The meeting of the National Accounting Standards Board, devoted to a preliminary discussion of the draft interpretations - IFRIC D 23 Distributions of Non-cash assets to owners and IFRIC D24 Customer Contributions took place on March 20, 2008. The meeting of the National Accounting Standards Board, devoted to a preliminary discussion of the draft interpretations - IFRIC D 23 Distributions of Non-cash assets to owners and IFRIC D24 Customer Contributions took place on March 20, 2008. As a result of the discussion, it was decided that the Project manager will prepare the draft comment-letters for further discussion at one of the following meetings of the NASB. At the presentation of the draft interpretation IFRIC D 23 Distributions of Non-cash assets to owners, the project manager pointed to the following propositions made by IASB in respect to accounting for the distribution of non-cash assets to shareholders: 1) An entity shall measure a liability to distribute dividends to its owners in accordance with paragraph 36 of IAS 37 at the fair value of the asset to be distributed. If an entity gives its owners a choice of receiving either non-cash or a cash alternative, the entity shall estimate the dividend payable by considering both the fair value of each alternative and the associated probability of owners selecting each alternative. 2) At the end of each reporting period and at the date of settlement, the entity shall review and adjust the carrying amount of the dividend payable in accordance with paragraph 59 of IAS 37, with any changes in the carrying amount of the dividend payable recognized as adjustments to the amount of the distribution. 3) When an entity settles the dividend payable, it shall recognize the difference between the carrying amount of the assets distributed and the carrying amount of the dividend payable in profit or loss. After that, project manager presented his own view on the issues addressed by the IASB. He criticized some proposals that constitute IASB’s approach and, particularly, emphasized that once the decision about the distribution of dividends has been taken at one specific point of time, than the liability to pay dividends should be classified as any other liability. Therefore, any changes in the fair value of this liability should be accounted in the profit and loss rather than directly in the adjustment to distributions. Besides that, from project manager point of view, recognizing the liability to distribute non-cash dividends at the fair value of the assets to be distributed without simultaneous revaluation of these assets to their fair value undermines the faithfulness of an entity’s financial position. Therefore, in order to present a financial position of an entity faithfully, it is appropriate to measure the liability and assets to be distributed at the fair value of the latter. Only in this case, information presented in the financial statements will faithfully reflect the consequences of a settlement of the liability in relation to the distribution of non-cash dividends. In respect to accounting for the difference between the fair value of the assets distributed and their carrying amount, project manager agreed with IFRIC’s view, which considers this difference as accumulated unrealized gains. However, he noted that the point of time when this unrealized gains become realized is a moment when the liability to pay dividend arises, rather than the moment of the actual settlement of this liability. In general, the members of NASB supported all the comments made by the project manager and instructed him to produce a draft comment-letter. With respect to the draft interpretation “Customer Contributions” published by IFRIC for public discussion, the project manager summarized the following propositions made by the IASB. 1) The draft interpretation attempts to address the situations, in which entities receive items of PPE or cash contributions for that must be used to acquisition of property, plant and equipment, which must be used to provide access to a supply of goods or services to customers. 2) An entity that has received a customer contribution assesses whether the contributed resource qualifies for recognition as an asset. If so, that resource shall be recognized as an item of PPE and measured on initial recognition at its fair value. 3) An entity that receives an asset that meets the definition of a customer contribution has an obligation to provide access to a supply of goods or services. That obligation shall be recognized in the statement of financial position and measured on initial recognition at the fair value of the contribution received. The obligation shall be reduced and revenue recognized as access to a supply of goods or services is provided. 4) An entity that has received an asset as a result of a customer contribution shall assess whether the ongoing arrangement to provide access to a supply of goods or services using that asset contains a lease. Determining whether an arrangement is or contains a lease shall be based on the substance of the arrangement. This assessment shall be made in accordance with IAS 17 and IFRIC 4. 5) The revenue shall be recognized over the period, which the entity has an obligation to continue to provide access to a supply of goods or services using the contributed asset. However, this period should not extend the useful life of the asset. 6) An entity that receives a cash contribution shall first consider whether the asset that must be acquired or constructed as a result of receiving the cash contribution will meet the criteria for recognition as an item of property, plant and equipment of the entity. If not, the entity shall account for the cash contribution as proceeds for providing the asset to the customer, using IAS 11 or IAS 18 as applicable. If the asset that is acquired or constructed will meet the criteria to be recognized as an item of the entity’s property, plant and equipment, it shall be recognized and measured as it is constructed or acquired in accordance with IAS 16. In this case, the entity that receives the cash contribution has an obligation to use that asset to provide access to a supply of goods or services. That obligation shall be measured with reference to the cash contribution received and accounted for as an obligation arising when an entity receives a non-cash contribution. After that, the project manager presented his own view on the issue. From his point of view, the approach suggested by IFRIC is logical. However, some of the arguments presented are debatable. Particularly, he noted that there is no clear distinction in the text between two categories – “obligation to provide access to the supply of goods and services” and “prepayment in cash made in respect to the obligation to provide access to a supply of goods and services.” However, he noted that estimation of “obligation to provide access to a supply of goods and services” is not always equal to the fair value of the received asset to be used to provide access. Such obligation should be accounted as a non-financial liability in accordance with IAS 37. Furthermore, he noted that the agreement to provide access to supply of goods or services in future for which the consumer has made cash or non-cash contribution is an executory contract, in which customer has partially performed its obligation. In the case of non-onerous executory contract access provider shall recognize liability to the extent of advance payment received. However, in the case when such contracts are qualified as “onerous contracts”, provisions should be recognized in relation to them. Therefore, the project manager suggests to modify the paragraph 11 in order to clarify that an advance payment made in order to receive the services in the future rather than the obligation to provide such services is subject to being recognized. Besides that, the project manager noted some other technical comments on the draft interpretation under discussion. The members of the NASB expressed their support to the comments made by the project manager and instructed him to produce a draft comment-letter for discussion at one of the following meetings.