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Conceptual Framework — Education session (IASB only)

Date recorded:

The IASB held an education session to discuss the conceptual framework.  The purpose of the session was to provide the IASB Board members with some additional background information on the conceptual framework project.  The staff presented two sets of slides to the IASB Board members:

  • An overview of the conceptual framework project including considerations as to the reasons for the original project not being completed; and
  • Issues associated with the reporting entity concept

Overview of the conceptual framework project

The staff presented the following topics to the IASB Board members:

  • The approach of the previous conceptual project;
  • Status of the phases;
  • Key dates;
  • Overview of the “Objective” and “Qualitative characteristics” chapters;
  • Why the original plan was not completed; and
  • Plans for the future

The staff noted that the purpose of the original project was not to start with a “clean sheet of paper” but was to update the existing frameworks (FASB and IASB), improve them and fill in any gaps.  The ultimate aim of the project was for a converged framework.  The staff noted that the original project consisted of a phased approach (it was considered that this would be most efficient) and that the only phase that was completed was phase A – “Objective and Qualitative Characteristics”.  The “Reporting entity” phase was also quite far advanced before the project was halted in November 2010 and there had been quite a lot of work performed on the “Elements” and “Measurement” phases.  The staff noted that there was no work performed on the “Purpose of the conceptual framework” and “Applicability to other entities” areas.

The staff provided the Board with further information on the chapters that had been completed before the project was halted in 2010 being “Objective” and Qualitative Characteristics”.

The staff then highlighted that the two key reasons why the Conceptual Framework project was not completed was due to the phased approach and also the workload of the IASB at the time which meant that the Conceptual Framework project got moved further down the Board agenda.  The staff noted that the phased approach made it difficult for the Board to make decisions on areas of the conceptual framework that were interrelated.

Going forward it was noted that for the current project, the phased approach would not be maintained. It was also noted that the current approach would also look to fill in the gaps left by the previous project rather than starting the whole project again.  Chapters that have been completed previously will not be worked on.

The staff presented a high level plan and noted that a draft discussion paper was planned for February 2013, a revised draft discussion paper in April 2013 and then a ballot in June 2013 .  It was proposed that the exposure draft be published in August 2014.  It was noted that a more detailed plan would be presented in the December Board meeting. The staff also noted that during the project the staff would use the new standard setting forum as a consultative group to help with the project.

A number of the IASB members noted that it was a good idea to not continue to follow the phased approach.  One Board member highlighted that the project should address what the status of the Conceptual Framework is to ensure that this is understood by all constituents.  He questioned was the Conceptual Framework mandatory or just a form of guidance.  The Board member agreed that the new advisory forum should be used but questioned why academics were not being used as well – he noted that these academics should be included in the project.

Another IASB member noted that the new forum of standard setters does not exist and questioned when in the process these would be used (after the discussion paper?/before the discussion paper?), also taking into account that there was a tight deadline to be adhered to.

One IASB member noted that the problem with the previous project was not knowing exactly what needed to be resolved and what areas required addressing.  He noted that only those areas that required amending should be focused upon and other areas should be left as they are.  He hoped that the discussion paper would be the Board’s preliminary views of the key topics and that by December assurance needed to be provided that the February deadline for the draft discussion paper could be met.  If this was not met, this would be considered a failure.  A number IASB Board members shared this view especially the focus on the areas that require amendment rather than an approach that reconsidered all areas.

Building on this comment, another Board member noted that he would like greater input from the Board members on the key areas (he noted OCI and liabilities) in terms of them thinking about the key issues before the Board meetings so that they could contribute positively to the Conceptual Framework discussions rather than just present issues to areas of the staff analysis that they disagree with.

Issues associated with the Reporting Entity concept

The staff presented their second set of slides to the Board on the Reporting Entity concept.  The staff discussed:

  • Why the Boards decided to develop a reporting entity concept;
  • What the existing framework says about the Reporting Entity;
  • Status of previous discussions; and
  • The Discussion Paper and the Exposure Draft

The Reporting Entity concept achieved discussion paper status in May 2008 and Exposure Draft status in March 2010.  The comment letter analysis was also presented to the Board members before the Conceptual Framework project was paused in 2010.  In the November 2012 Board meeting, the staff presented to the Board members the issues of, and responses to, the Discussion Paper of May 2008.  The staff also presented the contents of and, responses to, the Exposure Draft of March 2010.

One Board member noted that, of the issues identified in response to the Exposure Draft, the current Conceptual Framework project must ensure that it deals with the perspective of financial statements (entity v proprietary view).

Another Board member questioned what were the key issues to be addressed with the Reporting Entity chapter.  He re-emphasised that there was only a requirement to deal with the key issues that required to be resolved in the Conceptual Framework project.  He questioned the importance of the Reporting Entity section of the Conceptual Framework project.  This view was shared by another Board member.  One member noted that issues identified with liabilities and equity could be addressed with this chapter.

No Board decisions were taken at this session.