Official Journal L 338/2008

ANNEX

INTERNATIONAL ACCOUNTING STANDARDS

IAS 23

IAS 23 Borrowing costs (Revised 2007)

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INTERNATIONAL ACCOUNTING STANDARD 23

Borrowing Costs

CORE PRINCIPLE

1	Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognised as an expense.

SCOPE

2	An entity shall apply this Standard in accounting for borrowing costs.

3	The Standard does not deal with the actual or imputed cost of equity, including preferred capital not classified as a liability.

An entity is not required to apply the Standard to borrowing costs directly attributable to the acquisition, construction or production of:

(a)	a qualifying asset measured at fair value, for example a biological asset; or

(b)	inventories that are manufactured, or otherwise produced, in large quantities on a repetitive basis.

DEFINITIONS

This Standard uses the following terms with the meanings specified:

Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.

A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale.

Borrowing costs may include:

(a)	interest on bank overdrafts and short-term and long-term borrowings;

(b)	amortisation of discounts or premiums relating to borrowings;

(c)	amortisation of ancillary costs incurred in connection with the arrangement of borrowings;

(d)	finance charges in respect of finance leases recognised in accordance with IAS 17 Leases; and

(e)	exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Depending on the circumstances, any of the following may be qualifying assets:

(a)	inventories

(b)	manufacturing plants

(c)	power generation facilities

(d)	intangible assets

(e)	investment properties.

Financial assets, and inventories that are manufactured, or otherwise produced, over a short period of time, are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.

RECOGNITION

8	An entity shall capitalise borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. An entity shall recognise other borrowing costs as an expense in the period in which it incurs them.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are included in the cost of that asset. Such borrowing costs are capitalised as part of the cost of the asset when it is probable that they will result in future economic benefits to the entity and the costs can be measured reliably. When an entity applies IAS 29 Financial Reporting in Hyperinflationary Economies, it recognises as an expense the part of borrowing costs that compensates for inflation during the same period in accordance with paragraph 21 of that Standard.

Borrowing costs eligible for capitalisation

The borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are those borrowing costs that would have been avoided if the expenditure on the qualifying asset had not been made. When an entity borrows funds specifically for the purpose of obtaining a particular qualifying asset, the borrowing costs that directly relate to that qualifying asset can be readily identified.

It may be difficult to identify a direct relationship between particular borrowings and a qualifying asset and to determine the borrowings that could otherwise have been avoided. Such a difficulty occurs, for example, when the financing activity of an entity is coordinated centrally. Difficulties also arise when a group uses a range of debt instruments to borrow funds at varying rates of interest, and lends those funds on various bases to other entities in the group. Other complications arise through the use of loans denominated in or linked to foreign currencies, when the group operates in highly inflationary economies, and from fluctuations in exchange rates. As a result, the determination of the amount of borrowing costs that are directly attributable to the acquisition of a qualifying asset is difficult and the exercise of judgement is required.

To the extent that an entity borrows funds specifically for the purpose of obtaining a qualifying asset, the entity shall determine the amount of borrowing costs eligible for capitalisation as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings.

The financing arrangements for a qualifying asset may result in an entity obtaining borrowed funds and incurring associated borrowing costs before some or all of the funds are used for expenditures on the qualifying asset. In such circumstances, the funds are often temporarily invested pending their expenditure on the qualifying asset. In determining the amount of borrowing costs eligible for capitalisation during a period, any investment income earned on such funds is deducted from the borrowing costs incurred.

To the extent that an entity borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the entity shall determine the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate shall be the weighted average of the borrowing costs applicable to the borrowings of the entity that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that an entity capitalises during a period shall not exceed the amount of borrowing costs it incurred during that period.

In some circumstances, it is appropriate to include all borrowings of the parent and its subsidiaries when computing a weighted average of the borrowing costs; in other circumstances, it is appropriate for each subsidiary to use a weighted average of the borrowing costs applicable to its own borrowings.

Excess of the carrying amount of the qualifying asset over recoverable amount

When the carrying amount or the expected ultimate cost of the qualifying asset exceeds its recoverable amount or net realisable value, the carrying amount is written down or written off in accordance with the requirements of other Standards. In certain circumstances, the amount of the write-down or write-off is written back in accordance with those other Standards.

Commencement of capitalisation

An entity shall begin capitalising borrowing costs as part of the cost of a qualifying asset on the commencement date. The commencement date for capitalisation is the date when the entity first meets all of the following conditions:

(a)	it incurs expenditures for the asset;

(b)	it incurs borrowing costs; and

(c)	it undertakes activities that are necessary to prepare the asset for its intended use or sale.

Expenditures on a qualifying asset include only those expenditures that have resulted in payments of cash, transfers of other assets or the assumption of interest-bearing liabilities. Expenditures are reduced by any progress payments received and grants received in connection with the asset (see IAS 20 Accounting for Government Grants and Disclosure of Government Assistance). The average carrying amount of the asset during a period, including borrowing costs previously capitalised, is normally a reasonable approximation of the expenditures to which the capitalisation rate is applied in that period.

The activities necessary to prepare the asset for its intended use or sale encompass more than the physical construction of the asset. They include technical and administrative work prior to the commencement of physical construction, such as the activities associated with obtaining permits prior to the commencement of the physical construction. However, such activities exclude the holding of an asset when no production or development that changes the asset’s condition is taking place. For example, borrowing costs incurred while land is under development are capitalised during the period in which activities related to the development are being undertaken. However, borrowing costs incurred while land acquired for building purposes is held without any associated development activity do not qualify for capitalisation.

Suspension of capitalisation

20	An entity shall suspend capitalisation of borrowing costs during extended periods in which it suspends active development of a qualifying asset.

An entity may incur borrowing costs during an extended period in which it suspends the activities necessary to prepare an asset for its intended use or sale. Such costs are costs of holding partially completed assets and do not qualify for capitalisation. However, an entity does not normally suspend capitalising borrowing costs during a period when it carries out substantial technical and administrative work. An entity also does not suspend capitalising borrowing costs when a temporary delay is a necessary part of the process of getting an asset ready for its intended use or sale. For example, capitalisation continues during the extended period that high water levels delay construction of a bridge, if such high water levels are common during the construction period in the geographical region involved.

Cessation of capitalisation

22	An entity shall cease capitalising borrowing costs when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.

An asset is normally ready for its intended use or sale when the physical construction of the asset is complete even though routine administrative work might still continue. If minor modifications, such as the decoration of a property to the purchaser’s or user’s specification, are all that are outstanding, this indicates that substantially all the activities are complete.

When an entity completes the construction of a qualifying asset in parts and each part is capable of being used while construction continues on other parts, the entity shall cease capitalising borrowing costs when it completes substantially all the activities necessary to prepare that part for its intended use or sale.

A business park comprising several buildings, each of which can be used individually, is an example of a qualifying asset for which each part is capable of being usable while construction continues on other parts. An example of a qualifying asset that needs to be complete before any part can be used is an industrial plant involving several processes which are carried out in sequence at different parts of the plant within the same site, such as a steel mill.

DISCLOSURE

An entity shall disclose:

(a)	the amount of borrowing costs capitalised during the period; and

(b)	the capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation.

TRANSITIONAL PROVISIONS

27	When application of this Standard constitutes a change in accounting policy, an entity shall apply the Standard to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after the effective date.

28	However, an entity may designate any date before the effective date and apply the Standard to borrowing costs relating to all qualifying assets for which the commencement date for capitalisation is on or after that date.

EFFECTIVE DATE

29	An entity shall apply the Standard for annual periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the Standard from a date before 1 January 2009, it shall disclose that fact.

WITHDRAWAL OF IAS 23 (REVISED 1993)

30	This Standard supersedes IAS 23 Borrowing Costs revised in 1993.

Appendix

Amendments to other pronouncements

The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2009. If an entity applies this Standard for an earlier period, the amendments in this appendix shall be applied for that earlier period. In the amended paragraphs, new text is underlined and deleted text is struck through.

A1 IFRS 1 First-time Adoption of International Financial Reporting Standards is amended as described below.

Paragraphs 9, 12 and 13 are amended, after paragraph 25H a heading and paragraph 25I are inserted, and paragraph 47G is added as follows:

‘9	The transitional provisions in other IFRSs apply to changes in accounting policies made by an entity that already uses IFRSs; they do not apply to a first-time adopter’s transition to IFRSs, except as specified in paragraphs 25D, 25H, 25I, 34A and 34B.

This IFRS establishes two categories of exceptions to the principle that an entity’s opening IFRS balance sheet shall comply with each IFRS:

(a)	paragraphs 13–25I and 36A–36C grant exemptions from some requirements of other IFRSs.

(b)	paragraphs 26–34B prohibit retrospective application of some aspects of other IFRSs.

An entity may elect to use one or more of the following exemptions:

(a)

…

(l)	fair value measurement of financial assets or financial liabilities at initial recognition (paragraph 25G);

(m)	a financial asset or an intangible asset accounted for in accordance with IFRIC 12 Service Concession Arrangements (paragraph 25H); and

(n)	borrowing costs (paragraph 25I).

An entity shall not apply these exemptions by analogy to other items.

Borrowing costs

25I	A first-time adopter may apply the transitional provisions set out in paragraphs 27 and 28 of IAS 23 Borrowing Costs, as revised in 2007. In those paragraphs references to the effective date shall be interpreted as 1 January 2009 or the date of transition to IFRSs, whichever is later.

47G	An entity shall apply the amendments in paragraphs 13(n) and 25I for annual periods beginning on or after 1 January 2009. If an entity applies IAS 23 for an earlier period, these amendments shall be applied for that earlier period.’

A2 In IAS 1 Presentation of Financial Statements the last sentence of paragraph 110 is deleted.

A3 In IAS 7 Cash Flow Statements paragraph 32 is amended as follows:

‘32	The total amount of interest paid during a period is disclosed in the cash flow statement whether it has been recognised as an expense in the income statement or capitalised in accordance with IAS 23 Borrowing Costs.’

A4 In IAS 11 Construction Contracts the last sentence of paragraph 18 is amended as follows:

‘18	Costs that may be attributable to contract activity in general and can be allocated to specific contracts also include borrowing costs.’

A5 In IAS 16 Property, Plant and Equipment paragraph 23 is amended as follows:

‘23

The cost of an item of property, plant and equipment is the cash price equivalent at the recognition date. If payment is deferred beyond normal credit terms, the difference between the cash price equivalent and the total payment is recognised as interest over the period of credit unless such interest is capitalised in accordance with IAS 23.’

A6 In IAS 38 Intangible Assets paragraph 32 is amended as follows:

‘32

If payment for an intangible asset is deferred beyond normal credit terms, its cost is the cash price equivalent. The difference between this amount and the total payments is recognised as interest expense over the period of credit unless it is capitalised in accordance with IAS 23 Borrowing Costs.’

A7 In IFRIC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities paragraph 8 is amended as follows:

‘8	The periodic unwinding of the discount shall be recognised in profit or loss as a finance cost as it occurs. Capitalisation under IAS 23 is not permitted.’

17.12.2008

Official Journal of the European Union

L 338/17

COMMISSION REGULATION (EC) No 1261/2008

of 16 December 2008

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Whereas:

(1)	By Commission Regulation (EC) No 1126/2008 (2) certain international accounting standards and interpretations that were extant at 15 October 2008 were adopted.

(2)

On 17 January 2008, the International Accounting Standards Board (IASB) published Amendments to International Financial Reporting Standard (IFRS) 2 Share-based payment, hereinafter ‘amendment to IFRS 2’. The amendment to IFRS 2 provides clarification on what are vesting conditions, how to account for non-vesting conditions and how to account for cancellations of a share-based payment arrangement by the entity or the counterparty.

(3)

The consultation with the Technical Expert Group (TEG) of the European Financial Reporting Advisory Group (EFRAG) confirms that the amendment to IFRS 2 meets the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002. In accordance with Commission Decision 2006/505/EC of 14 July 2006 setting up a Standards Advice Review Group to advise the Commission on the objectivity and neutrality of the European Financial Reporting Advisory Group’s (EFRAG’s) opinions (3), the Standards Advice Review Group considered EFRAG’s opinion on endorsement and advised the European Commission that it is well balanced and objective.

(4)	Regulation (EC) No 1126/2008 should therefore be amended accordingly.

(5)	The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,

HAS ADOPTED THIS REGULATION:

Article 1

In the Annex to Regulation (EC) No 1126/2008 International Financial Reporting Standard IFRS 2 Share-based payment is amended in accordance with the Amendments to International Financial Reporting Standard IFRS 2 Share-based payment, hereinafter ‘amendment to IFRS 2’, as set out in the Annex to this Regulation.

Article 2

Each company shall apply the amendment to IFRS 2, as set out in the Annex to this Regulation, at the latest, as from the commencement date of its first financial year starting after 31 December 2008.

Article 3

This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 16 December 2008.

For the Commission

Charlie McCREEVY

Member of the Commission

ANNEX

INTERNATIONAL ACCOUNTING STANDARDS

IFRS 2

‘Amendment to IFRS 2 Share-based payment’

AMENDMENTS TO IFRS 2

Share-based Payment

This document sets out amendments to IFRS 2 Share-based Payment. The amendments finalise the proposals that were contained in the exposure draft of proposed amendments to IFRS 2 — Vesting Conditions and Cancellations published in February 2006.

Entities shall apply these amendments to all share-based payments within the scope of IFRS 2 for annual periods beginning on or after 1 January 2009. Earlier application is permitted.

NON-VESTING CONDITIONS

In the Standard, after paragraph 21, a heading and paragraph 21A are added as follows.

‘Treatment of non-vesting conditions

21A

Similarly, an entity shall take into account all non-vesting conditions when estimating the fair value of the equity instruments granted. Therefore, for grants of equity instruments with non-vesting conditions, the entity shall recognise the goods or services received from a counterparty that satisfies all vesting conditions that are not market conditions (e.g. services received from an employee who remains in service for the specified period of service), irrespective of whether those non-vesting conditions are satisfied.’

CANCELLATIONS

In the Standard, paragraph 28 is amended as follows.

‘28	If a grant of equity instruments is cancelled or settled during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) …’

In the Standard, paragraph 28(b) is amended as follows.

‘28

(b)

… Any such excess shall be recognised as an expense. However, if the share-based payment arrangement included liability components, the entity shall remeasure the fair value of the liability at the date of cancellation or settlement. Any payment made to settle the liability component shall be accounted for as an extinguishment of the liability.’

In the Standard, after paragraph 28, paragraph 28A is added as follows.

‘28A	If an entity or counterparty can choose whether to meet a non-vesting condition, the entity shall treat the entity’s or counterparty’s failure to meet that non-vesting condition during the vesting period as a cancellation.’

EFFECTIVE DATE

In the Standard, paragraph 62 is added as follows.

‘62

An entity shall apply the following amendments retrospectively in annual periods beginning on or after 1 January 2009:

(a)	the requirements in paragraph 21A in respect of the treatment of non-vesting conditions;

(b)	the revised definitions of “vest” and “vesting conditions” in Appendix A;

(c)	the amendments in paragraphs 28 and 28A in respect of cancellations.

Earlier application is permitted. If an entity applies these amendments for a period beginning before 1 January 2009, it shall disclose that fact.’

DEFINITIONS

In Appendix A, the definitions of ‘vest’ and ‘vesting conditions’ are amended as follows.

‘vest

To become an entitlement. Under a share-based payment arrangement, a counterparty’s right to receive cash, other assets or equity instruments of the entity vests when the counterparty’s entitlement is no longer conditional on the satisfaction of any vesting conditions.

vesting conditions

The conditions that determine whether the entity receives the services that entitle the counterparty to receive cash, other assets or equity instruments of the entity, under a share-based payment arrangement. Vesting conditions are either service conditions or performance conditions. Service conditions require the counterparty to complete a specified period of service. Performance conditions require the counterparty to complete a specified period of service and specified performance targets to be met (such as a specified increase in the entity’s profit over a specified period of time). A performance condition might include a market condition.’

17.12.2008

Official Journal of the European Union

L 338/21

COMMISSION REGULATION (EC) No 1262/2008

of 16 December 2008

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Whereas:

(1)	By Commission Regulation (EC) No 1126/2008 (2) certain international accounting standards and interpretations that were extant at 15 October 2008 were adopted.

(2)

On 5 July 2007, the International Financial Reporting Interpretations Committee (IFRIC) published IFRIC Interpretation 13 customer loyalty programmes, hereinafter ‘IFRIC 13’. IFRIC 13 eliminates the current inconsistencies in practice regarding the accounting treatment of free or discounted goods or services sold under customer loyalty programmes that companies use to award to their customers in form of points, air miles or other credits upon the sale of a good or a service.

(3)

The consultation with the Technical Expert Group (TEG) of the European Financial Reporting Advisory Group (EFRAG) confirms that IFRIC 13 meets the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002. In accordance with Commission Decision 2006/505/EC of 14 July 2006 setting up a Standards Advice Review Group to advise the Commission on the objectivity and neutrality of the European Financial Reporting Advisory Group’s (EFRAG) opinions (3), the Standards Advice Review Group considered EFRAG’s opinion on endorsement and advised the European Commission that it is well balanced and objective.

(4)	Regulation (EC) No 1126/2008 should therefore be amended accordingly.

(5)	The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,

HAS ADOPTED THIS REGULATION:

Article 1

In the Annex to Regulation (EC) No 1126/2008 International Financial Reporting Interpretations Committee’s (IFRIC) Interpretation 13 customer loyalty programmes is inserted as set out in the Annex to this Regulation.

Article 2

Each company shall apply IFRIC 13, as set out in the Annex to this Regulation, at the latest as from the commencement date of its first financial year starting after 31 December 2008.

Article 3

This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 16 December 2008.

For the Commission

Charlie McCREEVY

Member of the Commission

ANNEX

INTERNATIONAL FINANCIAL REPORTING STANDARDS

IFRIC 13

‘IFRIC Interpretation 13 customer loyalty programmes’

IFRIC INTERPRETATION 13

Customer Loyalty Programmes

REFERENCES

—	IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

—	IAS 18 Revenue

—	IAS 37 Provisions, Contingent Liabilities and Contingent Assets

BACKGROUND

Customer loyalty programmes are used by entities to provide customers with incentives to buy their goods or services. If a customer buys goods or services, the entity grants the customer award credits (often described as ‘points’). The customer can redeem the award credits for awards such as free or discounted goods or services.

The programmes operate in a variety of ways. Customers may be required to accumulate a specified minimum number or value of award credits before they are able to redeem them. Award credits may be linked to individual purchases or groups of purchases, or to continued custom over a specified period. The entity may operate the customer loyalty programme itself or participate in a programme operated by a third party. The awards offered may include goods or services supplied by the entity itself and/or rights to claim goods or services from a third party.

SCOPE

This Interpretation applies to customer loyalty award credits that:

(a)	an entity grants to its customers as part of a sales transaction, i.e. a sale of goods, rendering of services or use by a customer of entity assets; and

(b)	subject to meeting any further qualifying conditions, the customers can redeem in the future for free or discounted goods or services.

The Interpretation addresses accounting by the entity that grants award credits to its customers.

ISSUES

The issues addressed in this Interpretation are:

(a)

whether the entity’s obligation to provide free or discounted goods or services (‘awards’) in the future should be recognised and measured by:

(i)	allocating some of the consideration received or receivable from the sales transaction to the award credits and deferring the recognition of revenue (applying paragraph 13 of IAS 18); or

(ii)	providing for the estimated future costs of supplying the awards (applying paragraph 19 of IAS 18); and

(b)

if consideration is allocated to the award credits:

(i)	how much should be allocated to them;

(ii)	when revenue should be recognised; and

(iii)

if a third party supplies the awards, how revenue should be measured.

CONSENSUS

An entity shall apply paragraph 13 of IAS 18 and account for award credits as a separately identifiable component of the sales transaction(s) in which they are granted (the ‘initial sale’). The fair value of the consideration received or receivable in respect of the initial sale shall be allocated between the award credits and the other components of the sale.

6	The consideration allocated to the award credits shall be measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately.

If the entity supplies the awards itself, it shall recognise the consideration allocated to award credits as revenue when award credits are redeemed and it fulfils its obligations to supply awards. The amount of revenue recognised shall be based on the number of award credits that have been redeemed in exchange for awards, relative to the total number expected to be redeemed.

If a third party supplies the awards, the entity shall assess whether it is collecting the consideration allocated to the award credits on its own account (ie as the principal in the transaction) or on behalf of the third party (ie as an agent for the third party).

(a)

If the entity is collecting the consideration on behalf of the third party, it shall:

(i)	measure its revenue as the net amount retained on its own account, i.e. the difference between the consideration allocated to the award credits and the amount payable to the third party for supplying the awards; and

(ii)

recognise this net amount as revenue when the third party becomes obliged to supply the awards and entitled to receive consideration for doing so. These events may occur as soon as the award credits are granted. Alternatively, if the customer can choose to claim awards from either the entity or a third party, these events may occur only when the customer chooses to claim awards from the third party.

(b)	If the entity is collecting the consideration on its own account, it shall measure its revenue as the gross consideration allocated to the award credits and recognise the revenue when it fulfils its obligations in respect of the awards.

If at any time the unavoidable costs of meeting the obligations to supply the awards are expected to exceed the consideration received and receivable for them (ie the consideration allocated to the award credits at the time of the initial sale that has not yet been recognised as revenue plus any further consideration receivable when the customer redeems the award credits), the entity has onerous contracts. A liability shall be recognised for the excess in accordance with IAS 37. The need to recognise such a liability could arise if the expected costs of supplying awards increase, for example if the entity revises its expectations about the number of award credits that will be redeemed.

EFFECTIVE DATE AND TRANSITION

10	An entity shall apply this Interpretation for annual periods beginning on or after 1 July 2008. Earlier application is permitted. If an entity applies the Interpretation for a period beginning before 1 July 2008, it shall disclose that fact.

11	Changes in accounting policy shall be accounted for in accordance with IAS 8.

Appendix

Application guidance

This appendix is an integral part of the Interpretation.

Measuring the fair value of award credits

AG1	Paragraph 6 of the consensus requires the consideration allocated to award credits to be measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately. If the fair value is not directly observable, it must be estimated.

AG2

An entity may estimate the fair value of award credits by reference to the fair value of the awards for which they could be redeemed. The fair value of these awards would be reduced to take into account:

(a)	the fair value of awards that would be offered to customers who have not earned award credits from an initial sale; and

(b)	the proportion of award credits that are not expected to be redeemed by customers.

If customers can choose from a range of different awards, the fair value of the award credits will reflect the fair values of the range of available awards, weighted in proportion to the frequency with which each award is expected to be selected.

AG3

In some circumstances, other estimation techniques may be available. For example, if a third party will supply the awards and the entity pays the third party for each award credit it grants, it could estimate the fair value of the award credits by reference to the amount it pays the third party, adding a reasonable profit margin. Judgement is required to select and apply the estimation technique that satisfies the requirements of paragraph 6 of the consensus and is most appropriate in the circumstances.

17.12.2008

Official Journal of the European Union

L 338/25

COMMISSION REGULATION (EC) No 1263/2008

of 16 December 2008

(Text with EEA relevance)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Whereas:

(1)	By Commission Regulation (EC) No 1126/2008 (2) certain international standards and interpretations that were extant at 15 October 2008 were adopted.

(2)

On 5 July 2007, the International Financial Reporting Interpretations Committee (IFRIC) published IFRIC Interpretation 14 IAS 19 — The Limit on a defined benefit Asset, Minimum Funding Requirements and their Interaction, hereinafter ‘IFRIC 14’. IFRIC 14 clarifies provisions of International Accounting Standard (IAS) 19 regarding the measurement of a defined benefit asset within the context of post-retirement defined benefit plans, when a minimum funding requirement exists. A defined benefit asset is a surplus of the fair value of the plan assets over the present value of the defined benefit obligation. IAS 19 limits its measurement to the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan, which can be affected by minimum funding requirements.

(3)

The consultation with the Technical Expert Group (TEG) of the European Financial Reporting Advisory Group (EFRAG) confirms that IFRIC 14 meets the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002. In accordance with Commission Decision 2006/505/EC of 14 July 2006 setting up a Standards Advice Review Group to advise the Commission on the objectivity and neutrality of the European Financial Reporting Advisory Group's (EFRAG’s) opinions (3), the Standards Advice Review Group considered EFRAG's opinion on endorsement and advised the European Commission that it is well-balanced and objective.

(4)	Regulation (EC) No 1126/2008 should therefore be amended accordingly.

(5)	The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,

HAS ADOPTED THIS REGULATION:

Article 1

In the Annex to Regulation (EC) No 1126/2008, International Financial Reporting Interpretations Committee's (IFRIC) Interpretation 14 IAS 19 — The Limit on a defined benefit Asset, Minimum Funding Requirements and their Interaction is inserted as set out in the Annex to this Regulation.

Article 2

Each company shall apply IFRIC 14, as set out in the Annex to this Regulation, at the latest, as from the commencement date of its first financial year starting after 31 December 2008.

Article 3

This Regulation shall enter into force on the third day following its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 16 December 2008.

For the Commission

Charlie McCREEVY

Member of the Commission