IFRIC 17
Published
Distributions of Non-cash Assets to Owners
Addresses accounting for non-reciprocal distributions of non-cash assets by an entity to its owners, including measurement of the dividend payable at fair value and recognition of any gain or loss on settlement.
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Conceptual Framework Linkage
Why a specific interpretation for non-cash dividends was needed
IAS 10 governs when a dividend is recognised as a liability – it becomes a present obligation when the dividend is appropriately authorised and no longer at the discretion of the entity. But IAS 10 said NOTHING about HOW to MEASURE a dividend that is payable NOT in cash but in the form of the entity's OWN EQUITY INSTRUMENTS or OTHER NON-CASH ASSETS. IFRIC 17 closes that gap by specifying the measurement and remeasurement mechanics.
Without IFRIC 17, entities could measure non-cash dividends inconsistently – some using historical cost, others using fair value, and still others recognising no gain or loss on distribution at all. This created a material comparability gap.
The Conceptual Framework at work
IFRIC 17 applies the Conceptual Framework's liability recognition criteria to a specific dividend scenario. The dividend becomes a present obligation when authorised; the obligation is settled when the asset is distributed. The MEASUREMENT of the liability (fair value at recognition, remeasured at each reporting date) faithfully represents the economic cost to the entity of fulfilling its obligation to distribute non-cash assets to owners.
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Scope & Definitions
What IFRIC 17 covers
IFRIC 17 applies to DIVIDENDS that are payable in a form OTHER THAN CASH – specifically, distributions of NON-CASH ASSETS to owners (e.g. property, plant and equipment, investments in subsidiaries, or other non-current assets) and distributions of the entity's OWN EQUITY INSTRUMENTS. The interpretation does NOT apply to distributions that are part of a business combination or restructuring.
TYPICAL FACT PATTERNS
Parent distributing a subsidiary's shares to its own shareholders as a dividend-in-specie Real estate investment trust distributing property assets to unit holders Listed company distributing a subsidiary stake to existing shareholders as a special dividend
Key definitions
Dividend payable
A present obligation arising from the authorisation of a dividend, measured at the fair value of the non-cash assets to be distributed.
Gain or loss on distribution
The difference between the carrying amount of the distributed asset and the carrying amount of the dividend payable at the date of settlement, recognised in profit or loss.
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When the Dividend Liability Is Recognised
The recognition trigger – same as cash dividends
IFRIC 17 confirms that the timing of recognition for a NON-CASH dividend follows the SAME RULE as a cash dividend under IAS 10: the dividend becomes a PRESENT OBLIGATION when it is APPROPRIATELY AUTHORISED and no longer at the discretion of the entity. At that point, a liability is recognised for the FAIR VALUE of the non-cash assets to be distributed. The recognition timing is NOT affected by the form of the dividend.
⚠️ The dividend liability is recognised at the FAIR VALUE of the non-cash asset at the date the dividend is authorised – not at the date of distribution. Any change in fair value between authorisation and distribution affects the remeasurement, not the initial recognition.
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Measuring the Dividend Payable
Fair value at the date of authorisation
The dividend payable is measured at the FAIR VALUE of the non-cash assets to be distributed, CALCULATED AT THE DATE THE DIVIDEND IS AUTHORISED. If the distributed assets are measured at FAIR VALUE in the entity's balance sheet (e.g. under IFRS 13), the carrying amount is used. If they are measured at COST or AMORTISED COST, a fresh fair value measurement is required.
DIVIDEND PAYABLE MEASUREMENT
Dividend payable = Fair value of non-cash assets at the date of authorisation
When fair value cannot be reliably measured
If the fair value of the non-cash asset CANNOT be RELIABLY MEASURED – for example, an unquoted subsidiary with no observable market price – the entity must estimate fair value using VALUATION TECHNIQUES (discounted cash flow, comparable company multiples, etc.). If fair value cannot be reliably measured even with valuation techniques, the dividend is measured at the CARRYING AMOUNT of the assets.
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Remeasurement at Each Reporting Date
The remeasurement obligation
Between the date of authorisation and the date of distribution, the dividend payable must be REMEASURED AT EACH REPORTING DATE. Any change in the fair value of the non-cash asset between reporting dates is recognised in PROFIT OR LOSS. This ensures the liability faithfully represents the entity's obligation at each balance sheet date.
REMEASUREMENT MECHANICS
If fair value increases: debit the dividend payable, credit profit or loss If fair value decreases: debit profit or loss, credit the dividend payable The remeasurement continues until the asset is distributed to owners
The remeasurement requirement means that non-cash dividends create PROFIT OR LOSS VOLATILITY between the authorisation and distribution dates – an important consideration for entities planning large in-specie distributions.
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Settlement – The Gain or Loss on Distribution
The final gain or loss on distribution
When the non-cash asset is DISTRIBUTED to owners, the carrying amount of the asset is REMOVED from the balance sheet, and the dividend payable liability is REMOVED at its REMEASURED carrying amount. The DIFFERENCE between the two amounts is recognised as a GAIN OR LOSS ON DISTRIBUTION in profit or loss.
GAIN/LOSS ON DISTRIBUTION
Gain/loss = Carrying amount of non-cash asset - Carrying amount of dividend payable (at settlement date)
KEY PRINCIPLES
The gain or loss is ALWAYS recognised in profit or loss – never in other comprehensive income The gain or loss represents the difference between the "book value" of the distribution obligation and the actual assets given up A gain means the distributed asset's value fell between authorisation and distribution; a loss means it rose
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Worked Example – Full Distribution Cycle
Example: Distribution of a subsidiary stake
A parent company owns 80% of a subsidiary with a carrying amount of £80m. On 1 March, the board authorises a dividend-in-specie of the subsidiary stake to shareholders. The fair value of the subsidiary on 1 March is £120m. The distribution occurs on 30 June. Fair value at 30 June is £110m.
1 March (authorisation):
Dividend payable recognised at fair value: £120m
Deferred gain recognised in equity: £120m - £80m = £40m (deferred gain, not immediately in P&L)
30 June (reporting date):
Remeasure dividend payable to fair value: £110m
Recognise remeasurement gain in P&L: £120m - £110m = £10m
30 June (settlement):
Carrying amount of subsidiary: £80m
Dividend payable (remeasured): £110m
Gain on distribution = £80m - £110m = -£30m (loss recognised in P&L)
Total P&L impact: £10m remeasurement gain + £30m distribution loss = £20m net loss
Dividend payable recognised at fair value: £120m
Deferred gain recognised in equity: £120m - £80m = £40m (deferred gain, not immediately in P&L)
30 June (reporting date):
Remeasure dividend payable to fair value: £110m
Recognise remeasurement gain in P&L: £120m - £110m = £10m
30 June (settlement):
Carrying amount of subsidiary: £80m
Dividend payable (remeasured): £110m
Gain on distribution = £80m - £110m = -£30m (loss recognised in P&L)
Total P&L impact: £10m remeasurement gain + £30m distribution loss = £20m net loss
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Choice-of-Alternative Dividends
When shareholders choose between cash and non-cash
If shareholders have a CHOICE between receiving a CASH dividend and receiving a NON-CASH dividend (e.g. shares in a subsidiary), IFRIC 17 requires the entity to measure the dividend payable at the FAIR VALUE OF THE CASH ALTERNATIVE. The entity does NOT get to choose which fair value to use – the cash alternative's fair value governs, because that is the amount the entity is effectively giving up.
When the cash alternative is unavailable
If shareholders do NOT have a cash alternative (the dividend is ONLY payable in non-cash assets), the fair value of the non-cash assets themselves is used. This is a practical recognition that the entity cannot force a cash payment, so the true economic cost is the fair value of the distributed assets.
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Disclosure
What IFRIC 17 requires
Description of the non-cash asset(s) distributed or to be distributed The carrying amount of the non-cash asset at the date of distribution The fair value of the dividend payable at the date of authorisation and at each reporting date The gain or loss recognised on distribution, and any remeasurement gains or losses recognised between reporting dates
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Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether the distributed asset's fair value can be reliably measured, or whether the carrying amount must be used Whether shareholders have a genuine cash alternative choice (affecting the measurement basis) Whether the distribution is within IFRIC 17's scope (not a business combination or restructuring)
SIGNIFICANT ESTIMATES
Fair value of unquoted subsidiaries or complex assets at the authorisation date Fair value changes between reporting dates affecting remeasurement
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IFRIC 17 vs US GAAP
Comparison – IFRIC 17 vs ASC 505-30 (Treasury Stock)
FeatureIFRIC 17 (IFRS)US GAAP (ASC 505-30)
Liability recognitionAt fair value at authorisation dateAt fair value at declaration date
RemeasurementRemeasured at each reporting date, P&L impactRemeasured at each reporting date, P&L impact
Gain/loss on distributionRecognised in profit or lossRecognised in profit or loss
Choice-of-alternativeCash alternative fair value governs if choice existsSimilar principle applies
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Statement Mapping
Where every IFRIC 17 event lands
EventStatement(s) affectedNotes
Dividend payable recognised at authorisationSOFPLiability at fair value of non-cash asset
Remeasurement between reporting datesSOPL SOFPGain or loss in profit or loss; liability adjusted
Asset removed from balance sheetSOFPNon-cash asset derecognised at carrying amount
Gain or loss on distributionSOPLDifference between asset carrying amount and final dividend payable
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Related Standards
Cross-reference map
StandardConnection
IAS 10Governs when a dividend becomes a present obligation – the same timing applies to non-cash dividends under IFRIC 17
IAS 37Supplies the general liability recognition principle applied to the dividend payable
IFRS 5May apply to the distributed asset beforehand if it meets held-for-distribution criteria
IFRS 3Supplies the definition of a business relevant to determining the nature of the non-cash asset distributed
Quick-reference glossary
Dividend payable
A present obligation arising from the authorisation of a dividend, measured at the fair value of the non-cash assets to be distributed.
Gain or loss on distribution
The difference between the carrying amount of the distributed asset and the carrying amount of the dividend payable at the date of settlement, recognised in profit or loss.
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Glossary
Dividend payable
A present obligation arising from the authorisation of a dividend, measured at the fair value of the non-cash assets to be distributed.
Gain or loss on distribution
The difference between the carrying amount of the distributed asset and the carrying amount of the dividend payable at the date of settlement, recognised in profit or loss.
Non-cash dividend
A dividend payable in the form of non-cash assets or the entity's own equity instruments, rather than cash – the subject matter of IFRIC 17.
Remeasurement
The adjustment of the dividend payable at each reporting date between authorisation and distribution, reflecting changes in the fair value of the non-cash assets to be distributed.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Nov-2008
In November 2008 the International Accounting Standards Board issued IFRIC 17 Distributions of Non-cash Assets to Owners. It was developed by the Interpretations Committee.
Jul-2014
The Basis for Conclusions on IFRIC 17 was amended to reflect IFRS 9 Financial Instruments (issued July 2014).
May-2011
IFRS 10 Consolidated Financial Statements
Minor consequential amendment to IFRIC 17
May-2011
IFRS 13 Fair Value Measurement
Minor consequential amendment to IFRIC 17
Mar-2018
Amendments to References to the Conceptual Framework in IFRS Standards and IFRS 18 Presentation and Disclosure in Financial Statements
Minor consequential amendment to IFRIC 17