IASB/FASB convergence efforts strengthened
IASB issues new Financial Instrument standard
More IASB progress on Financial Instruments
IASB Webcast on financial instrument changes
IASCF updates G20 with progress and next steps
Live web update on financial instruments
IASB’s G20 response update
Expected loss model for consideration in IAS 39
Fair value measurement webcast
Webcasts on IAS 39 review
IASB DP – Credit risk in liability measurement
IASB/FASB convergence efforts strengthened
as reported in ANT45/2009
Following their joint meeting last week, the IASB and the Financial Accounting Standards Board (FASB) have announced their intention to intensify their efforts to achieve IASB/FASB convergence, agreeing to complete the major joint projects described in their 2006 Memorandum of Understanding (as updated in 2008) by June 2011. Both boards will now meet monthly for 2 days each month commencing in January 2010.
A copy of the statement (PDF) outlining the first principles underlying their joint standard setting agenda, their plans and the specific targets to achieve this deadline has been made available. The Boards have also committed to providing quarterly updates on their progress on their websites.
Both the Trustees of the IASC Foundation and the US Financial Accounting Foundation, which oversee these Boards, have welcomed the ongoing commitment. A copy of their statement is available on the IASB website (PDF).
IASB issues new Financial Instrument standard
as reported in ANT45/2009
The International Accounting Standards Board (IASB) has now issued IFRS 9 Financial Instruments dealing with classification and measurement of financial assets only, as part of its three-part project to replace IAS 39. It is operative for periods beginning on or after 1 January 2013, but early adoption for 31 December 2009 year ends is permitted. At the moment it is only available to the IASB’s eIFRS subscribers, but the AASB will reissue it for Australian use in due course.
On 12 November 2009, the IASB conducted a webcast introducing IFRS 9. The Institute attended the webcast and noted the following key points:- IFRS 9 only includes the classification and measurement models for financial assets
- The two models are amortised cost and fair value
- To classify as amortised cost, the asset must satisfy the business model test and have contractual cash flow characteristics
- All other instruments are at fair value
- Measurement of financial liabilities is still an ongoing project, expected to be finalised in 2010
More IASB progress on Financial
as reported in ANT40/2009
The International Accounting Standards Board (IASB) held an additional Board meeting on 6 October to continue the work on replacing the existing financial instruments standards IAS 39 Financial Instruments: Recognition and Measurement. The meeting continued discussions held in September (see item 8 ANT 39/2009) and reflects the significance and tight deadlines associated with this project.
All three phases of the project were discussed at this meeting.- Classification and Measurement
The Board made further decisions on a range of issues including the interaction of the classification models, details of which are included in the IASB Update (PDF). It expects to be able to issue the final standard on this aspect of the project in November 2009.
- Impairment
The Board discussed, amongst other things, the Presentation and Disclosure requirements to accompany the proposed expected cash flow (ECF) approach in the ED. It expects to be able to release the ED on this topic in mid-October.
- Hedge accounting
The Board continued discussions of implementation issues following its tentative decision at the September meeting to replace fair value hedge accounting by permitting recognition outside profit or loss of gains and losses on financial instruments designated as hedging instruments (an approach similar to cash flow hedge accounting).
The next meeting to discuss the project is scheduled for 16 October 2009. There may be extra meeting dates before this so as to ensure that the IASB meets its delivery timetable for pronouncements. Details will be announced on the IASB website.
IASB Webcast on financial instrument changes
as reported in ANT38/2009
The IASB conducted a webcast this week to update constituents on the progress of the revisions to IAS 39 Financial Instruments: Recognition and Measurement. They stressed that the project is still running to the original timetable, with a standard on classification and measurement expected in time for early adoption for 31 December 2009 year ends, an ED on impairment in October and an ED on hedge accounting in December.
Global feedback on the classification and measurement ED seems to have been very much in line with comments we made from Australia. Comments called for more detail on the amortized cost criteria, including guidance on what to do if the business model changes and more work to be done on how to treat realised items in the other comprehensive income (OCI) model. The board is also reconsidering the removal of the cost option for equity instruments, the fair value of which cannot be reliably measured.
The Board is pressing on with an expected loss model for impairment and looking at simplifications for hedging. Due to the volume of work, the Board is meeting weekly on financial instruments. FASB representatives are also attending to further convergence between the two boards’ proposals.
IASCF updates G20 with progress and next steps
as reported in ANT38/2009
In preparation for the upcoming meeting of G20 leaders in Pittsburgh USA this week, the International Accounting Standards Committee Foundation trustees (IASCF trustees) have released the text (PDF) of a letter written by the Chairman of Trustees to the meeting’s host President Barack Obama. The letter provides the meeting with a comprehensive summary of the progress the IASB has made towards meeting the financial reporting recommendations set at the G20 meetings in November 2008 and April 2009. The letter includes as an appendix the report issued by the International Accounting Standards Board (IASB) concerning progress on this topic released several weeks ago (refer item 9 ANT35/2009).
This report details progress and next steps in the areas of achieving uniform global economic standards on topics such as financial instruments, loan loss provisioning, off balance sheet exposures and valuation and impairment issues relating to financial assets. It also summarises the IASB’s work in the area of increasing the Board’s global accountability, setting out details of both the ongoing constitutional review programme and the steps it has taken to improve the technical dialogue with prudential supervisors, market regulators and other stakeholders.
Live web update on financial instruments
as reported in ANT37/2009
The Staff of the IASB will present two webcasts on the replacement project of IAS 39 Financial Instruments on 23 September 2009. The webcasts will provide an overview of the feedback received on the Exposure Draft Financial Instruments: Classification and Measurement, the Request for Information - Impairment of Financial Assets and the Discussion Paper Credit Risk in Liability Measurement. It will also address the next steps in the project taking into consideration developments from the IASB’s latest September board meeting.
Interested members can register for the event on the IASB’s website.
IASB’s G20 response update
as reported in ANT35/2009
The IASB has released an updated summary of their responses to the accounting recommendations made by the G20 at its Global Financial Summit meeting in April 2009 (see item 10 ANT 14/2009), ahead of the next G20 Finance Ministers Meeting to be held in London this week.
At the April meeting, the G20 leaders issued a Communiqué entitled “Strengthening the Financial System” (PDF), which called on the IASB to make progress on the creation of effective global accounting standards with improved stakeholder involvement in their creation by the end of 2009. The Communiqué also called for specific improvements in the areas of financial instruments, loan loss provisioning, off balance sheet exposures and valuation issues.
Since then, the IASB and the IASC Foundation has been engaged in a number of projects to address these concerns and the updated summary provides a comprehensive overview of the measures achieved to date and the actions still in progress.
The update is available for download from the IASB website (PDF). For more information on the April summit, refer to the G20 website.
Expected loss model for consideration in IAS 39
as reported in ANT26/2009
As part its revision of IAS 39, the IASB is reviewing the current impairment requirements of this standard. It has issued a request for information on the feasibility of adopting an “expected loss model” for the impairment of financial assets and seeks input on the practical implications of such a proposal.
Such a model would require an entity to make an ongoing assessment of expected credit losses, which may require earlier recognition of credit losses and therefore better reflect the way that financial assets are priced and the way some companies manage their business. It contrasts with the incurred loss model contained in the current IAS 39 which requires an entity to account for credit losses in financial assets only if an event (or a combination of events) has occurred that has a negative effect on future cash flows and that effect can be reliably estimated.
The Request for Information titled ‘Financial Instruments: Impairment of Financial Assets’ (PDF) is open for comment until 1 September 2009. An ED on this topic is anticipated as part of stage 2 of the financial instruments project in October 2009.
On July 3 and July 6 the IASB Staff will present the next in a series of short live webcasts on the progress of the project to replace IAS 39, focussing on this Request for Information. For more details and to register visit the IASB website.
Fair value measurement webcast
as reported in ANT25/2009
On Tuesday 30 June, Stephen Cooper (Member of the Board), Hilary Eastman (Project Manager) and Henri Venter (Assistant Project Manager) will be introducing the IASB's fair value measurement ED in a webcast, to be followed by a Q&A session where registered participants can send in questions for the IASB staff to answer.
To register for the event, please visit the IASB website.
Webcasts on IAS 39 review
as reported in ANT25/2009
IASB staff has commenced its series of webcasts on the progress of IAS 39 Financial Instruments to keep interested parties up to date on its comprehensive review (see item 6, ANT24/2009).
The second webcast on 23 June outlined a two-pronged approach, whereby financial assets and liabilities will be accounted for in one of two ways:- At amortised cost, where the instrument displays basic loan features, and is managed on a contract yield basis (i.e. kept for its dividends or interest, not for value increases). There will no longer be tainting
- At fair value in all other cases. Changes in the fair value of instruments held at fair value can go to OCI, unless they are held for trading
The Board proposes to do away with splitting out embedded derivatives and assess the instrument as a whole according to its dominant characteristics.
The IASB intends to publish an ED of these proposals in July. The proposals - if approved - would be operative from 1 January 2012, with early adoption permitted as far back as 2009.
The recording and slides from the webcast will be available from the IASB website. However, note that the webcasts appear towards the bottom of a very long page.
IASB DP – Credit risk in liability measurement
as reported in ANT24/2009
The IASB has published for public comment a discussion paper on the role of credit risk in liability measurement. The paper is accompanied by a staff paper that describes the most common arguments for and against including credit risk in measuring liabilities.
Credit risk in liability measurement is often referred to as ‘own credit risk’. Existing International Financial Reporting Standards (IFRSs) require profit or loss resulting from changes in ‘own credit’ to be booked when debt is fair valued. From an accounting perspective there are good reasons for applying fair value measurement to both assets and liabilities. However, some see the outcome as counter-intuitive. Recent developments in the financial markets have led to increased concerns about gains that result from changes in the value of an entity’s liabilities.
The discussion paper responds to this concern. The issue of ‘own credit risk’ has relevance to other IASB projects, in particular in the accounting for financial instruments, insurance, fair value measurement and provisions, contingent liabilities and contingent assets.
The staff paper is open for comment until 1 September 2009 and can be accessed from the IASB website. |
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