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Financial Instruments: Classification and Measurement

Date recorded:

The Board was joined in its discussion by FASB Board and staff members via video link. The staff presented to the Board a preliminary comment letter analysis (as the comment deadline expired this week only and comment letters are still arriving). The Board did not take any decisions during this session.

Constituents seem to support the basic idea behind the Classification and Measurement ED requirements. Nonetheless, they raised significant concerns about speed of the project, interaction of the project with other projects of the Board, as well as lack of convergence with FASB.

Most of constituents support a mixed attribute approach for measurement of financial instruments and the proposed criteria for the measurement cut. Nonetheless, significant majority of constituents believe that the interaction between the criteria was not well defined and understood and there was a need for clearer articulation of both of the conditions.

Additional concerns were raised regarding accounting for hybrid contracts (especially application for liabilities), lack of recognition of dividends in income in the FVTOCI category, lack of reclassification, and elimination of the cost exception for unquoted equities. The Board briefly discussed the possibility of reclassification between the categories and noted that what could be understood as 'change in business model' varied greatly among constituents.

The Board will address all of these issues on later meetings. Regarding the plan for the project, the Board announced that from the next week on, the Board would deliberate on these issues on a weekly basis, with special meetings announced for 22 and 29 September.