Summaries of Final IFRIC Interpretations
The full official text of all Interpretations is included in the Bound Volume of IASB Standards and IAS on
CD-ROM. The following unofficial summaries are, by their nature, incomplete.
SIC 1: Consistency - Different Cost Formulas for Inventories
SIC 2: Consistency - Capitalisation of Borrowing Costs
SIC 3: Elimination of Unrealised Profits and Losses on Transactions with Associates
SIC 5: Classification of Financial Instruments - Contingent Settlement Provisions
SIC 6: Costs of Modifying Existing Software
SIC 7: Introduction of the Euro
SIC 8: First-Time Application of IASs as the Primary Basis of Accounting
SIC 9: Business Combinations - Classification either as Acquisitions or Unitings of Interests
SIC 10: Government Assistance - No Specific Relation to Operating Activities
SIC 11: Foreign Exchange - Capitalisation of Losses Resulting from Severe Currency Devaluations
SIC 12: Consolidation - Special Purpose Entities
SIC 13: Jointly Controlled Entities - Non-Monetary Contributions by Venturers
SIC 14: Property, Plant and Equipment - Compensation for the Impairment or Loss of Items
SIC 15: Operating Leases - Incentives
SIC 16: Share Capital - Reacquired Own Equity Instruments (Treasury Shares)
SIC 17: Equity - Costs of an Equity Transaction
SIC 18: Consistency - Alternative Methods
SIC 19: Reporting Currency - Measurement and Presentation of Financial Statements Under IAS 21 and
IAS 29
SIC 20: Equity Accounting Method - Recognition of Losses
SIC 21: Income Taxes - Recovery of Revalued Non-Depreciable Assets
SIC 22: Business Combinations - Subsequent Adjustment of Fair Values and Goodwill Initially Reported
SIC 23: Property, Plant and Equipment - Major Inspection or Overhaul Costs
SIC 24: Earnings Per Share - Financial Instruments and Other Contracts that May Be Settled in Shares
SIC 25: Income Taxes - Changes in the Tax Status of an Enterprise or its Shareholders
SIC-27: Evaluating the Substance of Transactions in the Legal Form of a Lease
SIC-28: Business Combinations – “Date of Exchange” and Fair Value of Equity Instruments
SIC-29: Disclosure – Service Concession Arrangements
SIC-30: Reporting Currency – Translation from Measurement Currency to Presentation Currency
SIC-31: Revenue – Barter Transactions Involving Advertising Services
SIC-32 Intangible Assets – Web Site Costs New - 25/03/2002
SIC-33: Consolidation and Equity Method – Potential Voting Rights and Allocation of Ownership Interests
SIC 1: Consistency - Different Cost Formulas for Inventories
Summary of SIC-1
SIC-1 Requires that under IAS 2, Inventories, paragraph 21 and IAS 2 paragraph 23 the same cost
formula be used for inventories having the same characteristics. Where the nature or use of (groups of)
items differs from others, the application of different methods is allowed.
Effective date:
Periods beginning on or after 1 January 1999.
SIC 2: Consistency - Capitalisation of Borrowing Costs
Summary of SIC-2
If an enterprise once has decided to apply the accounting policy permitted as Allowed Alternative in IAS
23: Borrowing Costs -- capitalising all borrowing costs described in IAS 23 paragraph 11 -- that policy
should be applied consistently for all qualifying assets and periods.
Effective date:
Periods beginning on or after 1 January 1998.
SIC 3: Elimination of Unrealised Profits and Losses on
Transactions with Associates
Summary of SIC-3
Under IAS 28: Investments in Associates, paragraph 16, unrealised gains and losses resulting from
transactions with associates should be eliminated proportionately. This is consistent with the application
of the equity method for joint ventures as required by IAS 31: Financial Reporting of Interests in Joint
Ventures, paragraphs 39 and 40.
Effective date:
Periods beginning on or after 1 January 1998.
SIC 5: Classification of Financial Instruments - Contingent
Settlement Provisions
Summary of SIC-5
The issue is how to classify a financial instrument when the manner of settlement (in cash or in equity
instruments of the issuer) depends on the outcome of uncertain future events that are beyond the control
of both the issuer and the holder.
The SIC agreed that such instruments should be classified in accordance with IAS 32: Financial
Instruments: Disclosure and Presentation, paragraphs 5 and 18 as liabilities, regardless of their legal form
unless the possibility of settlement in cash appears to be remote, in which case the instruments should be
classified as equity.
Effective for instruments issued in periods beginning on or after 1 June 1998.
SIC 6: Costs of Modifying Existing Software
Summary of SIC-6
The issue is how expenditure such as those for modifications necessary to prepare existing software
systems for the turn of the millennium (often referred to as "Year 2000 Costs") or the introduction of the
euro should be accounted for.
The SIC agreed that in accordance with the Framework, paragraphs 89 and 90, (and applying IAS 16:
Property, Plant and Equipment, paragraph 24, by analogy) expenditure incurred in order to restore or
maintain the future economic benefits that an enterprise expected from the original standard of
performance of existing software systems should not be capitalised. This solution is also in compliance
with IAS 38: Intangible Assets.
In addition, the SIC agreed that expenditure should be recognised as incurred in accordance with paras.
94 - 98 of the Framework, i.e. for work undertaken "in house", as materials are used or labour time is
consumed. For work undertaken by external contractors, expenditure should be recognised only as the
work is carried out.
Effective date:
1 June 1998.
SIC 7: Introduction of the Euro
Summary of SIC-7
The issue is how the introduction of the Euro, resulting from the European Economic and Monetary Union
(EMU) will affect the application of IAS 21: The Effects of Changes in Foreign Exchange Rates.
The SIC agreed that the requirements of IAS 21 should be strictly applied. This means that monetary
assets and liabilities should continue to be translated at the spot rate. Where an enterprise has an
existing accounting policy of deferring exchange gains and losses related to anticipatory hedges, an
enterprise should continue to account for such deferred exchange gains and losses notwithstanding the
changeover to the euro. Cumulative differences classified as equity relating to foreign entities should
continue to be recognised as income or expenses only on the disposal of the foreign entity. The Allowed
Alternative Treatment of IAS 21.21 regarding exchange differences resulting from severe devaluations
does not apply to currencies participating in EMU.
Effective date:
1 June 1998.
SIC 8: First-Time Application of IASs as the Primary Basis of
Accounting
Summary of SIC-8
SIC-8 is an Interpretation of IAS 8: Net Profit or Loss for the Period, Fundamental Errors and Changes in
Accounting Policies
The issues dealt with in this Interpretation are:

how the financial statements of an enterprise should be prepared and presented in the period of
first-time application of the full set of IAS; and

how the specific transitional provisions set out in certain Standards and Interpretations are to be
applied in the period of first-time application of IASs to balances of items that existed already at
the Effective Date of those Standards and Interpretations.
The SIC agreed that in the period of first-time application of IAS as the primary accounting basis, the
financial statements of an enterprise, including comparative information, should be prepared and
presented as if the financial statements had always been prepared in accordance with the IAS effective
for the period of first-time application. Therefore, the Standards and Interpretations should be applied
retrospectively except when Standards or Interpretations require or permit a different transitional
treatment or when the amount of the adjustment relating to prior periods cannot be reasonably
determined. Adjustment amounts should be treated as an adjustment to the opening balance of retained
earnings of the earliest period presented in accordance with IAS. If adjustments relating to prior periods
or comparative information cannot be determined, the fact should be disclosed.
On the first-time application of IAS, an enterprise may apply the transitional provisions only for periods
ending at the date prescribed in the respective Standards and Interpretations. The transitional treatment
adopted should be disclosed. For example, goodwill may only be written off directly against equity when it
was acquired in periods beginning prior to January 1995.
Effective date:
1 August 1998.
SIC 9: Business Combinations - Classification either as
Acquisitions or Unitings of Interests
Summary of SIC-9
The issue resolved by this Interpretation is how the definitions in IAS 22: Business Combinations,
paragraph 9, and the additional guidance in IAS 22, paragraphs 11 to 13, and in IAS 22, paragraphs 14 to
17, are to be interpreted and applied in classifying a business combination and whether a business
combination under IAS 22 might be classified as neither an acquisition nor a uniting of interests.
The SIC concluded that the overriding criterion to distinguish an acquisition from a uniting of interests is
whether an acquirer can be identified, i.e. whether the shareholders of one of the combining enterprises
obtain control over the combined enterprise. The classification of a business combination and the
determination of whether control exists should be based on an overall evaluation of all relevant facts and
circumstances of the transaction; the guidance given in IAS 22 provides examples of important factors to
be considered, not a comprehensive set of conditions to be met.
In addition, the Interpretation clarifies that a business combination is to be classified as an acquisition,
unless the criteria of IAS 22, paragrpah 16, are met (exchange or pooling of the substantial majority of the
voting common shares of the combining enterprises, relative equality in fair values of the combining
enterprises and continuance of substantially the same percentage in voting rights and interests of the
shareholders of each of the combining enterprises in the combined enterprise). Even if all three criteria
are met, a business combination is only to be classified as a uniting of interests if no acquirer can be
identified.
Effective date:
Business combinations given initial accounting recognition in periods beginning on or after 1 August
1998.
SIC 10: Government Assistance - No Specific Relation to
Operating Activities
Summary of SIC-10
In some countries government assistance to enterprises can be aimed at encouragement or long-term
support of business activities either in certain regions or industry sectors. Conditions to receive such
assistance may not be specifically related to the operating activities of the enterprise. The issue is
whether such government assistance is "a government grant" within the scope of IAS 20: Accounting for
Government Grants and Disclosure of Government Assistance and should therefore be accounted for in
accordance with this Standard.
The SIC agreed that government assistance to enterprises that is aimed at encouragement or long-term
support of business activities either in certain regions or industry sectors meets the definition of
government grants in IAS 20. Such grants should therefore not be credited directly to shareholders'
interests.
Effective date:
1 August 1998.
SIC 11: Foreign Exchange - Capitalisation of Losses
Resulting from Severe Currency Devaluations
Summary of SIC-11
The Allowed Alternative Treatment in IAS 21: The Effects of Changes in Foreign Exchange Rates,
paragraph 21, requires several conditions to be met cumulatively before an enterprise can include
exchange losses on foreign currency liabilities in the carrying amount of related assets.
The issue is how the conditions of IAS 21, paragraph 21, should be interpreted that the liability "cannot be
settled" and that there is "no practical means of hedging" against the foreign currency exchange risk and
that the liability should arise on the "recent acquisition" of an asset.
The SIC agreed that foreign exchange losses on liabilities that result from the recent acquisition of assets
should only be included in the carrying amount of the assets if those liabilities could not have been settled
or if it was not practically feasible to hedge the foreign currency exposure before the severe devaluation
or depreciation occurred. Only in these cases foreign exchange losses are unavoidable and therefore part
of the asset's acquisition costs. "Recent" acquisitions of assets are acquisitions within twelve months prior
to the severe devaluation or depreciation of the reporting currency.
Effective date:
1 August 1998.
SIC 12: Consolidation - Special Purpose Entities
Summary of SIC-12
This interpretation addresses the question of when a special purpose entity would be consolidated by a
reporting enterprise. The SIC agreed that an enterprise should consolidate a special purpose entity
("SPE") when, in substance, the enterprise controls the SPE.
Examples of SPEs include entities set up to effect a lease, a securitisation of financial assets or R&D
activities. The concept of control used in IAS 27: Consolidated Financial Statements requires having the
ability to direct or dominate decision making accompanied by the objective of obtaining benefits from the
SPE's activities. The Interpretation provides example indications of when control may exist in the context
of an SPE. The examples involve activities of the SPE on behalf of the reporting enterprise, the reporting
enterprise having decision-making powers over the SPE, and the reporting enterprise having rights to the
majority of benefits and exposure to significant risks of the SPE.
Some enterprises may also need to evaluate separately the topic of derecognition of assets, for example,
related to assets transferred to an SPE. In some circumstances, such a transfer of assets may result in
those assets being derecognized and accounted for as a sale. Even if the transfer qualifies as a sale, the
provisions of IAS 27 and SIC-12 may mean that the enterprise should consolidate the SPE. SIC-12 does
not address the circumstances in which sale treatment should apply for the reporting enterprise or the
elimination of the consequences of such a sale upon consolidation.
Effective date:
Annual financial periods beginning on or after 1 July 1999.
SIC 13: Jointly Controlled Entities - Non-Monetary
Contributions by Venturers
Summary of SIC-13
This Interpretation clarifies the circumstances in which the appropriate portion of gains or losses resulting
from a contribution of a non-monetary asset to a jointly controlled entity (JCE) in exchange for an equity
interest in the JCE should be recognised by the venturer in the income statement. The Interpretation
indicates that under IAS 31: Financial Reporting of Interests in Joint Ventures, paragraph 39, recognition
of gains or losses on contributions of non-monetary assets is appropriate unless:

the significant risks and rewards related to the non-monetary asset are not transferred to the
jointly controlled entity;

the gain or loss cannot be measured reliably; or

similar assets are contributed by the other venturers.
Non-monetary assets contributed by venturers are similar when they have a similar nature, a similar use
in the same line of business and a similar fair value. A contribution meets the similarity test only if all
significant component assets included in the contribution are similar to each of the significant component
assets contributed by the other venturers. A gain should also be recognised if, in addition to the equity
interest in the jointly controlled entity, the venturer receives consideration in the form of either cash or
other assets which are dissimilar to the non-monetary assets contributed.
Effective date:
Annual financial periods beginning on or after 1 January 1999.
SIC 14: Property, Plant and Equipment - Compensation for
the Impairment or Loss of Items
Summary of SIC-14
This SIC Interpretation is an interpretation of IAS 16: Property, Plant and Equipment.
This Interpretation addresses how an enterprise should account for impairments or losses of items of
property, plant and equipment, the related compensation from third parties, and the subsequent
restoration, purchase or construction of assets.
The Interpretation confirms that three separate economic events are involved and that each event should
be accounted for separately. The three separate events are:
1. the impairment or loss;
2. the related compensation from third parties; and
3. the subsequent restoration, purchase or construction of assets.
Compensation is to be included in the income statement when recognised. Recognising the
compensation as deferred income or deducting it from the impairment or loss or from the cost of a new
asset is not appropriate.
Effective date:
Annual financial periods beginning on or after 1 July 1999.
SIC 15: Operating Leases - Incentives
Summary of SIC-15
SIC-15 clarifies the recognition of incentives related to operating leases by both the lessee and lessor.
The Interpretation indicates that lease incentives (such as rent-free periods or contributions by the lessor
to the lessee's relocation costs) should be considered an integral part of the consideration for the use of
the leased asset. IAS 17: Leases, paragraphs 24 and 42 require an enterprise to treat incentives as a
reduction of lease income or lease expense. As they are an integral part of the net consideration agreed
for the use of the leased asset, incentives should be recognised by both the lessor and the lessee over
the lease term, with each party using a single amortisation method applied to the net consideration.
Effective date:
Lease terms beginning on or after 1 January 1999.
SIC 16: Share Capital - Reacquired Own Equity Instruments
(Treasury Shares)
Summary of SIC-16
This SIC Interpretation is an interpretation of IAS 32: Financial Instruments: Disclosure and Presentation
This Interpretation indicates that treasury shares should be presented in the balance sheet as a deduction
from equity, and the acquisition of treasury shares should be presented in the financial statements as a
change in equity. Additionally, no gain or loss should be recognised in the income statement on the sale,
issuance, or cancellation of treasury shares, and consideration received should be presented in the
financial statements as a change in equity.
Effective date:
Annual financial periods beginning on or after 1 July 1999.
SIC 17: Equity - Costs of an Equity Transaction
Summary of SIC-17
This SIC Interpretation is an interpretation of IAS 32: Financial Instruments: Disclosure and Presentation.
This Interpretation addresses the costs of issuing or acquiring an enterprise's own instruments classified
as equity when the transaction results in a net increase or decrease to equity.
Costs of an equity transaction are only those incremental external costs directly attributable to the equity
transaction that would otherwise have been avoided. The transaction costs of an equity transaction
should be accounted for as a deduction from equity, net of any related income tax benefit. The costs of a
transaction which fails to be completed should be expensed. Transaction costs that relate to the issuance
of a compound instrument that contains both a liability and an equity element should be allocated to the
component parts in proportion to the allocation of proceeds. Transaction costs that relate jointly to more
than one transaction, for example, costs of a concurrent offering of some shares and stock exchange
listing of other shares, should be allocated to those transactions using a basis of allocation which is
rational and consistent with similar transactions.
Effective date:
Annual financial periods beginning on or after 30 January 2000
SIC 18: Consistency - Alternative Methods
Summary of SIC-18
This SIC Interpretation is an interpretation of IAS 1: Presentation of Financial Statements
If more than one accounting policy is available under an International Accounting Standard or
Interpretation, an enterprise should choose and apply consistently one of those policies, unless the
Standard or Interpretation specifically requires or permits categorisation of items (transactions, events,
balances, amounts, etc.) for which different policies may be appropriate. If a Standard requires or permits
categorisation of items, the most appropriate accounting policy should be selected and applied
consistently to each category. Once the appropriate initial policy has been selected, a change in
accounting policy should only be made in accordance with IAS 8: Net Profit or Loss for the Period,
Fundamental Errors and Changes in Accounting Policies and applied to all items or categories of items.
Effective date:
Annual financial periods beginning on or after 1 July 2000
SIC 19: Reporting Currency - Measurement and Presentation
of Financial Statements Under IAS 21 and IAS 29
Summary of SIC-19
This SIC Interpretation is an interpretation of IAS 21, The Effects of Changes in Foreign Exchange Rates
and IAS 29: Financial Reporting in Hyperinflationary Economies.
The measurement currency used by an enterprise to present its financial statements should provide
information about the enterprise that is useful and reflects the economic substance of the underlying
events and circumstances relevant to that enterprise. If a particular currency is used to a significant extent
in, or has a significant impact on, the enterprise, that currency may be an appropriate measurement
currency. All transactions in currencies other than the measurement currency should be treated as
transactions in foreign currencies when applying IAS 21, The Effects of Changes in Foreign Exchange
Rates. Once an enterprise has selected a measurement currency, the SIC agreed that it should not be
changed unless there is a change in the underlying events and circumstances relevant to that enterprise.
Although an enterprise normally presents its financial statements in the same currency as the
measurement currency, the SIC also agreed that it may choose to present its financial statements in a
different currency. The method of translating the financial statements of a reporting enterprise from the
measurement currency to a different currency for presentation should not lead to reporting in a manner
that is inconsistent with the measurement of items in the financial statements.
Effective date:
Annual financial periods beginning on or after 1 January 20
SIC 20: Equity Accounting Method - Recognition of Losses
Summary of SIC-20
The Interpretation requires that, for the purpose of applying IAS 28: Investments in Associates, paragraph
22, the carrying amount of the investment in an associate should include common shares and preferred
shares that provide unlimited rights of participation in earnings or losses and a residual equity interest in
the associate. If the investor's share of losses of an associate exceeds the carrying amount of the
investment, recognition of further losses should be discontinued, unless the investor has incurred
obligations to satisfy obligations of the associate that the investor has guaranteed or otherwise
committed, whether the obligation is funded or not. Financial interests in an associate which are not
included in the carrying amount of the investment are accounted for in accordance with other applicable
International Accounting Standards, for example IAS 39: Financial Instruments: Recognition and
Measurement. Additionally, continuing losses of an associate should be considered objective evidence
that financial interests in that associate may be impaired. Impairment of the carrying amount of the
investment in an associate is determined based on the carrying amount after adjustment for equity
method losses.
Effective date:
15 July 2000
SIC 21: Income Taxes - Recovery of Revalued NonDepreciable Assets
Summary of SIC-21
This Interpretation confirms that the deferred tax liability or asset recognised under IAS 12: Income Taxes
that arises from the revaluation of a non-depreciable asset under IAS 16: Property, Plant and Equipment
is measured based on the tax consequences that would follow from recovery of the carrying amount of
that asset through sale. Because the asset is not depreciated, no part of its carrying amount is considered
to be recovered (that is, consumed) through use.
Effective date:
15 July 2000
SIC 22: Business Combinations - Subsequent Adjustment of
Fair Values and Goodwill Initially Reported
Summary of SIC-22
SIC-22 interprets the application of the purchase method in IAS 22, Business Combinations and
addresses adjustments to identifiable assets and liabilities and goodwill, which are made to recognise
identifiable assets and liabilities (other than those related to income taxes) that previously did not satisfy
recognition criteria, and adjustments made to reflect additional evidence of the amounts initially assigned
in accounting for an acquisition under the purchase method. Such adjustments should be calculated as if
the newly assigned values had been used from the date of the acquisition. The Interpretation also clarifies
that adjustments to amounts included in the income statement, such as depreciation or amortisation of
goodwill, are included in the corresponding category of income or expense presented on the face of the
income statement.
The Interpretation requires disclosure of the amount of an adjustment recognised in the income statement
of the current period which relates to comparative and prior periods. For example, if the adjustment
increases depreciation expense in the current period by 150 and 100 of the increase results from the
recalculation of the effects of the adjustment to identifiable assets over the comparative year, that fact
would be disclosed.
Effective date:
Adjustments made in annual periods ending on or after 15 July 2000
SIC 23: Property, Plant and Equipment - Major Inspection or
Overhaul Costs
Summary of SIC-23
The costs of a major inspection or overhaul of property, plant and equipment occurring subsequent to the
acquisition of that property, plant and equipment are generally expensed. However, such costs are
capitalised when the enterprise has identified as a separate component of the asset an amount
representing major inspection or overhaul and has already depreciated that component to reflect the
consumption of benefits which are replaced or restored by the subsequent major inspection or overhaul.
The criteria for recognition of an asset under IAS 16: Property, Plant and Equipment must also be met.
Effective date:
15 July 2000
SIC 24: Earnings Per Share - Financial Instruments and Other
Contracts that May Be Settled in Shares
Summary of SIC-24
This SIC Interpretation is an interpretation of IAS 33: Earnings per Share.
SIC-24 addresses the treatment of instruments which may be settled by a reporting enterprise either by
payment of financial assets or by issuance of ordinary shares of the reporting enterprise to the holder.
The SIC agreed that all instruments which may result in the issuance of ordinary shares of the reporting
enterprise to the holder of the financial instrument or other contract, at the option of the issuer or the
holder, are potential ordinary shares of that enterprise. If a potential ordinary share is dilutive, (that is, its
conversion to ordinary shares would decrease net profit per share from continuing ordinary operations)
then its dilutive effect is included in calculating diluted earnings per share.
Effective Date:
1 December 2000
SIC 25: Income Taxes - Changes in the Tax Status of an
Enterprise or its Shareholders
Summary of SIC-25
This SIC Interpretation is an interpretation of IAS 12: Income Taxes.
SIC-25 addresses changes in the tax status of an enterprise or of a shareholder that has consequences
for an enterprise by increasing or decreasing its tax liabilities or assets. A change in the tax status of an
enterprise or its shareholders does not give rise to increases or decreases in the pre-tax amounts
recognised directly in equity. Therefore, the current and deferred tax consequences of a change in tax
status should be included in net profit or loss for the period, unless those consequences relate to
transactions and events that result, in the same or a different period, in a direct credit or charge to the
recognised amount of equity. An example of an event that is recognised directly in equity is a change in
the carrying amount of property, plant or equipment revalued under IAS 16: Property, Plant and
Equipment. Those tax consequences that relate to changes in the recognised amount of equity, in the
same or a different period (not included in net profit or loss) should be charged or credited directly to
equity.
Effective date:
15 July 2000
SIC-27: Evaluating the Substance of Transactions in the
Legal Form of a Lease
Summary of SIC-27
This SIC Interpretation is an interpretation of IAS 17: Leases.
The Interpretation addresses a number of issues when an arrangement between an Enterprise and an
Investor involves the legal form of a lease. It addresses how to determine whether a series of transactions
is linked and should be accounted for as one transaction. The SIC agreed that a series of transactions
that involve the legal form of a lease is linked and should be accounted for as one transaction when the
overall economic effect cannot be understood without reference to the series of transactions as a whole.
The Interpretation also addresses whether an arrangement meets the definition of a lease under IAS 17.
The SIC agreed that the accounting should reflect the substance of the arrangement, and that all aspects
of an arrangement should be evaluated to determine its substance, with weight given to those aspects
and implications that have an economic effect. In this respect, it agreed to a list of indicators that
individually demonstrate that an arrangement may not, in substance, involve a lease under IAS 17.
If an arrangement does not meet the definition of a lease, the Interpretation continues by addressing
whether a separate investment account and lease payment obligations that might exist represent assets
and liabilities of the Enterprise; how the Enterprise should account for other obligations resulting from the
arrangement; and how the Enterprise should account for a fee it might receive from an Investor. The
Committee agreed to a list of indicators that collectively demonstrate that, in substance, a separate
investment account and lease payment obligations do not meet the definitions of an asset and a liability
and should not be recognised by the Enterprise. It agreed that other obligations of an arrangement,
including any guarantees provided and obligations incurred upon early termination, should be accounted
for under IAS 37 or IAS 39, depending on the terms. Further, it agreed that the criteria in IAS 18.20
should be applied to the facts and circumstances of each arrangement in determining when to recognise
a fee as income that an Enterprise might receive.
SIC-28: Business Combinations – “Date of Exchange” and
Fair Value of Equity Instruments
Summary of SIC-28
SIC-28 is an Interpretation of IAS 22: Business Combinations.
The Interpretation addresses when the “date of exchange” occurs where shares are issued as purchase
consideration in an acquisition. The SIC agreed that when an acquisition is achieved in one exchange
transaction (i.e., not in stages), the “date of exchange” is the date of acquisition; that is, the date when the
acquirer obtains control over the net assets and operations of the acquiree. When an acquisition is
achieved in stages (e.g., successive share purchases), the Committee agreed that the fair value of the
equity instruments issued as purchase consideration at each stage should be determined at the date that
each individual investment is recognised in the financial statements of the acquirer.
The Interpretation also addresses when it is appropriate to consider other evidence and valuation
methods in addition to a published price at the date of exchange of a quoted equity instrument. The
Committee agreed that the published price at the date of exchange provides the best evidence of the
instrument’s fair value and should be used, except in rare circumstances. Other evidence and valuation
methods should also be considered only in the rare circumstance when it can be demonstrated that the
published price at that date is an unreliable indicator, and the other evidence and valuation methods
provide a more reliable measure of fair value. The published price at the date of exchange is an
unreliable indicator only when it has been affected by an undue price fluctuation or a narrowness of the
market.
SIC-29: Disclosure – Service Concession Arrangements
Summary of SIC-29
This SIC is an Interpretation of IAS 1: Presentation of Financial Statements.
The Interpretation addresses what information should be disclosed in the notes to the financial
statements of a Concession Operator and a Concession Provider when the two parties are joined by a
service concession arrangement. A service concession arrangement exists when an enterprise (the
Concession Operator) agrees with another enterprise (the Concession Provider) to provide services that
give the public access to major economic and social facilities. Examples of service concession
arrangements involve water treatment and supply facilities, motorways, car parks, tunnels, bridges,
airports and telecommunication networks. Examples of arrangements that are not service concession
arrangements include an enterprise outsourcing the operation of its internal services (e.g., employee
cafeteria, building maintenance, and accounting or information technology functions). The SIC agreed
that the following should be disclosed in each period:
1. a description of the arrangement;
2. significant terms of the arrangement that may affect the amount, timing and certainty of future
cash flows (e.g., the period of the concession, re-pricing dates and the basis upon which repricing or re-negotiation is determined);
3. the nature and extent (e.g., quantity, time period or amount as appropriate) of:
o
rights to use specified assets;
o
obligations to provide or rights to expect provision of services;
o
obligations to acquire or build items of property, plant and equipment;
o
obligations to deliver or rights to receive specified assets at the end of the concession
period;
o
renewal and termination options; and
o
other rights and obligations (e.g., major overhauls); and
4. changes in the arrangement occurring during the period.
SIC-30: Reporting Currency – Translation from Measurement
Currency to Presentation Currency
Summary of SIC-30
This is an Interpretation of IAS 21: The Effects of Changes in Foreign Exchange Rates and IAS 29:
Financial Reporting in Hyperinflationary Economies.
This Interpretation addresses how an enterprise translates items in its financial statements from a
measurement currency to a presentation currency. The SIC agreed that when the measurement currency
is not the currency of a hyperinflationary economy, the requirements of SIC-19.9 should be applied as
follows:

assets and liabilities for all balance sheets presented (i.e., including comparatives) should be
translated at the closing rate existing at the date of each balance sheet presented;

income and expense items for all periods presented should be translated at the exchange rates
existing at the dates of the transactions;

equity items other than the net profit or loss for the period that is included in the balance of
accumulated profit or loss should be translated at the closing rate existing at the date of each
balance sheet presented; and

all exchange differences resulting from translation should be recognised directly in equity.
When the measurement currency is the currency of a hyperinflationary economy, the Committee agreed
that the requirements of SIC-19.9 should be applied as follows:

assets, liabilities and equity items for all balance sheets presented (i.e., including comparatives)
should be translated at the closing rate existing at the date of the most recent balance sheet
presented; and

income and expense items for all periods presented should be translated at the closing rate
existing at the end of the most recent period presented.
The Interpretation also addresses the information that should be disclosed when additional information
not required by International Accounting Standards is displayed in financial statements and in a currency,
other than the currency used in presenting the financial statements, as a convenience to certain users.
The SIC agreed that an enterprise should:

clearly identify the information as supplementary information to distinguish it from the information
required by International Accounting Standards and translated in accordance with this
Interpretation,

disclose the measurement currency used to prepare the financial statements and the method of
translation used to determine the supplementary information displayed,

disclose the fact that the measurement currency reflects the economic substance of the
underlying events and circumstances of the enterprise and that the supplementary information is
displayed in another currency for convenience purposes only, and

disclose the currency in which the supplementary information is displayed.
SIC-31: Revenue – Barter Transactions Involving Advertising
Services
Summary of SIC-31
This is an Interpretation of IAS 18: Revenue.
The Interpretation address the circumstances when a Seller can reliably measure revenue at the fair
value of advertising services received or provided in a barter transaction. The SIC agreed that revenue
from a barter transaction involving advertising cannot be measured reliably at the fair value of advertising
services received. However, a Seller can reliably measure revenue at the fair value of the advertising
services it provides in a barter transaction, by reference only to non-barter transactions that:

involve advertising similar to the advertising in the barter transaction;

occur frequently;

represent a predominant number of transactions and amount when compared to all transactions
to provide advertising that is similar to the advertising in the barter transaction;

involve cash and/or another form of consideration (e.g., marketable securities, non-monetary
assets, and other services) that has a reliably measurable fair value; and

do not involve the same counterparty as in the barter transaction.
SIC-32: Intangible Assets – Web Site Costs
The Interpretation addresses whether a web site developed by an enterprise from internal expenditure for
internal or external access is an internally generated intangible asset that is subject to the requirements of
IAS 38: the SIC agreed that such a web site is subject to the requirements of IAS 38.
The Interpretation also addresses the appropriate accounting treatment for internal expenditure on the
development and operation of an enterprise’s own web site for internal or external access. The
Committee agreed that:
(a) a web site arising from development should be recognised as an intangible asset if, and only
if, in addition to complying with the general requirements described in IAS 38.19 for recognition
and initial measurement, an enterprise can satisfy the requirements in IAS 38.45. In particular, an
enterprise may be able to satisfy the requirement to demonstrate how its web site will generate
probable future economic benefits under IAS 38.45(d) when, for example, the web site is capable
of generating revenues, including direct revenues from enabling orders to be placed. An
enterprise is not able to demonstrate how a web site developed solely or primarily for promoting
and advertising its own products and services will generate probable future economic benefits,
and consequently all expenditure on developing such a web site should be recognised as an
expense when incurred.
(b) any internal expenditure on the development and operation of an enterprise’s own web site
should be accounted for in accordance with IAS 38. The nature of each activity for which
expenditure is incurred (eg training employees and maintaining the web site) and the web site’s
stage of development or post-development should be evaluated to determine the appropriate
accounting treatment. For example:
(i) the Planning stage is similar in nature to the research phase in IAS 38.42-.44.
Expenditure incurred in this stage should be recognised as an expense when it is
incurred.
(ii) the Application and Infrastructure Development stage, the Graphical Design stage and
the Content Development stage, to the extent that content is developed for purposes
other than to advertise and promote an enterprise’s own products and services, are
similar in nature to the development phase in IAS 38.45-.52. Expenditure incurred in
these stages should be included in the cost of a web site recognised as an intangible
asset in accordance with this Interpretation when the expenditure can be directly
attributed, or allocated on a reasonable and consistent basis, to preparing the web site
for its intended use. For example, expenditure on purchasing or creating content (other
than content that advertises and promotes an enterprise’s own products and services)
specifically for a web site, or expenditure to enable use of the content (eg a fee for
acquiring a licence to reproduce) on the web site, should be included in the cost of
development when this condition is met. However, in accordance with IAS 38.59,
expenditure on an intangible item that was initially recognised as an expense in previous
financial statements should not be recognised as part of the cost of an intangible asset at
a later date (eg when the costs of a copyright have been fully amortised, and the content
is subsequently provided on a web site).
(iii) expenditure incurred in the Content Development stage, to the extent that content is
developed to advertise and promote an enterprise’s own products and services (eg digital
photographs of products), should be recognised as an expense when incurred in
accordance with IAS 38.57(c). For example, when accounting for expenditure on
professional services for taking digital photographs of an enterprise’s own products and
for enhancing their display, expenditure should be recognised as an expense as the
professional services are received during the process, not when the digital photographs
are displayed on the web site.
(iv) the Operating stage begins once development of a web site is complete. Expenditure
incurred in this stage should be recognised as an expense when it is incurred unless it
meets the criteria in IAS 38.60.
(c) a web site that is recognised as an intangible asset under this Interpretation should be
measured after initial recognition by applying the requirements of IAS 38.63-.78. The best
estimate of a web site’s useful life should be short.
SIC-33: Consolidation and Equity Method – Potential Voting
Rights and Allocation of Ownership Interests
Summary of SIC-33
This is an Interpretation of IAS 27: Consolidated Financial Statements, IAS 28: Investments in Associates
and IAS 39: Financial Instruments: Recognition and Measurement.
An enterprise may own share warrants, share call options, debt or equity instruments that are convertible
into ordinary shares, or other similar instruments that have the potential, if exercised or converted, to give
the enterprise voting power or reduce another party’s voting power over the financial and operating
policies of another enterprise (potential voting rights). The Interpretation addresses whether the existence
and effect of potential voting rights should be considered, in addition to the factors described in IAS 27.12
and IAS 28.4-.5 when assessing whether an enterprise controls or significantly influences another
enterprise according to IAS 27 and IAS 28 respectively. The SIC agreed that the existence and effect of
potential voting rights that are presently (i.e., currently) exercisable or presently convertible should be
considered, in addition to the factors described in IAS 27.12 and IAS 28.4-.5.
The Interpretation also addresses whether any other facts and circumstances related to potential voting
rights should be assessed. The Committee agreed that all facts and circumstances that affect potential
voting rights should be examined, except the intention of management and the financial capability to
exercise or convert.
Further, the Interpretation addresses whether the proportion allocated to the parent and minority interests
in preparing consolidated financial statements, and the proportion allocated to an investor that accounts
for its investment in an associate using the equity method, should be determined based on present
ownership interests or ownership interests that would be held if the potential voting rights were exercised
or converted. The SIC agreed that the proportion allocated should be determined based solely on present
ownership interests. An enterprise may, in substance, have a present ownership interest when for
example, it sells and simultaneously agrees to repurchase, but does not lose control of, access to
economic benefits associated with an ownership interest. In this circumstance, Committee agreed the
proportion allocated should be determined taking into account the eventual exercise of potential voting
rights and other derivatives that, in substance, presently give access to the economic benefits associated
with an ownership interest.
In responding to respondants’ comments, the Committee agreed to address the appropriate accounting
treatment for potential voting rights until they are exercised or expire. The SIC agreed that when applying
the consolidation and the equity method of accounting, instruments containing potential voting rights
should be accounted for as part of the investment in a subsidiary and the investment in an associate
respectively only when the proportion of ownership interests is allocated by taking into account the
eventual exercise of those potential voting rights. In all other circumstances, instruments containing
potential voting rights should be accounted for in accordance with IAS 39.