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COMMISSION
REGULATION (EC) No 108/2006 of 11 January 2006 amending
Regulation (EC) No 1725/2003 adopting certain
international accounting standards in accordance with
Regulation (EC) No 1606/2002 of the European Parliament
and of the Council.
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Liabilities
arising from Participating in a Specific Market — Waste
Electrical and Electronic Equipments
References
— IAS 8
Accounting Policies, Changes in
Accounting Estimates and Errors
— IAS 37
Provisions, Contingent
Liabilities and Contingent Assets
Background
1. Paragraph 17 of IAS 37 specifies
that an obligating event is a past event that leads to a
present obligation that an entity has no realistic
alternative to settling.
2. Paragraph 19 of IAS 37 states that
provisions are recognised only for ‘obligations arising from
past events existing independently of an entity’s future
actions’.
3. The European Union’s Directive on
Waste Electrical and Electronic Equipment (WE&EE), which
regulates the collection, treatment, recovery and
environmentally sound disposal of waste equipment, has given
rise to questions about when the liability for the
decommissioning of WE&EE should be recognised. The Directive
distinguishes between ‘new’ and ‘historical’ waste and
between waste from private households and waste from sources
other than private households. New waste relates to products
sold after 13 August 2005. All household equipment sold
before that date is deemed to give rise to historical waste
for the purposes of the Directive.
4. The Directive states that the cost
of waste management for historical household equipment
should be borne by producers of that type of equipment that
are in the market during a period to be specified in the
applicable legislation of each Member State (the measurement
period). The Directive states that each Member State shall
establish a mechanism to have producers contribute to costs
proportionately ‘e.g. in proportion to their respective
share of the market by type of equipment.’
5. Several terms used in the
Interpretation such as ‘market share’ and ‘measurement
period’ may be defined very differently in the applicable
legislation of individual Member States. For example, the
length of the measurement period might be a year or only one
month. Similarly, the measurement of market share and the
formulae for computing the obligation may differ in the
various national legislations. However, all of these
examples affect only the measurement of the liability, which
is not within the scope of the Interpretation.
Scope
6. This Interpretation provides
guidance on the recognition, in the financial statements of
producers, of liabilities for waste management under the EU
Directive on WE&EE in respect of sales of historical
household equipment.
7. The Interpretation addresses neither
new waste nor historical waste from sources other than
private households. The liability for such waste management
is adequately covered in IAS 37. However, if, in national
legislation, new waste from private households is treated in
a similar manner to historical waste from private households,
the principles of the Interpretation apply by reference to
the hierarchy in paragraphs 10–12 of IAS 8. The IAS 8
hierarchy is also relevant for other regulations that impose
obligations in a way that is similar to the cost attribution
model specified in the EU Directive.
Issues
8. The IFRIC was asked to determine in
the context of the decommissioning of WE&EE what constitutes
the obligating event in accordance with paragraph 14(a) of
IAS 37 for the recognition of a provision for waste
management costs:
— the manufacture or sale of the
historical household equipment?
— participation in the market during
the measurement period?
— the incurrence of costs in the
performance of waste management activities?
Consensus
9. Participation in the market during
the measurement period is the obligating event in accordance
with paragraph 14(a) of IAS 37. As a consequence, a
liability for waste management costs for historical
household equipment does not arise as the products are
manufactured or sold. Because the obligation for historical
household equipment is linked to participation in the market
during the measurement period, rather than to production or
sale of the items to be disposed of, there is no obligation
unless and until a market share exists during the
measurement period. The timing of the obligating event may
also be independent of the particular period in which the
activities to perform the waste management are undertaken
and the related costs incurred.
Effective date
10. An entity shall apply this
Interpretation for annual periods beginning on or after 1
December 2005. Earlier application is encouraged. If an
entity applies the Interpretation for a period beginning
before 1 December 2005, it shall disclose that fact.
Transition
11. Changes in accounting policies shall be accounted for in
accordance with IAS 8.
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