20 July 2005

Dear Sir

IFRIC Draft Interpretation
D17 'Group and Treasury Share Transactions'

The Group of 100 (G100) is an organisation representing the interests of Chief Financial Officers of Australia’s largest business enterprises. The G100 is pleased to provide comments on D17.

Question
Paragraph 9 of the draft interpretation proposes that share-based transactions in which a parent entity grants rights to its equity instruments direct to a subsidiary entity’s employees should be accounted for as equity-based transactions. Paragraph 11 proposes that, for transactions in which a subsidiary entity grants to its employees rights to equity instruments of its parent, the subsidiary entity should account for those transactions as cash-settled transactions. Therefore, in the subsidiary’s individual financial statements, the accounting treatment of transactions in which a subsidiary’s employees are granted rights to equity instruments of its parent would differ, depending on whether the parent or the subsidiary granted those rights to the subsidiary’s employees. This is because the IFRIC concluded that, in the former situation, the subsidiary has not incurred a liability to transfer cash or other assets of the entity to its employees, whereas it has incurred such a liability in the latter situation (being a liability to transfer equity instruments of its parent). Do you agree with these proposals?

Response
The G100 agrees that from the perspective of the employer and the group (economic entity) the economic substance of the transactions referred to in paragraphs 9 and 11 is the same and, accordingly, should be subject to the same accounting treatment.

The nature and characteristics of employee share schemes is that they normally operate in respect of qualifying employees within the group, irrespective of whether the parent or a subsidiary is the designated employer.

The G100 acknowledges that consolidation adjustments will be required when the accounting in the subsidiary’s financial statements differs because of the particular arrangements in each case. We believe that the principal focus of the accounting should be the recognition and measurement in the consolidated financial statements.

Yours sincerely

Tom Honan
National President

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