The IFRS Interpretations Committee (Committee) discussed the following matter and tentatively decided not to add a standard-setting project to the work plan. The Committee will reconsider this tentative decision, including the reasons for not adding a standard-setting project, at a future meeting. The Committee invites comments on the tentative agenda decision. All comments will be on the public record and posted on our website unless a respondent requests confidentiality and we grant that request. We do not normally grant such requests unless they are supported by good reason, for example, commercial confidence.
Tentative Agenda Decision
The Committee received a request about how an entity accounts for employee home ownership plans and employee home loans.
Fact pattern 1: employee home ownership plans
An entity provides its employee with a house that the entity constructed and owns. In return, the employee has a proportion of his or her base salary deducted every month until the agreed price of the house has been fully repaid.
If the employee leaves employment within the first five years of the arrangement, the employee forfeits his or her rights to the house and recovers the salary deductions to date. If the employee leaves employment after that five-year period, the employee may choose either:
- to forfeit his or her rights to the house and recover the salary deductions to date; or
- to keep the house and immediately repay the outstanding balance.
Legal title to the house transfers to the employee only when he or she has paid in full the agreed price for the house.
The request asked how the entity should account for this arrangement—in particular, when it should recognise the transfer of the house to the employee, and the accounting before and after the transfer.
Fact pattern 2: employee home loans
An entity provides its employee with a loan to buy a house, which the employee chooses and purchases and the entity does not own. The entity provides the loan at a below-market rate of interest; the loan is typically interest-free. The employee repays the loan through salary deductions. If the employee leaves employment for any reason at any point, the outstanding balance of the loan becomes repayable.
The request asked how the entity should account for this arrangement—in particular, whether the loan is:
- a prepaid employee benefit within the scope of IAS 19 Employee Benefits; or
- a financial asset within the scope of IFRS 9 Financial Instruments, with the below-market element of the loan accounted for as a prepaid employee benefit by applying IAS 19.
Findings
Evidence gathered by the Committee [to date] indicated that the matters described in the request are not widespread, and that when the matters do arise, the amounts involved are not material.
Conclusion
Based on its findings, the Committee concluded that the matters described in the request do not have widespread effect and they do not have (and nor are they expected to have) a material effect on those affected. Consequently, the Committee [decided] not to add a standard-setting project to the work plan.
The deadline for commenting on the tentative agenda decision is 22 May 2023. The Committee will consider all comments received in writing by that date; agenda papers analysing comments received will include analysis only of comments received by that date.
