Financial instruments — Classification and measurement
The IASB and FASB met to discuss their respective projects on classification and measurement of financial instruments. Late in 2011, the IASB had agreed to consider reopening IFRS 9 to address certain issues, one of which was the possibility for further convergence with US GAAP. The FASB is also concluding re-deliberations on development of their classification and measurement project. The staffs decided to formally bring a question to the Boards of whether the Boards wanted to work on alignment between their respective classification and measurement models.
The staffs' proposal included consideration by the Boards of:
- which instruments (e.g. what cash flow characteristics and business activities) are eligible for amortised cost measurement
- the need and basis for bifurcating financial assets
- the basis for, and scope of, a classification category of debt instruments measured at fair value through other comprehensive income ('FVTOCI')
- knock-on effects from the above issues.
One of the IASB members mentioned his agreement with the staffs' proposal but suggested that a target date for completion be set so that the discussions did not further delay the implementation of IFRS 9. He also asked the staff whether recycling of amounts recognised in other comprehensive income would be part of the discussions around the FVTOCI category. The IASB staff affirmed that would be part of the discussion. Another Board member questioned if the Boards were to agree on a FVTOCI category for debt instruments but disagree on recycling of amounts in OCI whether it would be viewed as converged.
One IASB member stated that he hoped both Boards could come to the same position rather than attempting to minimise differences. He also suggested that the staff should include analysis in their agenda papers of user views on benefits suggesting that the Boards should not fail to resolve their differences because of personal preferences but genuinely considering users' needs.
One IASB member raised the issue of the potential for a cost exemption for unquoted equity instruments. The Board had previously decided not to include this as part of the reconsideration of IFRS 9 but rather attempt to address some of the concerns through IFRS 13 educational materials. Another IASB member noted the FASB had provided a scope out for non-public entities so that perhaps this issue should be included in the convergence discussions. However, the IASB Chair had little interest in revisiting the previous decision not to include this issue as part of the IFRS 9 reconsideration.
Ultimately, both Boards agreed to work together to improve the alignment of their respective financial instrument classification and measurement standards.