The International Financial Reporting Interpretations Committee (IFRIC) has released for public comment Draft Amendment D7 proposing an amendment to the scope of Interpretation SIC-12, Consolidation—Special Purpose Entities.
SIC-12 currently excludes from its scope post-employment benefit plans and equity compensation plans. Such plans are, at present, within the scope of the accounting standard IAS 19 Employee Benefits (as amended in 2002). However, when the accounting standard IFRS 2 Share-based Payment becomes effective 2 , IAS 19 will no longer apply to equity compensation plans. Furthermore, IFRS 2 will amend IAS 32 Financial Instruments: Disclosure and Presentation (as revised in 2003), so that its requirement to deduct treasury shares from equity will also apply to shares purchased, sold, issued or cancelled in connection with employee share option plans, employee share purchase plans, and all other share-based payment arrangements.
The Draft Amendment proposes removing the scope exclusion in SIC-12 for equity compensation plans. Hence, an entity that controls an employee benefit trust (or similar entity) set up for the purposes of a share-based payment arrangement would be required to consolidate that trust.
The Draft Amendment also proposes that the scope exclusion in SIC-12 for post-employment benefit plans should be amended to include other long-term employee benefit plans, to ensure consistency with the requirements of IAS 19. At present, SIC-12 does not exclude other long-term employee benefit plans from its scope. However, IAS 19 requires those plans to be accounted for in a manner similar to that for post-employment benefit plans.
The proposals are open for public comment until 13 September 2004.
Introducing the proposals, the Chairman of the IFRIC, Kevin Stevenson, said:
The IFRIC was asked by the IASB to consider whether the scope exclusion in SIC-12 for equity compensation plans should be removed when IFRS 2 becomes effective. At the same time, the IFRIC reviewed the scope exclusion in SIC-12 for post-employment benefit plans. It concluded that the scope exclusion should be amended to ensure consistency with the requirements of IAS 19 relating to post-employment benefit plans and other long-term employee benefit plans.
Subscribers to the IASB’s Comprehensive Subscription Service can view the Draft Amendment D7 from the secure online services area of the IASB’s Website (www.iasb.org). From 1 July the text of the Draft Amendment will be freely available from the Website.