IFRS FAQ

What is the difference between a joint operation and a joint venture under IFRS?

A joint operation gives the parties direct rights to assets and direct obligations for liabilities — proportional consolidation applies. A joint venture gives the parties rights only to net assets — the equity method applies. Proportional consolidation for joint ventures was eliminated in 2013 under IFRS 11.

How does IFRS goodwill treatment differ from HGB or K3?

Under IFRS, goodwill is not amortized. It is tested for impairment annually under IAS 36. Under HGB and K3, goodwill is amortized on a scheduled basis over its useful economic life. IFRS entities carry goodwill at cost less accumulated impairment losses; HGB/K3 entities carry it at cost less accumulated amortization.

What happens to the FCTR when a foreign subsidiary is disposed of?

The cumulative FCTR balance relating to that entity is reclassified from OCI to profit or loss as a reclassification adjustment (IAS 21.48). This differs from FAS and K3 where the translation reserve remains in equity and is not recycled.

How are intercompany transactions eliminated under IFRS?

The same three steps apply as under other frameworks: debt consolidation (eliminate IC receivables and payables), intra-group profit elimination (remove unrealized profit in inventory and fixed assets), and income and expense consolidation (eliminate IC revenues and costs). IFRS does not specify a fixed monetary materiality threshold — management applies judgment.