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Fair Value Measurement

Date recorded:

Comment letter analysis

The staff presented a summary analysis of comment letters received in response to the IASB's Invitation to Comment and Exposure Draft of a proposed IFRS Fair Value Measurement. To date, 157 comment letters had been received. The staff noted that as issues are redeliberated, more detailed analyses of the comments received would be presented.

The staff noted that nearly all respondents were in favour of the project and that constituents generally identified the following:

  • having a single source of guidance would reduce complexity and improve consistency in the application of fair value measurements
  • the IASB and FASB should work together to develop fully-converged guidance for fair value measurement under both IFRSs and US GAAP
  • an exit price notion is not relevant for assets when an entity does not intend to sell the asset (that is, when it is being used in the operations of the business or it is a financial asset not held for trading)
  • a liability measure should reflect a settlement notion, not a transfer notion, if the liability cannot legally be transferred or if the entity does not intend to transfer it
  • some of the guidance for measuring fair value in inactive markets in the Expert Advisory Panel's report should be added to the final IFRS on fair value measurement guidance.

Board members noted that some of these items reflected constituents' opposition to measuring an item at fair value (the 'when' question) rather than disagreement with the ED's proposals about 'how' to measure fair value when an IFRS required such a measure.

In addition, some Board members noted that the use of 'fair' in 'fair value' was an emotive issue for many constituents. Some constituents seemed to think that the Board had only two buckets, cost and fair value, and that there was no place in IFRSs for current measures other than fair value. It might be better that the IFRS be neutral and refer to 'exit price', 'entry price', etc. The confusion also extended to whether approximations/ estimations of fair value determined using present value techniques could be described as 'fair value'.

Another Board member was concerned about the application of the IFRS in less developed economies and economies in transition. In many such jurisdictions, hypothetical markets were 'beyond their experience and imagination'. As part of the Board's outreach activities during redeliberations, specific consideration should be given to engaging with these jurisdictions - either through activities in Africa, South America, and South-east Asia, or through meetings to be held as part of, or as an adjunct to, meetings of the SAC; or through remote meetings, utilising technology. There was support for such activities.

Preliminary project plan

The staff presented a preliminary project plan outlining their proposed approach to redeliberating issues in the exposure draft (ED) and for addressing developments in US GAAP (including Accounting Standards Updates 2009-5 and 2009-12) subsequent to the publication of the ED in May 2009.

While approving the project plan, Board members expressed concern that the plan gave the impression that the staff was concentrating on 'playing catch-up' with US GAAP and would not address IASB constituents' concerns and suggestions for joint improvement in the standards. The staff noted this concern and stated that such issues would be discussed at the forthcoming joint IASB-FASB meeting later in October 2009.

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