• 1. The company must be viewed from the perspective of a current investor in the company's common equity.
• 2. Fair value information is the only information relevant for financial decision making.
• 3. Recognition and disclosure must be determined by the relevance of the information to investment decision making and not based upon measurement reliability alone.
• 4. All economic transactions and events should be completely and accurately recognized as they occur in the financial statements.
• 5. Investors' wealth assessments must determine the materiality threshold.
• 6. Financial reporting must be neutral.
• 7. All changes in net assets must be recorded in a single financial statement, the Statement of Changes in Net Assets Available to Common Shareowners.
• 8. The Statement of Changes in Net Assets Available to Common Shareowners should include timely recognition of all changes in fair values of assets and liabilities.
• 9. The Cash Flow Statement provides information essential to the analysis of a company and should be prepared using the direct method only.
• 10. Changes affecting each of the financial statements must be reported and explained on a disaggregated basis.
• 11. Individual line items should be reported based upon the nature of the items rather than the function for which they are used.
• 12. Disclosures must provide all the additional information investors require to understand the items recognized in the financial statements, their measurement properties, and risk exposures.

We question the need for piecemeal changes to IAS 19 Employee Benefits, a Standard that the IASB acknowledges requires significant revision. We acknowledge the existence of the IASB's Short-term Convergence project, however we believe constituents would be better served in this particular instance by having to deal with these amendments as part of a broader proposal addressing IAS 19 as a whole.

We question the relevance of the distinction between voluntary and involuntary termination benefits and disagree with the proposed change in the point of liability recognition. If, at the time that an entity offers benefits, the entity has committed itself (either legally or constructively) and raised a valid expectation on the part of the employee that it will fulfil its responsibility should the employee accept the offer, a liability has been created. The key issue is whether an employee is required to provide future services in return for the termination benefits (whether voluntary or involuntary), in which case those benefits should be recognised as the services are provided. We agree with the immediate recognition of termination benefits where these are not offered to employees in exchange for the employees' future service.

With the exception of the proposals for restructuring provisions, we do not support the ED, which we see as largely unnecessary. In our view, the majority of the Board's proposals are premature and pre-judge matters that should be discussed in the context of the review of the IASB Framework rather than as an amendment of IAS 37. We think that IAS 37 is operating satisfactorily within the current operating model and environment. In addition, we do not think that the Board's choice of a single measurement attribute is appropriate. As such, we find the majority of the changes proposed in the ED fail to achieve an improvement in financial reporting.

• We agree that recording 100% of the fair value of all assets acquired and liabilities assumed, including goodwill attributable to the noncontrolling (minority) interest, produces more meaningful and relevant information. However, we do not believe that the costs and operational difficulties associated with recording the fair value of the acquiree as a whole are justified by the benefits of providing the information at this time.
• Additionally, significant portions of the exposure drafts are predicated on projects that have not yet been completed (eg the Conceptual Framework project, the Financial Performance Reporting project, the Fair Value Measurements project, the Liabilities and Equity project, and new basis issues). We do not believe the Exposure Drafts should be finalised until such time as the projects forming the foundation for this standard are completed.
• We believe the IASB should retain IFRS 3 Business Combinations, with limited modifications, and that the FASB should converge with this model. Our letter cites a range of benefits of this approach.

• Our comment letter on the IASB's June 2005 proposed amendments to IFRS 3 does not support the adoption of the proposed amendments. Consequently, we do not support the majority of this Exposure Draft's proposed changes to the accounting and reporting of non-controlling interests.
• The Board's conclusion that transactions between controlling and non-controlling shareholders should be accounted for as equity transactions is premature and should be deferred until completion of the IASB's and FASB's joint Conceptual Framework project. We are not yet convinced that the single economic entity view of consolidated financial statements provides the most relevant information to financial statement users.
• Neither IAS 27 as currently adopted nor as proposed to be amended provides guidance on accounting for changes in a parent's ownership that do not result in loss of control. As a result, preparers of financial statements apply differing accounting treatments as accounting policy elections, reducing comparability. Indeed, in practice, we have seen the application of at least five different methods of accounting for increases in ownership interest after control has been obtained.

I understand that European companies are concerned about continuing to bear the costs of reconciliation to U.S. GAAP on top of switching to IFRS. But, I am optimistic that Europeans and Americans can work together to eliminate this long-standing requirement in accordance with the 'roadmap' laid out earlier this year, contemplating a 2007-2009 timeframe of mutual recognition. I am confident that the need for reconciliation will disappear as all of us gain experience with IFRS in practice.

We in the U.S. are keenly aware that unnecessary reconciliation only imposes costs on investors on both sides of the Atlantic. For this reason, I am baffled at the suggestion by some that Europeans should begin to require U.S. companies to reconcile their U.S. GAAP financial statements to IFRS. This runs against the direction that we are taking in the United States and undermines our efforts towards mutual recognition. Some may assert that this is a useful bargaining chip to ensure that we Americans will recognize IFRS. But, I believe that it is counter-productive, ignores historical precedent and market practice, and diverts attention and energy from solving the real challenges before us. IFRS will stand or fall on its own merits. Our efforts should be focused on making sure that it succeeds.