Liabilities arising from Participating in a
Specific Market—Waste Electrical and
Electronic Equipment

In September 2005 the International Accounting Standards Board issued IFRIC 6 Liabilities
arising from Participating in a Specific Market—Waste Electrical and Electronic Equipment. It was
developed by the Interpretations Committee.

IFRIC Interpretation 6 Liabilities arising from Participating in a Specific Market—Waste
Electrical and Electronic Equipment (IFRIC 6) is set out in paragraphs 1–11. IFRIC 6 is
accompanied by a Basis for Conclusions. The scope and authority of Interpretations are
set out in the Preface to IFRS Standards.

IFRIC Interpretation 6
Liabilities arising from Participating in a Specific Market—
Waste Electrical and Electronic Equipment

References

• IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Background

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.
Paragraph 19 of IAS 37 states that provisions are recognized only for
‘obligations arising from past events existing independently of an entity’s
future actions’.
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 recognized. 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.
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.’
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

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.
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.

Issue

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

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

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

Changes in accounting policies shall be accounted for in accordance with
IAS 8.