The Board was presented with a comprehensive analysis of comment letters and outreach to constituents on the derecognition project. No decisions were taken during this session. FASB Board members and staff joined the meeting via the video link.

Overall, constituents overwhelmingly disagreed with the proposed approach as described in the ED. A significant majority of the arguments presented was similar to the reasons stated in the Alternative View in the ED.

A majority of constituents seemed to favour a kind of alternative approach, mainly for the reasons described in the ED. Nonetheless, many constituents were concerned that the alternative approach was not sufficiently developed, might lead to misleading representation of some transactions, and created opportunities for earnings management. Some of the constituents noted also their concerns related to expansion of fair value measurement, transfer definition, and lack of convergence with the US GAAP.

Most respondents disagreed with the Board (and the approach in both proposed and alternative approach) for treatment of the 'repo transactions' and asked the Board to reconsider their decision. One Board member suggested that regulatory regime and usage of repo transaction by some of the central banks to provide liquidity to financial markets may have played a role. The Board agreed to revisit this area in the process of re-deliberations.

The staff then continued its presentation with listing the problems with current IAS 39 requirements (internal inconsistencies, conceptual weaknesses and practical difficulties) before presenting 4 alternatives to replacing the current IAS 39 guidance on derecognition:

1. Enhancing disclosures
2. Address the know issues with IAS 39 and enhance the disclosures
3. Develop a proposed approach
4. Develop an alternative approach

The staff expressed its preference for the forth approach. The staff pledged to prepare further analysis for the October Board meeting in order to facilitate the Board`s decision.

In response, several Board members expressed their concern with the lack on convergence with FASB and urged the Board to co-operate with FASB and to provide a converged standard, issue that was highlighted also by the comment letters. The FASB members noted that FASB had recently issued FAS 166 on derecognition but it considered replacing the concept of legal isolation as it was just a temporary solution.

One FASB member noted that the Board has two alternatives how to proceed - either analyse the differences between current IAS 39 requirements and FAS 166 and try to converge on that basis or to work on a new standard based on the alternative approach. Some IASB members clearly preferred the second alternative. This issue will be discussed further at the joint meeting in October.

Regarding timing, several Board members noted that of alternative approach was to be developed re-exposure would be required and thus issuance of the new standard would be delayed. FASB members also noted that as FAS 166 was issued only recently, longer period would be required before a new standard was adopted.