Wednesday 22 April 2009
 Management Commentary
The staff introduced the session by reminding the Board that the forthcoming due process document:
- (a) places management commentary within the boundaries of financial reporting;
- (b) explicitly links management commentary to the financial statements, both of which are 'governed' by the [draft] conceptual framework for financial reporting;
- (c) establishes a framework for the preparation and presentation of management commentary; and
- (d) describes essential content elements for management commentary.
However, the management commentary document would not:
- (a) resolve questions about disclosure placement (the notes to the financial statements versus management commentary);
- (b) modify the disclosure requirements in existing IFRS to clarify disclosure placement;
- (c) offer a definition for what the Board means when it refers to 'financial information' or 'non financial information';
- (d) create a 'hard and fast' boundary between management commentary and the rest of financial reporting;
- (e) explicitly keep out from management commentary aspects of reporting that could be described as environmental impact reporting or corporate social responsibility reporting;
- (f) directly answer the question as to whether management commentary is necessary for a 'true and fair view' of the entity being reported on; or
- (g) contain application guidance or illustrative examples.
Much of the discussion centred on the nature of the guidance that the document would represent and whether the IASB's full due process should attach to it. Some Board members favoured treating the document as similar to the Expert Advisory Panel's guidance on measuring financial instruments, and would release the document on the IASB's Website and invite comment. Others favoured treating the document as a formal exposure draft of 'best practice' guidance. The Chairman was concerned that, having been asked by several jurisdictions to address this issue, to characterise it as an 'inferior document' would be a mistake.
By a majority, the Board voted to call the document an Exposure Draft [of proposed Best Practice Guidance]. The ED is expected to be issued in mid-June 2009 with an extended comment period ending in mid-February 2010.
Messrs Garnett, Kalavacherla, Leisenring, and (potentially) Smith indicated that they would be presenting an Alternative View.
Amendments to IAS 1 paragraphs 13 and 14 proposed in the Working Draft of the ED would be removed from the ED and referred to the Annual Improvements Project.
Discontinued Operations (Amendments to IFRS 5)
The Board discussed how to proceed with the comments received on the exposure draft Discontinued Operations: Proposed Amendments to IFRS 5.
The Board discussed a staff recommendation that because the disposal of or classification to held for sale of an operating segment may or may not represent a strategic shift in the entity's operations, the Board should adopt a principles-based approach and define a discontinued operation as a component of an entity whose disposal of or classification to held for sale represents a strategic shift in the entity's operations.
Many Board members were unhappy about the proposal, not least because the staff were not proposing to define or elaborate significantly on what a 'significant shift' represented. To these Board members, this was an open invitation to 'do what you want' reporting. Others preferred to see the effects of discontinued (and discontinuing) operations reported in the segment disclosure note. However, other Board members had a problem with that approach, primarily because the segment disclosure may be based on non-IFRS measures and lacks discipline.
Ultimately, the Board referred itself to a possible approach being developed by the FASB. This approach was described as:
- (a) Eliminate the requirement to present discontinued operations (except for businesses that meet the criteria to be classified as held for sale on acquisition) on the face of the statement of comprehensive income. The effects of businesses that meet the criteria to be classified as held for sale on acquisition would continue be presented separately from continuing operations (but possibly with a label that better describes these items).
- (b) Disclosures would be required for all components of an entity that have been disposed of or classified as held for sale, for the items proposed in the exposure draft, for all periods presented.
The Board agreed that they owed it to their constituents and to the FASB to explore this possible approach. They undertook to contact their users' forum, the Corporate Reporting Users Forum, as well as representatives in industries for which the issue is significant, such as REITS and retail groups. Board members noted that the FASB approach might not change or conform the definition of discontinued operations, but enhancing the disclosure in a useful way in this area would be a significant improvement. It is likely that, if the FASB approach is developed, it would trigger re-exposure.
The Board agreed that the staff should coordinate their constituent outreach activities with those of the FASB staff.
Post-employment Benefits
Recognition of changes in defined benefit obligation and in plan assets
The Board agreed that entities should recognise all changes in the value of plan assets and the change in the post-employment benefit obligation in the financial statements in the period in which they occur. The staff noted that that the Board's tentative decision that the remeasurement component of pension cost should be presented separately in the income statement net of tax effects might alleviate some concerns about volatility because it allows entities to draw a subtotal of profit before tax and pension remeasurement.
The Board also agreed entities should recognise unvested past service cost in the period of a plan amendment. A Board member was concerned that the treatment of unvested amounts should be consistent between post-employment benefits and IFRS 2. However, this view was not generally accepted.
Administration costs
The Board had a vigorous debate on the accounting treatment of administration costs related to a pension plan.
The Board disagreed with a staff recommendation that they remove the definition of 'return on plan assets'; instead, they agreed to amend that definition. Several Board members were concerned that costs of administering a pension plan were included in the defined benefit obligation at all: they were expenses – they have nothing to do with the benefit promise.
Ultimately, the Board agreed (by majority) that IAS 19 should be amended to require administrative costs to be included in the defined benefit obligation unless (a) they relate to the management of plan assets and (b) the benefit promise does not depend on the return on those plan assets.
Alternative Views
Board members were asked whether they intended to present an Alternative View in the Exposure Draft. Messrs Cooper, Kalavacherla, Yamada, and (potentially) Engstroem indicated that they would be presenting an Alternative View.
Insurance Contracts
Margins
Margins: Losses on initial recognition
The Board noted that they had previously decided that the over-all margin at inception should be measured by reference to the premium and that no 'day one' gains should arise. At this meeting, the Board agreed that if a premium was not sufficient to cover the obligations then the difference would be recognised in profit or loss on inception.
A Board member suggested that the exposure draft should describe this situation in terms similar to 'On contract origination, if the contract represents and asset no asset [and thus a gain in profit and loss] is recognised; if the contract represents a liability, recognise the liability and the associated expense in profit or loss'.
Should the measurement approach include specified margins?
There was little support for a staff recommendation that a measurement approach should include a separate risk margin that is remeasured at each reporting date. At least one Board member suggested that he did not know what that margin would be or how to calculate it!
Are margins part of the insurance liability?
The Board was split on whether all margins identified by the staff are part of the insurance liability rather than a separate liability outside the insurance liability. There was a high level of concern over the consequences of the staff recommendations.
Acquisition costs
The staff noted that the treatment of acquisition costs was equally relevant to the fulfilment notion and exit price notion. The discussion concentrated on what constituted an acquisition cost. US GAAP (for example, FAS 91 on loan origination costs) has a rather broad definition that includes selling, underwriting and initiation costs; IAS 39 limits transaction costs to incremental costs.
The Board agreed that acquisition costs should be defined narrowly – those incremental to the contract (which, by definition, means they must be direct costs).
Acquisition costs should be expensed and some of the premium recognised as revenue. The staff suggested that this treatment provides transparency about acquisition costs incurred during the period and acknowledges that pricing of insurance contracts includes 'premium loads' to recover such costs.
Earnings per Share
The staff presented a summary of the comments received on the ED Simplifying Earnings per Share. There was no substantive discussion of this presentation.
Plan for redeliberation
The majority of the discussion concerned whether to continue, delay, or discontinue the project. The staff noted that many respondents recommended either stopping the project or, at least, delaying it until the Board finalises the projects on financial instruments with characteristics of equity and financial statements presentation.
The Board was divided. Some thought that the ED's proposals were a significant improvement over existing guidance and that the work on convergence should not be lost. Others were concerned that any work on EPS at all was wasted effort. Other Board members noted real constraints on staff resources.
Ultimately, the Board did not favour discontinuing the project. It did agree, however, to suspend work on the project until the Consolidation project was complete (the staff resources are the same), at which time work would continue to finalise the proposals in the ED.
Fair Value Measurements
The Board made the following tentative decisions:
Fair value disclosure in interim financial statements
- Financial instruments measured at fair value
The fair value disclosures in the IFRS Fair Value Measurement should be required for financial instruments in both interim and annual periods.
- Financial instruments not measured at fair value
The fair value disclosures in paragraphs 25 and 27 of IFRS 7 be required for financial instruments in interim periods in IAS 34.
- Non-financial assets and liabilities measured at fair value
No specific fair value disclosure requirements should be introduced for interim periods for non-financial assets and liabilities measured at fair value.
- Non-financial assets and liabilities not measured at fair value
No specific fair value disclosure requirements should be introduced for interim periods for non-financial assets and liabilities not measured at fair value.
- Timing of the amendments to require specific interim disclosures for fair value
The proposed specific fair value disclosures for interim periods should be introduced in the ED on Fair Value measurements. These requirements should not be introduced more rapidly.
Whether FSP 157-4's disclosures should be required for major categories of assets and liabilities
FSP 157-4 refers to 'major categories' of assets and liabilities. In incorporating the requirements of the FSP into the forthcoming ED on fair value measurement, the IASB will refer to 'each class' of assets and liabilities, which is consistent with IFRS usage.
Reference market
The Board agreed that the most advantageous market is presumed to be the market in which the reporting entity would normally enter into a transaction for the asset or liability. In the absence of evidence to the contrary, an entity may assume that the principal market for the asset or liability is the most advantageous market, provided that the entity could sell the asset or transfer the liability in the principal market.
IASB Actions in Relation to FASB Staff Positions FAS 15u7-4 etc
The Board received a summary of the comments received on its Request for Views on three proposed FASB FSPs (later modified to comments on the final FSPs issued on 9 April 2009).
Consistency of FSP FAS 157-4 and the guidance issued by the IASB's Expert Advisory Panel (EAP) Measuring and Disclosing the Fair Value of Financial Instruments in Markets that are No Longer Active
After reviewing the responses received by the IASB on this topic, the Board agreed unanimously that the guidance issued by its EAP in October 2008 was consistent with that in FSP 157-4. In particular, Board members noted that the EAP material was amended as a result of comments received to emphasise the use of judgement when measuring fair value in markets that are no longer active.
The Board also agreed that the guidance in FSP 157-4 should be added to the forthcoming ED on fair value measurement. One Board member reserved his vote, noting a lingering concern that some of the FSP material could be construed as 'easier' than the material in the EAP guidance.
Finalising the Fair Value Measurement ED
The staff advised that it would be sending a pre-ballot draft to the Board presently, for comment by 4 May 2009. The staff hope to ballot during the week of 11 May and have the Exposure Draft issued for comment by the end of May 2009.
Thursday 23 April 2009
IFRS 1 – Additional Exemptions for First-time Adopters
Oil and Gas issues
The Board reviewed its proposed amendments to IFRS 1 with respect to certain exemptions for oil and gas assets in light of comments received on the Exposure Draft issued in September 2008. The staff noted that 95 responses were received and the vast majority of those responses had been favourable towards the proposed amendments.
The Board confirmed the proposals. In doing so, they agreed to amend the proposed paragraph 19A to describe the attributes of 'full cost accounting' rather than refer to the method by name. Other minor amendments were made with little debate.
The Board will discuss the proposed exemptions related to rate-regulated activities at a subsequent meeting.
Rate-regulated Activities
Recognition and measurement
The Staff explained that the essential approach being adopted by the staff when drafting the Exposure Draft is that an entity subject to rate regulation should apply IFRS to its assets and liabilities first and, as a second step, determine whether the specific effects of rate regulation give rise to assets and liabilities not otherwise recognised. If such assets and liabilities are identified, these would be recognised in accordance with the proposed IFRS.
What kind of asset?
The staff explained that the proposed unit of account is the aggregate pool of customers of the rate-regulated activity, not individual customers.
In addition, the asset created by the effects of rate regulation is neither tangible nor financial; by elimination the staff concluded that it is an intangible asset. However, the asset involved has some but not all the attributes of an intangible asset, which means that IAS 38 cannot be used to recognise and measure these items. In reaching this conclusion, the Board agreed that assets arising from rate regulation meet the requirements of IAS 38 paragraph 9-17 in that they:
- Arise from a contractual or other legal right. (IAS 38.12(b)
- Are controlled by the entity-the entity has been granted the right by the rate regulator to increase future billings to the aggregate customer base (IAS 38.13); and
- Are increased future billings that will result in future economic benefits in the form of increased cash receipts from customers (IAS 38.17)
The Board noted that while they can be identified separately, the effects of rate regulation are not 'separable' from the related activities, which is why the emphasis is on identifying the effects of rate regulation.
With these clarifications, the Board agreed that:
- To the extent possible the requirements of the proposed IFRS would be consistent with the requirements of other standards addressing similar assets and liabilities.
- Regulatory assets meet the definition of intangible assets in IAS 38.
- IAS 37 provides guidance on the accounting for liabilities for which no specific standard exists. Consequently, once the standard resulting from this project is issued, regulatory liabilities will be within its scope rather than IAS 37.
What to recognise?
As a general principle, the Board agreed that an asset arising from the effects of rate regulation would reflect what the rate regulator permitted (sometimes called 'allowable costs'). This is not the measurement required by IAS 38, and this was the source of considerable concern to several Board members and much discussion among the Board generally.
Board members noted that evidence that could support the recovery of costs includes:
- statutes or regulations that specifically provide for the recovery of the cost in rates and cannot be overturned by future regulatory decisions;
- rate orders from the regulator specifically authorising recovery of the cost in rates;
- previous rate orders from the regulator allowing recovery for substantially similar costs (precedents) for a specific entity or other entities in the same jurisdiction;
- written approval from the regulator (although not a formal rate order) approving future recovery in rates;
- uniform regulatory accounting guidance providing for the accounting treatment of various costs that is typically followed by the regulator in setting rates;
- written approval from the regulatory staff of the jurisdiction suggesting they will support rate recovery of the cost (but is not legally binding on the regulatory body that sets rates); and
- analysis of recoverability from internal or external legal counsel.
This evidence serves two functions: to determine whether there is an asset to be recognised and, if so, what costs can be included in the initial measure of that asset. With this clarification, the Board agreed that a discussion of the evidence the entity considers in assessing whether costs will be allowed by the regulator be included as application guidance in the standard.
The Board considered a related issue: whether return on equity is an allowable cost. Treating return on equity as an allowable cost was inconsistent with the Board's conclusions in IAS 23R. Board members were uncomfortable with the staff rationale. They agreed that if the rate regulator permitted some measure of a return on equity to be layered on the allowable costs, then it was part of the measure: however, how that principle was articulated was the issue.
A Board member suggested that the correct rationale was that the 'cost of equity' represents a discount factor because the costs are incurred in one period while they will be recovered over a number of future periods. The Board seemed content to have this as the explanation.
Measurement
The Board agreed that that assets arising from the effects of rate regulation should be measured, both on initial recognition and subsequently, on the basis of the probability-weighted average of all possible outcomes. This is consistent with the measure being developed in the amendments to IAS 37, which should be issued by the time this IFRS is finalised. There was more discussion of the appropriate discount rate to use in the measure: whether it should be the risk-free rate or the rate that the rate regulator allows (or would allow). The discussion was difficult to follow, and although the decision on the use of probability-weighted cash flows was approved, there was no consensus on the appropriate discount rate.
Presentation issues
The Board agreed that assets and liabilities arising from the effects of rate regulation should not be offset in the statement of financial position.
The Board agreed that current and non-current assets and liabilities be presented separately in the statement of financial position.
The Board debated a staff recommendation that the effect of rate regulation should be presented as a single line in the statement of comprehensive income, but did not approve the recommendation. Nor did they reach agreement on how it should be presented and the staff will return at a later date with alternative proposals.
Scope-additional considerations
The Board agreed to include illustrative examples of the type of rate regulated activities that are in the scope of the proposed IFRS. The examples wiuld be included in the ED to help constituents understand the Board's proposals, but may be removed to Education Guidance when the IFRS is finalised.
Liabilities – Amendments to IAS 37
The Board agreed that they should endeavour to issue revisions to IAS 37, even if some issues remain unresolved. To do so would 'save' the following items, which several Board members saw as significant improvements to IAS 37:
- removing the probability recognition criterion. At present, IAS 37 requires entities to recognise liabilities only if it is probable that there will be an outflow of economic benefits. This requirement is inconsistent with the recognition requirements for liabilities in other standards-such as IAS 39. In particular, it is inconsistent with the requirements in IFRS 3 Business Combinations, which does not apply the probability recognition criterion for contingent liabilities that an entity acquires in a business combination.
- removing the term 'contingent liability' and updating guidance on identifying liabilities. The guidance in IAS 37 on identifying liabilities is unclear. IAS 37 uses the term 'contingent liability' to describe various things, some of which are liabilities and some of which are not liabilities. The proposed revisions would remove the label 'contingent liability' and focus solely on whether an item does or does not meet the definition of a liability. They would also include more guidance to help entities to identify liabilities – particularly for situations in which the outcome is dependent on the occurrence or non-occurrence of future events. The concepts and terminology developed in the Exposure Draft are consistent with those now being used in other projects, such as revenue recognition and insurance.
- improving the general guidance on identifying constructive obligations and hence the specific requirements for restructuring liabilities. The Board proposes to tighten the definition of constructive obligations by specifying that entities must have a present duty or responsibility to another party who will benefit from the entity's performance of its duty or responsibility. This additional guidance should make it easier for entities to distinguish between constructive obligations and economic compulsion, and align IFRSs more closely with US GAAP.
In particular, by tightening the definition of a constructive obligation, the Board can change the requirements for recognising liabilities for restructuring costs. The change will improve a weak area of IAS 37 and eliminate the main differences between IAS 37 and US accounting standard FAS 146 Accounting for Costs Associated with Exit or Disposal Activities.
- clarifying that entities should measure all liabilities on the basis of expected value, not most likely outcome. At present the guidance in IAS 37 is ambiguous. It is widely interpreted as permitting entities to measure single obligations at their most likely outcome.
- making a range of other minor improvements, for example removing outdated terminology (eg 'provisions'), clarifying that IAS 37 applies to all liabilities that are not within the scope of other standards and adding guidance on identifying and measuring onerous contracts.
Measurement guidance
The staff presented its proposals seeking to address the Board's desire to clarify the measurement objective and explain more fully how entities should apply those requirements. This was presented in the form of Draft Application Guidance.
The Board quickly returned to its favourite discussion: what does the measure in IAS 37 represent? The Board discussed this issue at length. A Board member was concerned that the Application Guidance as drafted could be read in several different ways, which was unacceptable. Several Board members offered their views of what cash flows would be considered in determining the measure of the IAS 37 liability.
A possible solution was advanced late in the discussion. There was general consensus that the following proposed application guidance would be appropriate for liabilities such as lawsuits-those not involving the delivery of services:
If the obligation is of a type that is fulfilled by making payments to the counterparty, the relevant cash flows include:
- a) the amounts that are expected to be paid to the counterparty; and
- b) associated costs, such as legal fees.
In those situations in which the obligation is fulfilled by undertaking a service, the relevant cash flows include the profit margin that the entity would charge in the market to fulfil the obligations of another market participant. (Company A has a decommissioning obligation; it has the capacity to discharge that obligation itself or to contract with Company Z to do the decommissioning for it. When measuring the IAS 37 obligation, it considers it would consider both what Company Z would charge and what it would charge to do the work (that is, with its own profit margin included in the measure). In a competitive market, these two measures may be similar.
If the entity is not in a position to discharge the obligation itself, then it would have to use the third party amount - that is, the current exit price for that obligation.
A majority of the Board indicated that they would support a measurement principle based on this approach.
Restructuring disclosure
Description of restructuring activity
The Board decided that the information entities should give when describing the restructuring activity should be the same disclosure as FAS 146, that is, a description of the exit or disposal activity, including the facts and circumstances leading to the expected activity and the expected completion date.
Other disclosure
There was less agreement about what other disclosure should be required and the extent to which IAS 37 should be conformed to the disclosure requirements in FAS 146. There seemed to be a desire for a greater degree of conformity with FAS 146 than the staff had proposed, but in any event, the disclosure package will have to come back to the Board.
Financial Instruments – FASB amendments on fair value measurement and other-than-temporary impairments
The Board received a summary of responses to their request for views on FSP FAS 115-2 and FAS 124-2 Recognition and Presentation of Other-Than-Temporary Impairments.
The board received over 60 letters giving views on the FSP which were primarily from financial institutions, prudential regulators and national standard setters.
No respondents recommended full adoption of the FSP. Responses were broadly split into those that recommended limited amendments to the impairment rules of IAS 39 and those that recommended no immediate change but instead for the staff to focus on the broader IAS 39 project addressing methods of measurement and characteristics for categorising financial instruments.
Those that recommended limited amendments had a variety of suggestions, with banking entities focussing on attempting to achieve a level playing field with US GAAP and address the issue of the perceived overstatement of losses under the current model.
Board members recalled that at past round table discussions and in various comment letters received (including those to this FSP and the January ED on Investments in Debt Instruments) the general feedback has been an opposition to short term piecemeal changes to IAS 39 without due process.
It was noted that if amendments to the impairment rules was dealt with as a separate project it would put pressure on time and resources dedicated to the broader IAS 39 project. Further, if sufficient time is to be given for deliberation and due process any final amendment to the impairment rules would not be issued long before the final amendments arising from the broader IAS 39 project. Board members highlighted that if the impairment rules were first changed as part of a separate project then changed again (or removed) as part of the broader IAS 39 project this would lead to two changes to the standard in a short space of time increasing the cost of implementation for preparers.
As a result the Board unanimously decided there should be no piecemeal change to the impairment rules of IAS 39 but instead a focus on the broader IAS 39 project which should consider the suggestions received in the request for views on the FSP.
Financial Instruments: Recognition and Measurement – Comprehensive reconsideration of IAS 39
The Board gave a brief summary of its timetable on the IAS 39 project to develop a comprehensive standard for the recognition and measurement of financial instruments. This timetable aims for the Board to begin to make tentative decisions on the measurement methods for financial instruments and the potential characteristics for categorising financial instruments in time for the joint FASB and IASB meeting in July.
This session was the first of series to ensure Board members comprehensively understood the different possible measurement methods available and the perceived advantages and disadvantages of each in order to make informed decisions on which method to choose at a later stage. No decisions on which method to adopt were made at this meeting.
This session discussed the first of three different measurement methods: amortised cost (the other two being discounted cash flows and fair value which will be discussed in the next two months).
The Board discussion focussed on the three different impairment models: incurred loss, expected loss and fair value based.
Board members raised the point that when it comes to choosing which model to use, they will need to understand the objective of measuring impairment and the principle behind it such that criteria can be used to assess each model.
Board members debated how an expected loss model would work in practice which highlighted differences in understanding of the model. Some board members expected it to equate to a fair value model, based on the discount rate being recalculated to reflect market rates. Questions were raised over whether the expected loss model was applied on a portfolio basis or an individual basis. There were different expectations about whether the expected loss model resulted in a smoothing in impairment losses.
Board members requested that the concepts in FSP FAS 115-2 and FAS 124-2 be appropriately considered in the fair value based model.
As a result of these discussions further detail would be provided to the Board on the expected loss model and the fair value based model at the next Board meeting.
Friday 24 April 2009
Insurance Contracts
Policyholder behaviour
The Board had a preliminary discussion on future insurance contract premium payments (and other cash flows resulting from those premiums, e.g. benefits and claims). In particular, the Board considered whether insurance contract recurring payments – that is, those premiums that will occur as long as the policyholder does not cancel the existing contract-should be included in the measurement of the insurance contract liability. Should the answer to that question be 'yes', the Board would need to address how the 'boundary' for an existing contract should be determined.
The Board addressed the second part of the issue (the boundary). The staff analysis noted that there was no disagreement that future contracts do not enter into the current contract liability measurement (although they may be relevant in determining a customer relationship intangible asset). Thus, the discussion centred on existing contracts, which the staff had divided into two segments:
- contracts that compel the insurer to accept future premiums
- contracts that guarantee continuing insurability if the policyholder continues to pay premiums (a sub-set of these contracts); and
- other contracts that have neither of these characteristics (that is, the policyholder cannot compel the insurer to accept future premiums).
The Board was divided: some supported drawing the boundary to include some element of the 'other contracts'. Other Board members were clearly worried that if the boundary was extended to include 'other contracts', that would represent a major, untested leap in accounting measurement and would be quite different from the measurement of intangible assets in IAS 38. One Board member likened the 'other contracts' to nothing more than a time series of written options and was very uncomfortable with recognising these as assets, given the consequences for other areas of IFRS. Other Board members were sympathetic to this view.
Board members also noted that several of the issues in this topic were very similar to issues surrounding renewals in the Board's projects on revenue recognition and leases. They wanted a consistent answer for all. In addition, the accounting for customer behaviour had to be consistent with that for acquisition costs.
No decisions were made and the staff will return at a later date.
Amendment to IFRS 2 – Group Group Cash-settled Share-based Payment Arrangements
Issues arising from drafting the pre-ballot draft of amendments to IFRS 2
The Board agreed to replace the existing paragraph 3 that addresses shareholder transfers with a new paragraph 3A to state clearly the clarified scope of IFRS 2 for group share-based payment transactions. The Board confirmed that they did not think that the new wording represented a change in guidance for those group transactions already in the scope of IFRS 2.
The Board agreed that the final amendments to IFRS 2 should:
- explicitly include in the scope of IFRS 2 a settling entity only in a group share-based payment transaction, and
- not include a settling group entity in the revised defined terms of 'equity-settled' and 'cash-settled' share-based payment transactions.
The Board agreed that that the accounting for transfers of employees among group entities for all awards that are accounted for as equity-settled should remain the same as the consensus reached in IFRIC 11.
The Board agreed that that the defined term 'share-based payment arrangement' not be amended to refer to the goods or services that the suppliers provide. (There was a concern that, because the notion of 'exchange of goods or services' is not part of the defined term 'share-based arrangement' but is included in the defined term 'share-based transaction', some inconsistency in practice would emerge.)
The Board amended paragraphs 44 and 45(a) of IFRS 2 related to the disclosure requirements to replace the term 'share-based payment arrangement' with 'share-based payment transaction'.
The Board reviewed an analysis of the criteria for re-exposure and concluded that re-exposure was not necessary.
The Board agreed that the effective date for the amendments should be accounting periods beginning on or after 1 January 2010.
The Board reaffirmed the retrospective transitional requirements as proposed in the ED and permitted the use of amounts previously recognised in the group's financial statements in the group entity's stand-alone financial statements if the information necessary for retrospective application is not available.
The Board agreed to add an example that addresses group cash-settled share-based payment transactions as Application Guidance.
No Board members indicated that they would dissent from the Amendments.
IFRS for Small and Medium-sized Entities
Issues arising in drafting the pre-ballot draft
The staff had identified three issues on which the Board's view was requested:
- Consolidation disclosures. The Board decided to add disclosures comparable to those in paragraph 41 of IAS 27(2008) Consolidated and Separate Financial Statements.
- Option to use IAS 39. The Board tentatively decided that an entity that elects to use IAS 39 Financial Instruments: Recognition and Measurement instead of the two financial instruments sections in the IFRS for SMEs should make the disclosures required by the IFRS for SMEs rather than those required by IFRS 7 Financial Instruments: Disclosures.
Board members were concerned that the disclosures in IFRS 7 were onerous for publicly-accountable entities that are financial institutions, and that to require them for entities without public accountability was likely to be burdensome. The Board preferred that, if an entity using this Standard chose to apply IAS 39, it should assess whether the disclosure required by that standard provided sufficient information to the users of the financial statements. Only then would a further fall-back to IFRS 7 be required.
The Board asked the staff to prepare a comparison of the two sets of disclosures and circulate the comparison to Board members after the meeting. If Board members feel there is a significant omission in the disclosures in the pre-ballot draft, that issue will be raised at the May 2009 Board meeting.
- Example of measurement of a one-off provision. The Board decided not to add an example to the appendix to the section of the Standard on provisions that would illustrate a calculation of a provision for settlement of a lawsuit.
Name of the Standard
The Board has discussed the name on several occasions during its redeliberations. In March 2009, the Board agreed to raise the issue with the National Standard Setters (NSS) at their April 2009 meeting. After considering the various views it has received, the Board has decided that the name of the final standard will be International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs), as proposed in the exposure draft.
Technical Plan
The Board reviewed the status of the Technical Plan. The Plan will be restructured to highlight various areas of focus (for example, financial crisis-related issues). A revised version of the Plan will be available on the IASB's website presently.
The staff confirmed that a 'virtual meeting' of the IASB would be convened on 5 May for half a day. Details of this meeting will be published shortly.
This summary is based on notes taken by observers at the IASB meeting and should not be regarded as an official or final summary.
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