Earnings Per Share

The Board agreed to keep this project as an improvement project, and convergence issues will be dealt with at a later stage.

IAS 11, Construction Contracts

The Board decided that the convergence project will not address any revenue recognition issues. Nonetheless, the Board recognises that there is an IFRS-US GAAP difference in the area of construction contracts: When it is not possible to use the percentage of completion method, IAS 11 requires the use of the cost recovery method while US GAAP requires the use of the completed contract method.

The Board agreed to ask the IFRIC to look at the criteria US GAAP has in SOP 81-1 for combining and segmenting contracts and consider whether the guidance is consistent with IAS 11 and whether an interpretation should be issued.

Amendments to IAS 37

Contingent Assets and Contingent Liabilities

The Board indicated its intention to remove the notion of probability from the recognition criteria for provisions. They noted that they did not believe this was a change in the standard but merely a cleaning up of redundant wording. The Board agreed to change the definition of contingent assets and liabilities to:

The Board specified that under these definitions, items would be contingent if the past event had occurred but there was uncertainty as to the outcome of the confirming event. The Board asked the staff to add examples to clarify the consequences of this change. In addition the Board asked the staff to add a flow chart to illustrate the steps for recognising a provision.

The Board discussed whether the recognition criteria for contingent assets (virtually certain) should be changed to be symmetrical with contingent liabilities. Currently, losses and related insurance gains are recorded in different periods. The Board recognised that a problem exists but expressed concern about addressing it in a short-term project without thinking through the implications.

Restructuring provisions

The Board agreed to change the treatment of onerous contracts, as follows:

• If a contract is onerous as a result of a decision to stop using the underlying item and the contract can be terminated, a provision is recognised at the date of notice of termination.
• If the contract cannot be terminated, a provision will be recognised when the underlying item is no longer used.
• If the contract is onerous as a result of price changes the provision will be recognised at the time of the price change.

The Board also concluded that an onerous contract provision should include recoveries (for instance, sub-leases) based on prices that could be obtained in the market.

Constructive obligations

The Board agreed to include some clarifications to the wording in the standard.

Measurement

The Board agreed that a provision should be measured at the amount that would be rationally paid to settle the obligation at the balance sheet date. References to the 'most likely outcome' would be removed as this would be inconsistent with this principle.

The Board agreed to clarify that provisions should be remeasured at each reporting date using a current discount rate.

Disposal of Non-Current Assets and Reporting of Discontinued Operations

The Board discussed various issues related to this project and agreed:

• Not to replace the term 'held for sale' with 'retired from active use'.
• To include in the scope of the ED:
  • intangible assets,
  • assets held by entities in extractive industries,
  • long term customer relationships,
  • insurance contracts, and
  • associates.
• To use the definition of a 'discontinued operation' as per FAS 144 but to specifically request comment on this in the ED
• To use the term 'highly probable' instead of 'likely'

Disclosures Relating to Post-Employment Benefits

The Board agreed to include sensitivity disclosure requirements in respect of significant actuarial assumptions. This disclosure would be required individually for each significant assumption.