Financial Instruments – Planning

No technical decisions were made during this session.

The Board discussed the primary objectives of, possible extent of IASB involvement with, a suggested outline of, and proposed timetable for the IASB-FASB Discussion Paper or Preliminary Views on financial instruments.

Primary objectives

The Board confirmed that the primary objectives of the Discussion Paper should be to:

• describe the major issues in current accounting standards and practice related to financial instruments;
• describe the boards' long term objectives with regard to accounting for financial instruments and the reasons that the boards established those objectives;
• present preliminary views on any individual issues on which a majority of the members of either Board have agreed, tentative conclusions supported by a significant minority of members of the boards, and any other results of the boards' deliberations that would aid constituents in preparing responses to the questions in the document;
• ask constituents for their opinions about the issues and possible alternative resolutions that may have been identified, and to request suggestions from constituents about possible ways to achieve the boards' long term objectives with the least cost and disruption in practice; and
• demonstrate to constituents the interaction between the issues related to the long-term objectives for financial instruments and other projects the boards are undertaking (such as the financial statement presentation project). The due process document should demonstrate the progress made on addressing issues relating to the accounting for financial instruments in the other projects.

Extent of Board involvement

The Board agreed that:

• the Discussion Paper should contain preliminary views, to the extent that the boards have reached them already either in this project (such as the long-term objectives of the boards and the decision not to undertake efforts with the single objective of eliminating reconciling items in SEC filings) or in other related projects;
• the Discussion Paper should contain the preliminary views of the boards on other issues to the extent that the staff and boards believe that it might be possible to reach those preliminary views in the timeframe we have; and
• to the extent that the boards have not discussed (or have not reached) preliminary views on specific issues, the Discussion Paper should include a neutral discussion of those issues (and state that no view has been reached).

Possible contents of Discussion Paper

The Board agreed that:

• The Discussion Paper should be drafted from a 'broad scope' position. That is that financial instruments (broadly defined) is the appropriate basis for the scope of the document, subject to whatever exceptions the boards think it desirable to make or additional items the boards wish to include. The board agreed with the staff that a scope that included all contracts requiring delivery or exchanges would be easier to describe and implement, as well as easier to justify conceptually.
• The Discussion Paper should not address derecognition issues relating to the transfer of financial assets: these should be included in a separate discussion paper. That DP should also include other derecognition issues (for example, relating to financial liability extinguishment or debt modification).
• In drafting the Discussion Paper, the long-term objective of fair value measurement should be assumed. The Board stressed that there might be some instruments for which a fair value measure would not be appropriate and that having this general principle would assist the boards to identify those contracts for which fair value was not an appropriate measure and to apply that principle consistently.

Timetable

The Board noted the current timetable, which plans for a Discussion Paper with Preliminary Views to be released in November 2007. Several Board Members noted the timetable was 'ambitious', but encouraged the staff to get on with it.

Financial Instruments – Presentation of Changes in Fair Value

The Board discussed an analysis of the results of a survey of the views of users responsible for making investment and credit decisions (or those advising others on investment and credit decisions), which asked what types of information in respect of financial instruments measured at fair value would be relevant to their analysis.

The staff had received responses to the questionnaire from 47 individuals covering 34 organisations, including many of the major sell-side and buy-side institutions. Six of the organisations who participated are based in the US with the rest based outside the US. The staff thanked these constituents for their assistance. Board Members noted that the survey was one of the most comprehensive and useful of its kind.

The questionnaire raised the following major points:

• Users require some disaggregated information for financial instruments that are measured at fair value. In particular, users continue to want information on bad debts (both in terms of bad debt charges and bad debt allowances) and interest. However, most users do not believe that further disaggregation of fair value changes and balances would provide information that would be of significant value given the current valuation methods that are used;
• There is little or no demand for interest income/expense to be reported on a 'fair value' basis. Most users express a preference for interest information to be presented on an accruals basis;
• There is support for the provision of more information on the exposure of an entity to future changes in the fair value of financial instruments (such as enhanced sensitivity analysis or stress tests)

It was noted that users had a general level of unease with the degree of optionality within IAS 39 and had difficulty tracking the reversal of value changes recognised in equity when these were subsequently recycled to profit and loss. In addition, it was noted that the survey was conducted before the effective date of IFRS 7, which requires some of the information currently sought by users.

The Board agreed that the next steps in the project should be to hold further discussions with selected users to:

• Ensure that the staff analysis as set out in this paper is appropriate; and
• Attempt to develop requirements for sensitivity analysis/stress tests that will provide useful information to users.

Redeliberation of the probability recognition criteria

The Board considered a detailed analysis of the role of probability in the recognition of liabilities. [The staff paper is excellent, and those interested in this area are commended to read it, reproduced in large part as the Observer Note. The explanation of the Board's rationale is much better than that in the Exposure Draft.]

Subject to affirming the measurement requirements proposed in the ED, the Board affirmed its conclusion in the ED, namely that the revised IAS 37 should not include a probability recognition criterion.

However, instead of just explaining that the criterion has been omitted because it is always satisfied, the staff recommends developing a more comprehensive explanation that captures the following points:

• The probability criterion as articulated in the Framework is confused. Furthermore, it is flawed, because in the absence of the notion of a stand-ready obligation, it results in the obviously anomalous conclusion that liabilities such as guarantees, warranties, and insurance obligations should not be recognised until it is probable that claims will arise. Most such obligations would therefore not initially qualify for recognition. Accordingly, the Framework concept that we should be focussing on in the IAS 37 project is the liability definition.
• The only standard that, in practice, currently uses the probability recognition criterion to determine recognition is IAS 37. Furthermore, IAS 37 has established its own unique interpretation of probability.
• The probability recognition criterion as articulated in the current IAS 37 is not related to resolving element uncertainty. Hence, once an entity has concluded that it has a liability, the criterion, as articulated in the current IAS 37, would in most cases not be a determining factor in recognition.
• The notion of a stand ready obligation is a logical extension of the existing Framework. Contractual stand ready obligations entail a flow of economic resources while the entity is standing ready and, hence, satisfy the probability criterion as articulated in the current IAS 37.
• A probability recognition criterion is inconsistent with the measurement requirements proposed in the ED because it results in similar obligations being treated very differently. For liabilities that can be measured reliably, the criterion unnecessarily delays including decision-useful information in the balance sheet.
• Some of the concerns about omitting the probability recognition criterion are concerns about element uncertainty and measurement uncertainty. We are seeking to address these concerns directly. (The Board has already directed the staff to develop more guidance to assist entities in determining when a liability has been incurred. The staff will also be asking the Board to consider what is meant by reliable measurement at a later point in the redeliberations.)

During the debate, Board Members noted that the Board needed to address what was the objective of measurement. Board members were of the view that, at a given measurement date; the objective was to measure the amount of the liability today. It was not to predict the outcome or the amount of the ultimate payment. It was a routine measurement uncertainty issue. Board members also noted the need to address specifically the 'high value, low probability' measurement issue.

Revisiting lawsuits

The Board discussed Examples 1 and 2 included in the Exposure Draft. The Board agreed that:

• Examples 1 and 2 in the ED are contradictory (and Example 1 was wrong).
• the illustrative examples accompanying any final Standard need to include additional guidance on how to address 'element uncertainty' in the context of legal proceedings (and similar regulatory actions).
• the likelihood that an external party will detect an entity's violation of the law or breach of contract is not relevant in determining whether the definition of a liability is satisfied.
• the start of legal proceedings does not of itself obligate an entity.

The Board noted that detection risk (implicit in Example 2) does not affect the existence of a liability (recognition): it does affect measurement. In addition, it was noted that there was no need for symmetry in accounting between the recognition of a liability by one party and the corresponding asset by another.

With respect to ED Example 1, the Board agreed that the start of legal proceedings does not resolve uncertainty about the facts relating to the claim. They agreed with respondents who noted that start of legal proceedings does not resolve uncertainty about whether the entity served harmful food at a wedding and that this food caused the death of ten guests. At the balance sheet date the entity continues to dispute this fact therefore it is not certain that an obligating event has occurred. In the ED, Example 1 concluded the start of legal proceedings gives rise to a present obligation. This suggests that the start of legal proceedings in itself gives rise to a present obligation (regardless of whether a present obligation exists relating to the subject matter of the lawsuit).

The Board agreed with respondents who argued that determining whether a present obligation exists for the underlying claim should be based on an evaluation of all known evidence. The staff notes that the Framework's definition of a liability states that a present obligation arises from past events (as opposed to a single past event). Thus, the start of legal proceedings is just one of a number of different facts, all of which should be taken into account when determining whether a present obligation exists. This approach is also consistent with the guidance in paragraph 16 of the ED (carried forward from the current IAS 37) which states that an entity must take into account all available evidence when determining whether a liability exists at the balance sheet date.

Earnings per Share – Treasury Stock Method

At the January 2006 meeting, the Board decided that the (amended) treasury stock method should also be used to calculate the dilutive effect of convertible instruments on EPS calculations. This would replace the 'if converted' method that is used for these instruments at present. The staff noted that the difference in treatment of convertible instruments between IFRSs (treasury stock method) and US GAAP (if converted method) would have significant effects on the calculation of diluted EPS. Using the treasury stock method proposed in the amendments to IAS 33, most convertible instruments would not be dilutive. Using the 'if converted' method, an instrument is dilutive when the dividend or interest on the instrument is lower than basic EPS. The staff were concerned about this effect, particularly in the context of the Convergence Agenda.

Board members noted that EPS was not part of the Convergence Agenda and, more importantly, that the Convergence Agenda accommodates differences in treatments in circumstances in which there are legacy differences in standards. In this case, IFRS bifurcates compound financial instruments; US GAAP does not. The majority of Board members thought that it was more important to fix the IASB's EPS standard for the vast majority of IFRS users rather than to accommodate the relatively few US Foreign Private Issuers that might report different EPS numbers under IFRS and US GAAP.

The IASB directed the staff to prepare amendments to IAS 33 utilising the treasury stock method. The Board agreed not to address the matter of the treatment of 'senior securities' in the EPS calculation at this time. The Board thought that it was more important to amend IAS 33 such that it was internally consistent than to attempt, in a 'quick fix' manner, to achieve convergence with US GAAP.

Wednesday 21 June 2006

Accounting Standards for Small and Medium-sized Entities (SMEs)

In an all-day session, the Board discussed a revised draft Exposure Draft of an International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). Among the broad range of decisions made by the Board were the following:

• Definition of an SME. In defining SMEs, an entity that is economically significant in its home country would not automatically be regarded as publicly accountable. Each jurisdiction should decide.
• Pervasive measurement principles. The draft ED includes some pervasive principles for recognising assets, liabilities, income, and expenses, based on the IASB Framework, and also some specially developed pervasive measurement principles not in the Framework. The Board asked the staff to redraft the measurement principles in consultation with a small group of Board members.
• Maintaining the IFRS for SMEs. Approximately every two years, the Board will publish an 'omnibus' Exposure Draft of proposed amendments to the IFRS for SMEs based on new and amended IFRSs adopted during those two years.
• Sections of the draft ED that require significant rewriting. The draft has 40 topical sections. Based on Board discussions, only the following are likely to require substantial rewriting:
  • financial instruments
  • provisions
  • employee benefits
  • income taxes
  • business combinations.
• Financial instruments. The Board discussed proposals for simplification of IAS 39 Financial Instruments: Recognition and Measurement for SMEs in three important areas:
  • Classification of financial instruments. The ED would provide for two categories of financial instruments – fair value through profit or loss and cost/amortised cost.
  • Derecognition. The draft Exposure Draft imposes a high hurdle for derecognition - only when substantially all risks and rewards have been transferred. The major benefit of this derecognition requirement is that an SME will not have to refer to the complex derecognition provisions of IAS 39. A drawback would be that the SME standard would not derecognise securitisations whereas IAS 39 would.
  • Limited relief from hedge accounting focussed on the two kinds of hedging that an SME is likely to do.
  The Board expressed general agreement with the proposals and identified several matters for which revision or amplification is needed.
• Cash flow statement. Add guidance on cash and cash equivalents. Add guidance on when cash flows can be reported net. Disclose total taxes paid. Disclose the effect of exchange rate changes on cash and cash equivalents separately from operating, investing, and financing activities. Add guidance on reporting cash flows from acquisitions and disposals of subsidiaries.
• Accounting policies.
  • When an entity has adopted an accounting policy for an event or circumstance for which the IFRS for SMEs allows an accounting policy choice, disclosure of the chosen policy is required.
  • State that inappropriate accounting policies are not rectified by disclosure.
  • Clarify that it is inappropriate to make, or leave uncorrected, immaterial departures from the IFRS for SMEs to achieve a particular presentation of an entity's financial position, performance, or cash flows.
  • Explain that a change in measurement basis is a change in accounting policy.
• Model financial statements. Michelle Fisher of Deloitte Hong Kong was credited with preparing the model financial statements included in the draft Exposure Draft. The Board welcomed the model financial statements. The Board decided that the illustrative balance sheet should show assets and liabilities in a 'current followed by non-current' sequence, rather than the other way around.
• Invitation to comment. Ask a question about the adequacy of guidance and which specific areas need additional guidance.
• Consolidation. The Board concluded that the standards for consolidation should be included in the IFRS for SMEs rather than incorporated by cross-reference of IAS 27 Consolidated and Separate Financial Statements. One Board member will work with the staff to develop a shortened version of the consolidation guidance in IAS 27.
• Business combinations. Details of the purchase method should be included in the IFRS for SMEs rather than addressed by cross-reference to IFRS 3 Business Combinations. Add guidance on reverse takeovers and common control transactions. Define minority interest.
• Government grants. The section on government grants should reflect the principles in IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. Grants related to agricultural assets measured at fair value through profit and loss should be addressed in the section on Agriculture.
• Leases. Discussion of lessor accounting for finance leases should be deleted and replaced by a cross-reference to IAS 17 Leases.
• Agriculture. Circumstances in which an SME would fall back to the cost model should be less restrictive than those currently in IAS 41 Agriculture. In general, for an SME, if fair value is not readily determinable, then the cost model should be followed.
• Internally generated intangible assets other than goodwill. The expense model (charge costs to expense when incurred) will be in the IFRS for SMEs. An SME wishing to follow the capitalisation model (to the extent provided under IAS 38 Intangible Assets) would be cross-referred to IAS 38 for guidance.
• Impairment of assets. The section on impairment should be titled Impairment of Non-financial Assets.
• Employee benefits. Because many SMEs provide benefits under voluntary or government-mandated programmes that are similar to defined plans, include guidance on defined benefit plan accounting in the IFRS for SMEs rather than by cross-reference to IAS 19 Employee Benefits.
• Interim financial reporting. If an entity does not routinely prepare interim financial statements, but is required to do so on a one-time basis (perhaps in connection with a business combination), allow its prior annual financial statements to be comparatives, if it is impracticable to prepare financial statements for the comparable prior interim period.
• Inventories. Clarify that borrowing cost can be part of the cost of inventory under certain conditions if the entity chooses the option of capitalising borrowing cost.
• Opening balance sheet. A balance sheet at the beginning of the period will not be required as part of a complete set of financial statements of an SME.
• The Board deleted the following disclosures:
  • Dividends per share
  • Amount of retained earnings legally available for distribution to shareholders.
  • An entity's objectives, policies, and processes for managing capital.
  • Disclosures about amendments to the IFRS for SMEs that have not been early-adopted.
• Receivables from sale of an entity's own equity. Clarify that these should be shown as an offset in the equity section of the balance sheet, not as an asset.

Thursday 22 June 2006

IFRIC Matters

IFRIC Update

The Board was presented the IFRIC Update from the May 2006 IFRIC meeting. There were no comments.

D18 Interim Reporting and Impairment

IFRIC's draft interpretation D18 Interim Financial Reporting and Impairment was discussed at the May 2006 IFRIC meeting. During that meeting, the IFRIC agreed on certain changes to the Interpretation arising from comments from constituents and decided that a revised draft should be presented at the June 2006 IASB meeting for approval. The Board had only minor editorial comments, and voted unanimously in favour to approve the Interpretation for publication.

IAS 32 Financial Instruments: Presentation - Classification of a Financial Instrument as Liability or Equity

At the March 2006 IFRIC meeting the IFRIC discussed the role of contractual and economic obligations when classifying a financial instrument under IAS 32. At that meeting the IFRIC decided to reject taking an issue on their agenda as they thought it was clear that a contractual obligation is necessary in order to classify a financial instrument as a liability and that an economic obligation, by itself, would not result in a financial instrument being classified as a financial liability.

At the May 2006 meeting the IFRIC discussed the final wording for a rejection note but failed to reach consensus on the stated reasons for rejection. The item was therefore withdrawn by the Chairman of IFRIC and the issue was brought to the Board. The IFRIC thought it would be helpful if the Board confirmed the following position taken by the IFRIC:

"the IFRIC agreed that IAS 32 is clear that a contractual obligation was necessary in order that a financial instrument be classified as a liability (ignoring the classification of financial instruments that may or will be settled in the issuer's own equity instruments). Such a contractual obligation could be explicitly established or could be indirectly established. However, the obligation must be established through the terms and conditions of the instrument. The IFRIC agreed that IAS 32 is clear that economic compulsion, by itself, would not result in a financial instrument being classified as a liability."

The Chairman of IFRIC commented that it would be easier to get this statement through IFRIC if it was supported by the Board. The Board observed that it was bound by what they had said in relation to the Improvements Project, where they had decided that a liability was defined by the terms and conditions of a contractual arrangement.

The Board voted to support the IFRIC statement.

Fair Value Measurement

The Board continued its discussion of Fair Value Measurements (FVM), and reviewed the current project plan and due process steps. In addition, the Board had a preliminary discussion on accounting for 'day-one gains'.

Project Plan and Due Process

The Board was briefly updated on the developments from the last FASB meeting at which the Fair Value Measurements project was discussed.

The Fair Value Measurement project was added to the IASB's agenda in September 2005. At that time, the Board decided that they would expose the FASB's final FVM standard as an IASB exposure draft, not modifying it other than change US GAAP references to the appropriate IFRS references.

Since then, the staff has become aware of concerns raised by IASB constituents. These include:

• As the FVM project could change how fair value is measured, some think that proceeding directly to an IASB exposure draft based on the final FASB document could potentially short-cut the IASB's due process requirements.
• As the FASB document applies a different concept of fair value from that of older IFRSs, constituents have problems with the conceptual reasons for changing to an 'exit price objective' of fair value, particularly when an entity have no intention to sell an asset.
• As fair value is being increasingly used, fundamental questions regarding relevance and reliability need to be debated prior to completion of the project.

Due to these concerns, the staff presented the Board with two alternative solutions:

• The first alternative was a modified plan which still would include issuing the FASB document as an exposure draft, in addition to conducting field visits and round-table discussions to get input from constituents.
• The second alternative was to issue the FASB document as a discussion paper, deliberate this, and then issue an exposure draft. This would allow the Board more time and more flexibility to address the concerns raised by constituents and hopefully a better standard, even if this route will be a longer one.

The Board expressed sympathy for the concerns raised by the constituents, and the majority of Board members agreed that this would require a shift from the current project plan to alternative two which is to issue the FASB document as a discussion paper. However some Board members thought that the second alternative should be avoided as this would delay the issuing of a final standard too long. Alternative two will result in a final IFRS in late 2008 or early 2009.

Some Board members thought that it would be crucial to communicate with constituents that this move away from the current project plan and towards the discussion paper route would take more time, but that it would be done to ensure the interest of constituents.

The Board voted in favour of alternative two, resulting in a discussion paper being issued based on the FASB document. The Board noted that a final plan could not be put together before the final FASB document is issued. As long as the FASB have not issued their final document including, e.g. their application guidance, the IASB will not have a public document accessible for issuing as the IASB's discussion paper.

Day-one Gains and Losses

Fair value, as defined in the FASB's document is an exit price. As a result of the Board's tentative approval of the exit price definition of fair value, in circumstances where an asset or a liability is required to be measured at fair value on initial recognition, a day-one gain or loss may be recorded.

The staff believes the existing guidance in IAS 39 is inconsistent with the exit price notion as tentatively approved by the Board, and therefore needs amendment. The Board was asked whether they would consider:

• To make only consequential amendments to conform IAS 39 with the guidance in the Fair Value Measurement statement and to leave the current guidance on recognition of day-one gains and losses in IAS 39.
• Making consequential amendments and change the existing guidance in IAS 39.

Conceptual Framework

The Board continued its deliberation of the working definitions of an asset and a liability from the April 2006 meeting.

The Board focussed its discussion on the asset definition during this session. The following asset definition working definition was presented to the Board:

First, the Board discussed what is the economic resource? An example to buy/sell corn forward was presented to the Board as a way to explain that the existence of the product-corn-is irrelevant, as the present economic resource is the promise to deliver/accept the corn by the parties. The Board was asked whether they agreed that it was the promise rather than the corn that defined the economic resources by the parties.

The majority of Board members agreed to the statements as set out in the working paper. However one Board member commented that it was hard to accept the promise as the asset as the contract initially was executory.

The Board agreed that it is the promise rather than the corn that is the economic resource.

Secondly the Board discussed whether both parties in such a contract would have an asset. It was agreed that both parties have an asset as there are two promises: the seller promises to deliver (buyer's asset) and the buyer promises to accept the delivery of the corn (seller's asset).

In the end the Board discussed the application of the asset definition to an entity's own shares. During a previous meeting some Board members concluded that an entity's own issued shares would meet the proposed working definition of an asset. The staff therefore presented the Board with text to amplify the working definition as follows:

• a. A promise with no external counter party, in the form of unissued or treasury shares (or unissued debt), constitutes neither an economic resource nor an economic burden to the entity.
• b. A promise by an entity in the form of issued shares (or issued debt) constitutes an economic burden-not an economic resource.
• c. A contract that does not involve an inbound promise by a party external to the entity cannot constitute an economic resource of the entity.

This would clarify that even if an entity has a prospectus approved for the issue of debt, that does not create an asset representing the debt. The Board agreed to the proposal.

Insurance Contracts - Phase 2 [Education Session]

The Board had an educational session on insurance. It was given a briefing from insurance supervisors on developments in insurance supervision. Three different organisations represented by five persons presented to the Board.

No decisions were taken during this session.

IAIS Second Liabilities Paper

Rob Esson, Chair of the Insurance Contracts Subcommittee, IAIS, made a presentation highlighting areas of contention and how IAIS looks to cooperate with the IASB in future.

Their liabilities paper provides a second set of IAIS observations on identified measurement themes common to both general purpose financial reporting and regulatory reporting that the IAIS understand the IASB is addressing in its consideration of Phase II of its Insurance Contracts Project.

Outline of CEIOPS structure and work on the Solvency II project

Alberto Corinti, Paul Sharma and Gabriel Bernardino from CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors) gave three presentations on CEIOPS organisational structure, framework, technical provisions and development on disclosure requirements on the Solvency II project (the Solvency project is an EU initiated project which aims at creating a more risk-related solvency model).

International Actuarial Association

Finally, Sam Gutterman, from the International Actuarial Association, gave a presentation on the IAIS Liabilities Paper from the IAA's point of view, some insurance regulatory issues and key issue that need further actuarial assessment.

Friday 23 June 2006

UK ASB Project on Pension Accounting [Education Session]

The aim of the session was to provide the Board members with a briefing on the ASB's work on pension accounting, and to give them an opportunity to make observations and suggestions for the future of this project. A summary of the session can be found in agenda paper 11. Paper 11A goes into more detail, but was not available to observers. It will be available on the ASB's website shortly.

The session focussed on the work being done to develop a new accounting standard that can be applied globally. The aim of the project was to be principles-based. Thus, for example, the current goal is for there to be no distinction between the principles behind accounting for defined benefit plans and defined contribution plans. Andrew Leonard (from the ASB) noted in his presentation that there are several active IASB projects that need to be considered as part of the work on pensions. These include the projects on:

• the conceptual framework;
• non-financial liabilities;
• consolidation;
• measurement;
• reporting financial performance; and
• insurance.

Several Board members noted that the insurance project was of particular relevance as there were many similar issues being faced, particularly on stand-ready obligations. No decisions were made during this session.

Technical Plan

This discussion focussed on the timetable for the IASB's projects. It was noted that a few changes had been made to the plan, as follows:

• staff have started work on the impairment project, although the timings have yet to be determined;
• an exposure draft on income taxes is expected in the fourth quarter of 2006 (rather than the third);
• a discussion paper will be issued prior to issuing an exposure draft in the fair value measurement project. This will push back the timings of the exposure draft and final IFRS;
• a discussion paper on revenue is expected in the second half of 2007 (rather than the fourth quarter of 2006);
• a discussion paper will be issued for the conceptual framework project, although the timing has yet to be determined for some aspects;
• an exposure draft on the SME project is due in the fourth quarter of 2006 (rather than the third quarter); and
• an exposure draft on puttable instruments has already been issued, in advance of the expected issue date (which was in the fourth quarter of 2006).

In addition, it was noted that roundtable discussions are planned for:

• phase C of the conceptual framework project (measurement) in the first half of 2007; and
• liabilities in the fourth quarter of 2006.

There was some discussion about the effective date of new or amended standards. Whilst some preparers object to effective dates too far in the future (on the grounds that there is a longer period with a lack of comparability between entities), some preparers are struggling with some of the current effective dates (for example because there is insufficient time to translate the standards). It was generally agreed that the effective date should be about one year from the date of publication. Occasionally this period might need to be longer or shorter.

In addition, to have a period of stability, the Board agreed that most of the Standards that are due to be published in 2007 would have an effective date of 1 January 2009.

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