FRSC Approves Adoption of IFRIC Interpretations
The Financial Reporting Standards Council, or FRSC, (the successor body to the Accounting Standards Council) approved the adoption as part of Philippine Financial Reporting Standards the following Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC)
- Interpretation IFRIC 4, Determining Whether an Arrangement Contains a Lease
This Interpretation provides guidance for determining whether an arrangement, comprising a transaction or a series of related transactions, that does not take the legal form of a lease but conveys a right to use an asset (e.g., an item of property, plant or equipment) in return for a payment or series of payments, is or contains, a lease that should be accounted for in accordance with PAS 17, Leases. Examples of such arrangements are outsourcing arrangements or take-or-pay and similar contracts. The Interpretation addresses how to determine whether an arrangement is, or contains a lease; when such assessment or a reassessment should be made; and if an arrangement is, or contains, a lease, how the payments for the lease should be separated from payments for any other elements in thecontract. The Interpretation is effective for annual periods beginning on or after January 1, 2006.
- Interpretation IFRIC 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
This Interpretation provides guidance on accounting by a contributor, for interests in decommissioning, restoration and environmental rehabilitation funds. Such funds are intended to segregate assets to fund some or all of the costs of decommissioning a plant (e.g., a nuclear plant) or certain equipment (e.g., cars), or in undertaking environmental rehabilitation. The Interpretation addresses how a contributor should account for its interest in a fund and how to
account for an obligation to make additional contributions. The Interpretation is effective for annual periods beginning on or after January 1, 2006.
- Interpretation IFRIC 6, Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment
This Interpretation gives guidance on the accounting for liabilities for waste management costs, specifically, the recognition of liabilities for waste management under the European Union’s Directive on Waste Electrical and Electronic Equipment, (i.e. waste arising from products sold on or before August 13, 2005). It concludes that the obligating event that triggers liability recognition in accordance with PAS 37, Provisions, Contingent Liabilities and Contingent Assets, is participation in the market during a measurement period (rather than the production or sale of the equipment, nor the incurrence of waste management costs).The Interpretation is effective for annual periods beginning on or after December 1, 2005
- Interpretation IFRIC 7, Applying the Restatement Approach under PAS 29 Financial Reporting in Hyperinflationary Economies
This Interpretation provides guidance on how to apply the requirements of PAS 29 in a reporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy was not hyperinflationary in the prior period. The Interpretation addresses how comparative amounts in financial statements and how deferred tax items in the opening balance sheet should be restated. The Interpretation is effective for annual
periods beginning on or after March 1, 2006.
- Interpretation IFRIC 8, Scope of PFRS 2
The Interpretation clarifies that PFRS 2, Share-based Payment, applies to share-based payment transactions in which the entity cannot specifically identify some or all of the goods or services received. If the value of the identifiable consideration received (if any) appears to be less than the fair value of the equity instruments granted or the liability incurred, this is an indication other consideration (i.e. unidentifiable goods or services) has been (or will be) received which should be measure in accordance with PFRS 2. The Interpretation is effective for annual periods beginning on or after May 1, 2006.
- Interpretation IFRIC 9, Reassessment of Embedded Derivatives
The Interpretation clarifies whether an entity should reassess whether an embedded derivative needs to be separated from the host contract after the initial hybrid contract is recognized. It concludes that reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. The Interpretation is effective for annual periods beginning on or after June 1, 2006
The Interpretations have been forwarded to the Board of Accountancy and Professional Regulation Commission for approval.