15-17 February 2005, London

Tuesday 15 February 2005

Insurance Contracts - Phase 2 Non-life Insurance Contracts, Focusing on Discounting and Risk Margins [Education Session]

The Board received a presentation on aspects of discounting and risk margins for property and casualty insurance liabilities. The presenters present at the table were Ralph Blanchard (Casualty Actuarial Society), Robert Conger (Towers Perrin Tillinghast) and Sam Gutterman (PricewaterhouseCoopers). No decisions were made.

Standards for Non-Publicly Accountable Entities (NPAEs/SMEs)

Board members noted that comments at the Standards Advisory Council meeting held 10 and 11 February demonstrated that many people 'turned on' a filter whenever they discussed this project and seemed to filter out information that the Board was giving. The Board had been consistent throughout this project in its attempts to focus on the needs of users of financial statements. In broadening the membership of the working group, the Board needed to find 'real users' of small company financial statements.

Comments at the SAC had also demonstrated that constituents had a tendency to focus on 'who is going to apply the standards' rather than the Board's approach of assessing costs and benefits to both users and preparers. Board members noted that the Board's target was the information needs of smaller entities with any third party users-as understood by the IASB Framework. One Board member suggested that external users would not include management, tax authorities or other regulators who, by virtue of their position or local law, are able to request any information they require from the entity. External users would include, for example, owners who are not directors or part of management, trade suppliers and credit rating agencies such as Dun & Bradstreet. Board members noted that this limitation was a tool to assist the Board in its analysis of IFRS in the non-public entity environment. It was not related to issues related to which entities would apply the standards.

Broadening the advisory panel/working group

The Board agreed to broaden the membership of the working group, but stressed that the nominations should be assessed with a degree of rigor.

Round-table discussions

The staff introduced a proposed questionnaire that would be sent to all respondents to the IASB's Preliminary Views document, the SAC and the working group. The questionnaire was intended to focus the discussion at the round-tables likely to be held in September 2005. The questionnaire was intended to probe responses already made and, if properly completed, would require a good deal of effort on behalf of those responding. Board members and senior staff had comments on some aspects of the questionnaire, but the general approach was agreed.

Disclosure and presentation simplification

The staff and some of the Board agreed to review the current disclosure requirements of IFRSs (using a disclosure checklist prepared by one of the major accounting firms) to determine not only what might be unnecessary in a non-publicly accountable entity environment but also what additional disclosure might be necessary (e.g., in those circumstances in which there was a recognition or measurement difference between IFRSs and the policies adopted).

Other matters

The remainder of the project plan was agreed. The Board also decided to use the term 'non-publicly accountable entities' (NPAEs) in place of 'small and medium-sized entities' (SMEs).

Business Combinations II – Purchase Method Procedures

The FASB staff was present by video link.

Recognition of an acquirer's deferred tax benefits as a result of a business combination

The Board agreed that a previously unrecognised deferred tax liability (or one for which a full valuation allowance had been provided under FAS 109 Accounting for Income Taxes) may be recognised at the acquisition date and not before. This would be made explicit through a consequential amendment to IAS 12 Income Taxes.

Including deductible temporary differences or loss carryforwards of the acquirer in the combination

The Board agreed that the recognition of a deferred tax asset by the acquirer as the result of its pre-existing deductible tax differences or loss carryforwards that meet the recognition criteria in IAS 12 as a result of a business combination is a separate transaction and should be accounted for separately from the business combination.

The FASB staff noted that, in an education session, the FASB had expressed a preference (by a 5-2 vote) for including these items as part of the business combination. IASB members noted this, but expressed concerns about the application of the FASB's preferred approach in jurisdictions that do not have consolidated tax returns. The Board agreed to include a discussion of this point, and any difference with the FASB, in the Basis for Conclusions on the exposure draft. Disclosure: intangible assets that were not recognised separately from goodwill The Board agreed to remove the reliability of measurement recognition criteria for intangible assets. This converges with a FASB decision.

Disclosure: format of the disclosure of the assets acquired and liabilities assumed

The Board agreed to require disclosure of a condensed balance sheet and to provide a non-mandatory illustration of this requirement. (This approach was adopted because of concerns that there might be confusion between the disclosure required in the business combinations standard and that required by IAS 34 Interim Financial Reporting.)

Disclosure: carrying amount of assets acquired and liabilities assumed

The Board agreed to eliminate the requirement to disclose the carrying amounts immediately prior to the combination of each of the classes of assets acquired and liabilities assumed (determined in accordance with IFRSs). Some Board members saw this requirement as both onerous and as raising almost insurmountable audit issues.

Disclosure: maximum potential amount of future payments

The Board agreed to add a requirement in the business combinations exposure draft to disclose (a) the maximum potential amount of future payments (undiscounted) the acquirer could be required to make under the terms of the acquisition agreement; and (b) if there is no limitation on the maximum amount, disclosure of that fact.

Disclosure: operations to be disposed of

The Board agreed to eliminate the requirement in IFRS 3 Business Combinations to disclose the details of any operations the acquirer has decided to dispose of as a result of the business combination. This requirement has been superseded by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Disclosure: scope of application for certain disclosures

The Board agreed (by an 8-5 majority) to require all entities to disclose revenue of the acquiree since the acquisition date and selected information as if the business combination had occurred as of the beginning of the annual reporting period. This will result in a difference between IFRSs and US GAAP, although entities applying IFRSs will satisfy US GAAP. The Board agreed that the derogation proposed by the FASB would be considered as part of its project on non-publicly accountable entities.

Disclosure: pro-forma disclosure for prior period

The Board expressed a preference not to add a requirement to disclose the comparable prior fiscal year if comparative financial statements are presented (for selected information as if the business combination had occurred as of the beginning of the annual reporting period). It was noted that, in the US this pro-forma disclosure was supplementary to the audited financial statements, an option that was unavailable to the IASB. The Board agreed to discuss this issue in its Basis for Conclusions on the exposure draft and to ask a question about it in the Invitation to Comment.

Disclosure: assets and liabilities for which the measurement period is still open

The Board agreed to add a requirement to disclose the assets acquired and liabilities assumed for which the measurement period is still open.

Disclosure: 'Day 2' gains or losses of significance

The Board agreed to clarify that disclosure is required of the amount and an explanation for any gain or loss recognised in relation to a business combination occurring in the current or immediately prior period that relates to the identifiable assets acquired or liabilities assumed and is of such size, nature, or incidence that disclosure is relevant to understanding the combined entity's financial statements.

Disclosure: goodwill

The Board agreed that it would expose its proposals on goodwill as part of the business combinations exposure draft. To include them as a proposed amendment of IAS 38 Intangible Assets would be a 'non-trivial exercise'. (The FASB will include its proposals as an amendment of FAS 142 Goodwill and Other Intangible Assets.) The Board did not accept a proposal to reduce the line items that are required in the reconciliation of the opening and closing balance of goodwill.

Reliability of measurement recognition criteria for intangible assets acquired in a business combination

The Board agreed to remove the reliability of measurement criteria for intangible assets. In addition, the Board agreed to include guidance similar to that in FAS 141 paragraph 39.

Incorporation of EITF guidance

The Board discussed whether the business combinations exposure draft should incorporate guidance contained in EITF 04-1 Accounting for Pre-existing Relationships between the Parties to a Business Combination. The issue was the appropriate accounting by a franchisor for the acquisition from a franchisee of a franchise right. This might occur, for example, when a franchisor repurchases a [successful] franchise either to run the location as a corporate location or, if the location is not successful, to turn it around with a view to re-franchising it later on.

The Board agreed to incorporate this guidance and to specify that the asset acquired was an intangible asset and not goodwill. The intangible asset would be amortised over the remaining franchise term.

Guidance on reverse acquisition accounting

The Board agreed to include detailed guidance on reverse acquisition accounting and related example, as revised, in its implementation guidance.

IAS 27 sweep issues

The Board agreed that IAS 27 Consolidated and Separate Financial Statements should be revised so that the gain or loss on disposal of a subsidiary includes cumulative gains and losses reflected in equity that relate to the subsidiary and that are being 'recycled' on loss of control of that subsidiary.

The Board agreed not to prescribe a specific presentation of the gain or loss on disposal of a subsidiary in the income statement.

The Board agreed that no gain or loss should be recognised with respect to noncontrolling interests on loss of control.

ED 7 Financial Instruments: Disclosures

Amendments related to insurance contracts

The Board agreed to amend IFRS 4 Insurance Contracts to be consistent with the new IFRS, with modifications to reflect the Board's temporary special treatment in phase I of the insurance project for insurance contracts.

The Board agreed to permit a choice of sensitivity analysis disclosures for insurance risk only. However, the staff was asked to consider this issue further and will come back to the March Board meeting.

Proxy disclosure

The Board agreed that the IFRS should require disclosure of the amount of change in the fair value attributable to changes in the instrument's creditworthiness. The requirement will provide that entities may use a surrogate or proxy suggested by the Board or a better number, if an entity can develop one. There would be examples provided to explain the Board's intention.

'Day 1' profit recognition

The Board agreed to amend ED 7 paragraph 23 to require disclosure of the accounting policy for determining when any difference between the transaction price and any valuation based not solely on observable market data ('mark-to-model') is recognised in profit or loss.

The Board agreed to require, for financial instruments within the scope of IAS 39, (a) the difference between transaction prices at initial recognition and valuations made at the time of the transactions that were not based solely on data from observable markets; and (b) a reconciliation of changes to the amount disclosed in (a) from the previous period. There would be an example of the application of this requirement.

Other issues

The Board agreed a number of minor changes (not detailed in the Observer materials) without significant debate.

Timetable for completion of the IFRS

The staff estimated that the IFRS would be available late in Q2 or early in Q3 2005.

Wednesday 16 February 2005

Insurance Contracts - Phase 2 Non-life Insurance Contracts, Focusing on Discounting and Risk Margins [Education Session, continued]

The Board held public education sessions on non-life insurance contracts, focussing on discounting and risk margins. The sessions were led by the General Insurance Association of Japan and the Group of North American Insurance Enterprises. No decisions were made.

Development of Standards and Guidance for Management Commentary – Preliminary Views

At the October 2002 meeting between the IASB and its liaison National Standard Setters, it was recommended that a project examining the potential for issuing a standard or guidance on Management Commentary (MC) by the IASB be undertaken. Accordingly, the IASB established a project team comprising representatives from the national standard-setters in Canada, Germany, New Zealand, and the United Kingdom. The concept of MC is similar to a Management Discussion & Analysis (MD&A) required in the USA or an Operating and Financial Review required in the United Kingdom.

The project team tabled a discussion paper which begins with an overview of the project, including the motivation for undertaking the analysis, the importance of the project to the IASB and its constituency, and the key issues addressed. It then outlines the analytical steps undertaken by the project team. This includes highlighting areas where there was strong consensus among the project team and those areas where there was less agreement. The section also presents background information on what is meant by MC, the different ways MC is presented within financial reports and the approach different jurisdictions have taken to developing requirements around its form and content.

Whilst the discussion paper does not constitute a completed draft, it covers the core components that could be developed to the next stage of this project and has been drafted as a preliminary views paper. The Board discussed the issue of how to progress the project, especially whether the IASB would be taking ownership of the work done to date.

There was general agreement that whilst the IASB should take ownership and continue with this project as its own, there was not enough time to deliberate on the issues identified and the proposals made, so as to issue the discussion paper as presenting the preliminary views of the IASB. The Board's agenda at this time would not allow for resources to be channelled to this project. The Board agreed to expose the paper on the basis that it presents the results of the research process undertaken, not the preliminary views of the IASB, but the Board may suggest that certain questions or issues be raised with constituents.

The project team made the following conclusions in the discussion paper:

• The IASB should issue a principles-based standard on MC, together with non-mandatory implementation guidance.
• MC should be defined as "information that accompanies financial statements as part of an entity's financial reporting and explains the main trends and factors underlying the development, performance, and position of the business of an entity during the period covered by the financial statements, as well as the main trends and factors which are likely to affect the entity's future development, performance and position."
• The objective of MC is to assist current and potential investors in assessing the strategies adopted by the entity and the potential for successfully achieving them.
• The objectives, principles, and qualitative characteristics of MC should be clearly outlined. Specifically, management should prepare MC setting out their analysis of the business, which both supplements and complements the financial statements with an orientation to the future. MC should be comprehensive, focusing on matters that are relevant and important to investors, and should be understandable, neutral and balanced, comparable and reliable.
• An MC standard should require certain entities to present an MC as part of their financial report. At a minimum the standard would apply to all entities that have publicly traded equity or debt securities, or are in the process of issuing equity or debt securities in public securities markets. The preferred objective is to require these entities to present MC to be able to assert compliance with IFRS. The project team acknowledges, however, that this is unlikely to be achievable in the short-term. Many jurisdictions have regulatory requirements that conflict with the MC model proposed here.
• When an entity is required to present MC the standard should require the disclosure of information around five essential elements, being Nature of the business, Objectives and strategies, Resources, risks and relationships, Performance measures and indicators, and Results and prospects.
• Non-mandatory implementation guidance accompanying the standard should be issued to assist with the preparation of MC. Such guidance would provide examples of what MC that complies with the proposed standard would look like in practice.
• If the IASB does mandate MC the IASB should determine when it subsequently issues new standards, or revises existing standards, whether information should be disclosed in financial statements or MC.

The IASB did not debate all of the above issues. However some of the key comments made during discussions are as follows:

• There was general consensus that the work performed so far and the quality of the report presented was of a high standard.
• There was no clear indication as to whether the Board favoured developing a separate series of Standards dealing with MC or incorporating such requirements into IAS 1. Those in favour of the issuance of a Standard reiterated that the content of that pronouncement would only deal with principles and would to some extent, cover what is currently presented within many operational reviews as contained in annual reports.
• Some Board members favour the inclusion of the MC as an integral part of the financial statements, however there were concerns regarding whether the MC would be a single report within the financial statements or whether the MC would be 'dispersed' within the footnotes of the financial statements and whether preparers would be left to make this decision. Concerns were also raised regarding the 'auditability' of such reports and the consequential increase in scope of financial reporting as a whole under IFRS if it were to include 'forward looking' commentary on management strategy amongst other issues.
• It was suggested the MC standard or guidance be optional, that is, not a requirement under IFRSs, except possibly for entities within the scope of IAS 33 (which would mean that the standard would apply to all entities that have publicly traded equity or debt securities, or are in the process of issuing equity or debt securities in public securities markets).
• Comments specific to the drafting of the discussion paper included some Board members stating a preference for the SEC objectives as regards the MD&A compared to those objectives of a MC set out in the discussion paper, and others requested that the drafting be aligned more with IFRS as drafted, particularly the disclosure requirements.
• Additional comments would be passed onto the project team outside of the meeting.

Amendments to IAS 39: – Cash Flow Hedge Accounting of Forecast Intra-group Transactions

The staff gave an overview of the comment letter analysis. In response to the question of whether respondents agreed with the proposals in the ED:

• 28 (48% of all comment letters, 50% of those who responded) agreed with the proposals.
• 28 (48% of all comment letters, 50% of those who responded) disagreed.
• 2 (4%) did not express a clear view or did not respond.

The staff identified and presented the following possible ways forward (some of which were suggested by respondents):

• Do nothing, i.e. reject the proposals in the exposure draft and retain the current version of IAS 39.

  The staff did not recommend this approach as it was clear that respondents were in need of clarity on this issue.

• Proceed with the proposed amendment, possibly with some alterations to address some of the main concerns of respondents.

  The staff did not recommend this approach as it would not address the conceptual issues identified during the development of the exposure draft.

• Proceed with an amendment that allows a highly probable intra-group forecast transaction to be designated as the hedged item at a group level. The amounts relating to the hedging instrument initially recognised in equity would be included in profit or loss when the hedged exposure affects consolidated profit or loss.

  The staff recommended this approach and the Board agreed. This approach would entail that the IASB proceed with an amendment that allows a highly probable intra-group forecast transaction to be designated as the hedged item for the purposes of the consolidated financial statements, as allowed by the previous version of IAS 39 as interpreted by IGC 137-14 Forecasted intra-group foreign currency transactions that will affect consolidated net income.

  The Board indicated that this solution was the only way around the IAS 21 concept that does not allow for a group functional currency. In addition, the staff proposed that re-exposure was not necessary.

The staff went on to present the following 'transition recommendations':

Effective date

The Staff recommended that the effective date of the proposed amendment would be accounting periods beginning on or after 1 January 2006, with earlier application encouraged.

Restatement of comparatives

For existing users of IAS 39, the amendment will not require restatement of comparatives as, in substance, the Staff recommendation is consistent with IGC137-14. Specifically with regard to the Staff proposal requiring recycling of any gain/loss from the hedging instrument held in equity to profit or loss whenever consolidated profit or loss is affected by the hedged exposure, the Staff recommends that given the practical considerations of requiring restatement of comparatives for this requirement alone, that groups should apply this requirement prospectively from the date of application of this amendment.

For first-time adopters of IAS 39, the issue of restatement of comparatives does not arise because they are exempt from restating comparatives in the first year of adoption. This means that IFRS 1 will not require amendment.

Application of Amendments from 1 January 2005

All hedging relationships have to be designated at the inception of a hedge. This means that from 1 January 2005 groups will not have known what the hedged item should be in order to obtain hedge accounting in the consolidated financial statements.

Given the practical difficulties being faced by constituents, as noted by the Board in the December Update, to provide groups with relief for the period between 1 January 2005 and the application date of the amendment the staff recommends the following solution:

• The Board permits an entity that designated a forecast intra-group transaction as a hedged item at the start of the annual period beginning on or after 1 January 2005, in a hedge that would otherwise qualify for hedge accounting, to use that designation to apply hedge accounting in consolidated financial statements from the start of the annual period beginning on or after 1 January 2005.

• When an entity designated an external forecast transaction, denominated in the functional currency of the entity entering into the transaction, the Board allows the entity to obtain hedge accounting in the consolidated financial statements in the period from the start of the annual period beginning on or after 1 January 2005 to the date of application of this amendment, provided that the hedge would otherwise have qualified for hedge accounting.

Some Board members expressed concern that whilst the above proposals were necessary in this particular case (as the Board had given indications that through the exposure draft, it was merely clarifying the existing IAS 39 requirements), it should not be viewed as tacit approval for constituents to apply the principles contained in exposure drafts. Those Board members reiterated the point that only the principles contained in final pronouncements should be applied.

Amendments to IAS 39: The Fair Value Option

Since the Board's last discussion in January, the staff redrafted the possible new approach in the light of constituents' comments, and this was presented to the Board. The redrafted document will be taken to the round-table discussion scheduled to take place in London on Wednesday 16 March 2005, in public session. Due to time constraints, only certain constituents (approximately 30) would be invited to participate at those round-table discussions.

It was indicated that some discussions had taken place with representatives of the Basel Committee and the ECB during which useful clarifications had been made of the concerns expressed previously with regards to the fair value option in IAS 39. Those clarifications had been incorporated into the redrafted document. The purpose of the round-table discussions was to solicit input from other constituents to ensure that the proposal was appropriate for all.

Some Board members questioned whether the regulators had provided assurances that the redrafted document adequately addressed their concerns such that the Board could expect for the round-table discussions to be conclusive.

As regards the actual redrafting, the Board debated at length whether some of the terminology and the examples could be misinterpreted (for example, the word 'mismatch' and the example in paragraph AGX5 which was viewed by some as unclear regarding the level of reduction required of the mismatch, that is, whether it is a 'greater reduction' or just a 'reduction'). An inconsistency was identified in this paragraph with the requirements in the redrafted paragraph 9 which refers to 'eliminates or significantly reduces a measurement or recognition inconsistency'.

After much debate, there was general agreement that the proposals should refer to an 'accounting mismatch'.

Thursday 17 February 2005

FASB Update: Business Combinations - Purchase Method

The staff provided feedback on the activities of the FASB as regards this project. The staff provided the Board with a summary of issues where the FASB had agreed to incorporate the disclosure requirements into the ED together with those areas where there was disagreement (e.g. pro-forma disclosures, which were rejected on cost benefit grounds). The Board asked the Staff to raise questions for constituents to comment specifically where proposed disclosures presented points of divergence with US GAAP.

A requirement that entities present goodwill by segment was discussed in the context of the IAS 36 requirements which are focussed on cash generating units (rather than segments). The Board requested that the Staff ask the FASB to reconsider this requirement given that even if segments were to be used for impairment testing (as per US GAAP but not IFRS), that the presentation under IAS 14 could require a different allocation.

Financial Guarantees and Credit Insurance – Amendments to IAS 39 and IFRS 4

The purpose of the discussion was to explore the implications of the Board's decision in January, including the key issues raised in comment letters as well as consider re-exposure and a proposed time-table for the rest of the project.

At the January meeting, the Board tentatively decided to permit two approaches:

• The approach proposed in the Exposure Draft; or
• Applying IFRS 4, but with a more rigorous liability adequacy test. In particular, in addition to meeting the minimum requirements specified in paragraph 16 of IFRS 4, the net liability recognised should not be less than the amount determined under IAS 37. This additional requirement would not apply to other types of insurance contracts.

The following implications of this decision were discussed:

• Cash flows from subrogation. The Board questioned why subrogation rights would be considered to be reimbursement rights under IAS 37 and not as contractual rights in terms of the original contract. There was general disagreement with the analysis presented and the Board agreed to consider the other implications before making a final decision.
• Intra-group guarantees. The Board noted the issue raised had broader implications about measurement of related party transactions that is currently not dealt with under IFRS and which would continue to arise for as long as this lack of measurement guidance exists. After some discussion, the Board noted the difficulties in providing guidance in this area. Some Board members pointed out that IAS 18 would not apply to the contracts (financial guarantees that are in substance, insurance contracts) as that Standard scopes out insurance contracts within the scope of IFRS 4.
• Whether the option to apply IFRS 4 or IAS 39 should be an accounting policy choice or apply instrument by instrument.
• Whether the benefits of the proposed approach outweigh the costs.

The Board considered these issues holistically together with proposals to overcome the problems presented in the context of the 'stable platform' and limited changes to insurance accounting that were intended when developing IFRS 4. The Board considered discontinuing with this project but decided to reconsider the issues at the next meeting to allow three Board members that were not present to consider the arguments put forward.

It was suggested that should the Board decide to discontinue with this project, it may be appropriate for Example 9 in Appendix C to IAS 37 to be moved to IFRS 4.

IFRIC Update

The IFRIC Chairman provided an overview of the IFRICs activities, noting the significant amount of output that was now evident and for which he requested that his appreciation be put on public record, for the work performed by the individual IFRIC members in the last 18 months. It was noted that accounting firms were now familiar with the format of IFRIC papers and therefore the analysis of issues submitted was mainly in the required format which assists the IFRIC in terms of resources. In addition, it was also noted that although there was a noticeable increase in the number of issues submitted to IFRIC, that the accounting firms were dealing with a considerable number of those issues in practice. A proposal to amend IAS 38 in view of the reaction received to IFRIC 3 was mentioned. It was indicated that this issue may be discussed at the March meeting. The issue of whether EFRAG had provided a clear rationale supporting its view that IFRIC 3 is inconsistent with IFRS was raised, and the Chairman of the IFRIC was asked to pursue this issue. An update was provided of a meeting that took place earlier in the day between certain organisations and which included some Board members; mainly highlighting that there seemed to be general support for consistent application of IFRS in Europe and had touched on how guidance should be provided for this purpose. It was noted that the meeting had resulted in EFRAG offering to facilitate a forum that would allow for issues to be discussed.

Short-term Convergence – Income Taxes

Enacted and substantively enacted

At the January meeting, the Board deliberated the use of 'enacted' or 'substantively enacted' tax rates. The Board discussed whether the notion of substantially enacted should be based on probability of enactment or on the process of enactment and the Board decided that reaching a specified stage in the process should be required. In terms of the stage, the process of enactment would be complete when the remaining steps 'will not change the outcome'.

The purpose of this session was for the Staff to provide additional information to the Board on the implementation and operation of substantively enacted tax rates. The processes in a number of jurisdictions were considered and the Board discussed the Staff proposals of when substantive enactment was considered to have occurred. Some Board members noted that the US GAAP guidance refers to 'enactment' therefore setting the point later (e.g. when the President signs the legislation) compared to 'substantively enacted' which could be prior to that point depending on the legislative process.

The Board was supportive of the 'substantive enactment' principle on the basis that it would be achieved when the steps remaining in the process 'will not change the outcome'.

The Board agreed to proceed with this issue by providing the analysis of each jurisdiction in the Basis for Conclusions, and request specific comments from constituents. National Standard Setters would be allowed to review this information prior to the exposure draft being issued.

Uncertain tax positions

The purpose of this session was for the FASB staff to update the IASB members about the FASB's current deliberations on the initial recognition, initial and subsequent measurement, derecognition, classification and disclosures of uncertain tax positions. In addition, the feedback covered interim reporting, interest and penalties, comment period, transition method and the effective date. No decisions were taken by the IASB.

Conceptual Framework

The following project plan was discussed by the Board:

	Topic	2005	2006	2007	2008	2009	2010
A	Objectives and qualitative characteristics	Discuss and DP	ED	Final
B	Elements, recognition, and measurement I	Discuss	DP	ED	Final
C	Measurement II			DP	ED	Final
D	Reporting entity			Discuss	DP	ED	Final
E	Presentation and disclosure including reporting boundaries			Discuss	DP	ED	Final
F	Purpose and status			Discuss	DP	ED	Final
G	Applicability to NFP sector			Discuss	DP	ED	Final
H	Entire framework			Discuss	DP	ED	Final
Discuss = Commence Board discussions. DP = Discussion Paper with Board's preliminary views. ED = Exposure Draft published. Final = Text finalised and, if possible, relevant sections of existing frameworks replaced.

Concern was registered regarding the duration of this project, followed by suggestions that the Board should aim for a shorter project duration.

The staff indicated the reasons for the staggered approach and the anticipated duration of this project, highlighting the new territory that would be covered, resource constraints and the number of items already on the Board's agenda.

Suggestions for how to tackle the various phases of the project were discussed and noted. These included, addressing the 'elements' (e.g. distinction between liabilities and equity) as part of phase A, and defining the 'reporting entity' earlier as this would be essential in dealing with the other issues that follow. The staff indicated that it may be appropriate to amend the current Framework on a piece-meal basis depending on the nature of the new provisions but this would be assessed on an on-going basis.

The Board reiterated that the drafting of the framework required a 'top down' approach to the high level conceptual issues as well as a 'bottom up' approach to the more detailed aspects of those concepts, therefore, the items currently on the Board's agenda would allow the Board to test or explore the issues in this project indirectly. It was also noted that this approach was not well understood by commentators who criticised the Board for developing Standards that appeared to contradict the current Framework.

It was noted that some of the issues in the project plan had been initiated and commenced by some national standard setters (e.g. Canadian research project on initial measurement) which the Board agreed should be considered.

The overall plan was accepted by the Board, subject to the above suggestions and the staff were asked to implement it as well as consult the FASB on whether they concurred.

The Board agreed to initiate the process of appointing a Working Group that would assist the staff with this project.

This summary is based on notes taken by observers at the IASB meeting and should not be regarded as an official or final summary.