 Annual Improvements (IASB)
The Board briefly discussed the package of decisions on the Annual Improvements Project that will be published later this month. The Board clarified a few minor issues that were raised by the staff when drafting the Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards related to the use of deemed cost for operations subject to rate regulation. In particular, the Board agreed to require the entity to disclose the use of this deemed cost exemption, and explained in the basis for conclusion that the exemption was not conditional on the nature of the differences between previous GAAPs and IFRSs, but on the fact that the asset was subject to rate regulation and the carrying amount was determined in accordance with previous GAAP.
The Board also assessed the package of Annual Improvements against the current criteria for inclusion in Annual Improvements Project ('non urgent but necessary amendments to IFRSs'). On this basis the Board agreed with all the Amendments as agreed at the February and March meetings.
The Board also noted that it would develop a new set of criteria for inclusion in the Annual Improvements and apply them for the 2009-2011 cycle.
IAS 19: Termination Benefits (IASB)
The Board discussed potential re-exposure of the Amendments to IAS 19: Termination Benefits along with the proposed amendments to IAS 19: Defined Benefit Plans. The Board found little basis to support re-exposure as it believed that there is only a very limited scope for unintended consequences resulting from interaction between these two amendments to IAS 19 Employee Benefits. Therefore, the Board decided not to support the re-exposure of the Amendments to IAS 19: Termination Benefits and instructed the staff to proceed with publication of the Amendments as soon as possible. The staff noted that the amendments will be published at the end of April, or beginning of May.
Fair Value Measurement (IASB)
The Board discussed potential re-exposure of the Fair Value Measurement ED based on the tentative decision to require a disclosure of the effects of interdependencies or correlation of inputs in the fair value sensitivity analysis as discussed at the March Board meeting. The staff noted that the Board already agreed to publish a Request for Views based on the FASB ED that would propose changes to the current guidance in US GAAP and point out remaining differences between US GAAP and IFRSs. Therefore, limited re-exposure would not influence the project timetable. Board members saw benefit in re-exposure in gaining feedback on cost-benefit analysis of the proposed disclosure of the sensitivity analysis. One Board member noted that without the correlation, disclosure of sensitivity analysis could be misleading and, therefore, the Board should ask whether constituents prefer to have a full sensitivity analysis (reflecting correlations) or not to have it at all.
One Board member was concerned that the Request for Views could be viewed as an invitation to comment on issues already re-deliberated. Other Board members disagreed as they viewed the FASB ED as a convergence project with questions aimed at remaining differences.
Another Board member asked whether the ED should not also ask a question on offsetting market and credit risk portfolios. The Board disagreed as it viewed it as not changing the current practice in IAS 39 Financial Instruments: Recognition and Measurement. In addition, most of the Board members acknowledged that in case constituents have serious issues with those proposals, they would comment even without a formal invitation to comment.
Finally, the Board decided to re-expose an ED limited to the correlations in the sensitivity analysis at the same time as the Request for Views based on the FASB ED. The Board decided to align the comment period with the FASB's. The Board expects to publish the ED and the Request for Views at the end of May with the comment period ending in the middle of August.
One Board member disagreed as he would prefer no re-exposure of the proposals, only the Request for Views based on the FASB ED (which would include a question on sensitivity analysis) to avoid duplication of questions.
Derecognition of Financial Instruments – Educational Session
The IASB staff held an educational session for the FASB members related to the tentative decisions reached by the IASB in deliberating the issue. Several IASB members were present.
The FASB showed considerable interest in the model being developed by the IASB. The legal isolation principle was identified as the major difference between the current US guidance and the IASB proposals. In addition, the FASB seemed to support elimination of the collateral maintenance criterion in accounting for repurchase agreements.
Individual FASB members expressed some concerns about the applicability of the principle behind the IASB derecognition model in the United States and raised specific questions related to empty SPEs, collateralised loans, the pass through test, and interaction between the consolidation and derecognition guidance, especially in the context of SPEs and guarantees provided by the GSEs. This was an educational session only, no decisions were made. The Boards would discuss jointly the derecognition project at the April joint meeting.
This summary is based on notes taken by observers at the joint IASB-FASB meeting and should not be regarded as an official or final summary.
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