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iGAAP Alert: December 2008


iGAAP Alert: December 2008 coverNew Interpretation on non-cash distributions

IFRIC 17 Distributions of Non-cash Assets to Owners provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders. The specific questions addressed in the Interpretation are:

  • When should the entity recognise the dividend payable?
  • How should the entity measure the dividend payable?
  • When the entity settles the dividend payable, how should it account for any difference between the carrying amount of the assets distributed and the carrying amount of the dividend payable?

The most significant conclusion reached by the IFRIC is that the dividend should be measured at the fair value of the assets distributed, and that any difference between this amount and the previous carrying amount of the assets distributed should be recognised in profit or loss when the entity settles the dividend payable. In the UK this accounting treatment will result in a change in practice from recording non-cash distributions at book value.

Importantly, the Interpretation does not apply to distributions of non-cash assets where the asset is ultimately controlled by the same party or parties before and after the distribution (e.g. distributions of non-cash assets between entities under common control).

The Interpretation has resulted in consequential amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations regarding the appropriate treatment of the non-cash assets held for distribution.

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