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Financial Instruments

Date recorded:

Comprehensive Project to Replace IAS 39: Transition - Disclosure Requirements for Early Adopters

The staff noted that the Board's forthcoming proposed amendments to IAS 39 would be effective for annual financial years beginning on or after 1 January 2012, with early adoption permitted.

The Board considered staff proposals designed to address Board members' concerns that disclosures would be required for early adopters to increase comparability with entities that do not adopt early. The staff noted that IAS 8.28 already requires extensive disclosure in the year of initial application of an IFRS. However, they maintained their view that additional disclosures for early adopters were necessary to assist users in comparing the financial position and performance of entities adopting the amendments before the mandatory application date. However, they acknowledged a need for a balanced approach, so that any disclosure was not overly onerous so as to discourage early adoption.

The staff clarified that these proposed disclosures would not apply to first time adopters, and that an amendment to IFRS 1 would be made to clarify this (the disclosures address the transition from the current IAS 32/39 model to the proposed model, not adopting the new model from a previous GAAP).

The Board agreed (one opposed) that the following disclosures (additional to those required by IAS 8.28) should be made in the year of adoption if the final requirements are adopted before the mandatory application date.

  • (a) A table displaying all financial instruments, aggregated by class as defined in IFRS 7, whose measurement basis or the presentation of gains or losses had changed as a result of applying the new guidance, disclosing:
    • (i) the original and new measurement basis
    • (ii) the original and new carrying amount
    • (iii) the reasons for the change in the measurement basis or presentation method.
  • (b) a table displaying the reclassified amounts as a result of any:
    • (i) designations into the fair value option including the original measurement bases (and presentation method) and carrying amounts;
    • (ii) designations out of the fair value option distinguishing between permitted and required dedesignations including the original measurement bases (and presentation method) and carrying amounts; and
    • (iii) the reasons for any such designation and dedesignation.

One Board member thought that, while he understood the intention of the proposed disclosure, the result would be ineffectual boilerplate. The revised standard would permit changes in presentation and measurement, and a preparer might legitimately state in the footnote that the entity had adopted a new accounting policy because the IASB allowed it to do so! Other Board members thought that this position was extreme, and that a sensible application of the requirements would yield the appropriate disclosure.

There was some concern among Board members about how the proposed disclosure would apply to interim reporting. The staff agreed to confirm the implications of their proposals on interim reporting and revert to the Board if necessary. If no Board decision was necessary, the interim reporting consequences would be explained in the exposure draft.