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Financial Instruments

Date recorded:

Hedge accounting

EFRAG noted that it was very encouraged with the direction and tentative conclusions on the general (or micro-) hedging proposals. In particular they supported the business model approach and the alignment with risk management and the removing bright lines. However, they also stated that given the G20's focus on global financial institutions, to deliver a financial instrument package without a macro-hedging component would be 'to deliver nothing'.

The IASB noted that the general hedging proposals would be released for comment by mid-December. Accompanying the ED would be a significant amount of material on the IASB's website. The IASB's outreach activities would combine hedging and impairment (see below). With respect to the hedging proposals, the IASB expected to give the staff directions on macro-hedging at a meeting in November. The outreach on and redeliberations of the general hedging ED would inform the IASB's work on macro-hedging, with give and take on both sides. The staff was explicit that IFRS 9 was open to amendment as a result of conclusions reached on subsequent phases of the project, including macro-hedging.

The IASB hoped that the macro-hedging proposals would be issued as an ED by the end of June 2011.

Impairment

The IASB staff explained the current state of play on impairment. Three days of intense debate between the IASB and FASB had confirmed that the Boards were firmly in different camps: the FASB favouring 'Day 1' recognition of all expected losses and the IASB favouring recognising all expected losses over the life of the loan. The Boards were looking for common ground, but it was not certain that they would be able to find it. The US approach was backed by the US banking regulators; the IASB's approach was more in line where the Basel Committee would like them to be. There was common ground – in particular the use of current information and looking forward using reasonable and supportable information suitable to the life of the loan. It was how those general principles were put into practice that caused problems.

The IASB would re-expose the impairment chapter in January with a 60-day comment period. That would give them enough time to complete the chapter by June 2011. As elsewhere, there would be a comprehensive series of workshops and visits – mainly looking at the operational aspects of the proposals.

Related Meeting Notes


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