equity if the entity can refuse or prohibit redemption. 3) IFRIC 17 provides that non-cash dividends are recognized as the fair value of distributed assets, with gains/losses on settlement between carrying amounts and initial fair value recognition. Impaired assets are written down

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 2

    CHAPTER 40 – IFRIC INTERPRETATIONS

    DECOMMISSIONING LIABILITY
    • IFRIC 1
    • Decommissioning liability as an obligation to dismantle, remove and restore an item of property,
    plant and equipment as required by law or contract.
    • Decommissioning liability is capitalized as cost of the property and initially recognized at present
    value.
    • Change in decommissioning liability
    o A decrease in decommissioning liability is deducted from the cost of the asset.
    o An increase in decommissioning liability is added to the cost at the asset.

    MEMBERS’ SHARES IN COOPERATIVE ENTITIES


    • IFRIC 2
    • May be classified as equity or liability depending on the terms and conditions of the financial
    instrument
    • Classified as equity if the members did not have a right to request for redemption under either of
    the following conditions:
    o If the entity has an unconditional right to refuse redemption of the members’ shares
    o If redemption is unconditionally prohibited by law, regulation or the entity’s charter.

    DISTRIBUTION OF NONCASH ASSET TO OWNERS


    • IFRIC 17
    • Payment of property dividend to shareholders
    • Entity shall measure a liability to distribute noncash asset as a dividend to its owners at the fair
    value of the asset to be distributed
    • Dividend payable is initially recognized at the fair value of the noncash asset on date of declaration
    and is increased or decreased as a result of the change in fair value of the asset at year-end and
    date of settlement
    • Offsetting debit or credit is through equity or directly retained earnings
    • Settlement of dividend payable
    o When an entity settles the dividend payable, the difference between the carrying amount
    of the dividend payable and the carrying amount of the asset shall be recognized as gain
    or loss on distribution of property dividend
    • Measurement of noncash asset distributed
    o Entity shall measure a noncurrent asset classified for distribution to owners at the lower
    of carrying amount and fair value less cost to distribute
    o If the fair value less cost to distribute is lower than the carrying amount of the asset at
    the end of the reporting period, the difference is accounted for as impairment loss.

    EXTINGUISHMENT OF FINANCIAL LIABILITY


    • Simply known as equity swap
    • Equity swap is the issuance of share capital by the debtor to the creditor in full or partial payment
    of an obligation.
    • Equity instruments issued to extinguish a financial liability shall be measured at the following
    amount in the order of priority:
    o Fair value of equity instrument issued
    o Fair value of liability extinguished
    o Carrying amount of liability extinguished
    • The difference between the carrying amount of the financial liability and the initial measurement
    of the equity instrument issued shall be recognized as a gain or loss on extinguishment.
    • Gain or loss on extinguishment shall be reported as a separate line item in the income statement.

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