As we covered here, IFRIC recently discussed a fact pattern relating to reassessing control.

In the fact pattern, the governing document of an investee controlled by an entity is amended in a way that could result in a change in the investee’s relevant activities, as well as in the rights of the entity and other parties relating to those relevant activities. The committee’s tentative agenda decision indicated that in this situation the entity reassesses whether it retains control of the investee, and the committee didn’t find much diversity in practice on this point. We noted previously that as written, the issue might have seemed fairly obvious, and indeed, many of IFRIC’s usual commentators, such as three of the big four firms, didn’t bother responding (Deloitte did so, but only to say that they “agree with the IFRS Interpretations Committee’s decision not to add a standard-setting project to the work plan for the reasons set out in the tentative agenda decision”).

 Of those who did comment, several questioned whether it was worth spending time on. For example, Cristian E. Munarriz:

• The “Question” as stated in the TAD makes explicit mention of paragraph 8 of IFRS 10. In my view, that paragraph is very clear about the need to reassess the evaluation of control when relevant facts and circumstances change, leaving no place for misunderstandings. As the fact pattern and the question are written in the TAD, it is quite difficult to understand what exactly the submitter interpreted regarding paragraph 8 of IFRS 10 to conclude the change in the entity’s governing document is not a trigger for reassessment of control under that paragraph.

Munarriz suggested rewriting the agenda decision to clarify that the questioner can’t have considered that paragraph, or put another way, to make the questioner look dumber. Manish Iyer also commented, in somewhat tetchy manner:

• Paragraph 8 and B80 of IFRS 10 are amply clear unless one does not understand English… It is not clear when the standard is so clear on reassessment, why is the IFRS Committee even discussing this. It is so obvious. There have been times when I have raised concerns on application of IFRS to the IFRS Committee and one of the staff of IFRS Committee responds that in absence of evidence of diverse practice being followed, we will not be discussing this in the Committee. If the IFRS Committee is short of issues for consideration in IFRS Committee meeting and therefore spending time discussing such issues, I give a case for the Committee to resolve.

True to his word, he points to a possible wording discrepancy between IAS 2 and IFRS 18, and then takes another parting shot:

• It would be better that IFRS Committee spends its time resolving such inconsistencies within IFRS than the current one which is so clear and obvious. However, the Committee has the option to disregard the matter…in absence of evidence on diverse practice. It can also disregard the matter saying that the Committee does not resolve issues raised in comments. What is not clear is when is the option to disregard exercised by the Committee and when not. Is it based on who submits the issue or from what jurisdiction is the issue coming from or any other hidden criteria.

But on the other hand, the South African Institute of Chartered Accountants, while agreeing that the conclusion was appropriate for the fact pattern presented, reminded the committee that “the original fact pattern submitted to the Committee related to the assessment of BEE (Black Economic Empowerment) trust transactions/structures within the South African regulatory environment” (we set out the underlying facts, relating to compliance with requirements to undertake specified Corporate Social Responsibility initiatives, in greater detail here). They went on:

• We observe that this continues to give rise to diversity in practice and therefore remains widespread within the South African context specifically, but also across the African continent where similar structures are put in place.
• Accordingly, we recommend that the Committee reconsider the context of the request as it relates to changes in structures established for specific regulatory or policy objectives, including those aimed at promoting equitable economic participation and representation and whether the changes in the governing documents would allow for the reassessment of the purpose of the structure. Given the prevalence of BEE structures and the diversity observed in their application, we request that the Committee consider adding this matter to its agenda for further deliberation, as outlined in the original submission.

I’m not sure I follow why further clarity is needed, even given their specific perspective, but it raises the prospect of the Committee discussing the issue in near-perpetuity, each time issuing a slightly more detailed agenda decision than the last, never satisfying one respondent while increasingly exasperating everyone else. Well, they’d have my (albeit somewhat twisted) support!

The opinions expressed are solely those of the author.