Conclusions of the EU Economic and financial Affairs Council on IASB Governance and Funding, 10 July 2007

The Council emphasises the importance of International Financial Reporting Standards (IFRS) for EU financial markets. Strong governance and stable funding of the International Accounting Standards Board (IASB) and the International Accounting Standards Committee Foundation (IASCF) are crucial for the European Union.

At its meeting on 11 July 2006, the Council adopted conclusions on funding of the International Accounting Standards Board (IASB). The Council welcomed the current private sector efforts to create a broad-based voluntary financing system for the IASB. In addition, ECOFIN stressed the importance of improvements in the IASB governance structure and invited the Commission and the Economic and Financial Committee to monitor the work of the IASB and report to the Council on a regular basis on the effective progress on these issues.

The Council notes that following the two progress reports prepared by the Commission, improvements have been made to the IASB/IASCF governance structure. Reaffirming the July 2006 Conclusions, whilst recognising these achievements made by the IASB/IASCF, the Council would like to see further action in the following areas:

• Implementation of the decided measures to improve the IASB's governance structure through an appropriate work-plan;
• Comments from the Roundtable on Consistent Application of IFRS in the EU need to be fully taken into account in work of the IASB on standards and interpretations;
• IASB should carry out rigorous ex-ante impact analysis for any new standards and ex-post analysis of the impact and functioning of issued standards and interpretations to ensure that their goals have been achieved and that they provide relevant information to users;
• Member States and the European Parliament should be regularly informed at an early stage by members of the IASB about their intention to issue new standards, and by the Trustees on governance developments in the IASCF;
• The IASCF should proceed swiftly with the review of the working methods of the Standards Advisory Council (SAC) and give more prominence to its role.

Furthermore, the Council continues to underline the importance/necessity of:

• Full transparency by the IASB at all stages of the process of international accounting standards convergence, taking into account the views of all relevant stakeholders;
• Geographically balanced representation in all key Committees of the IASB/IASCF structure;
• Ensuring that stakeholders are adequately represented in the IASB foundation, IASB and International Financial Reporting Interpretations Committee (IFRIC) governing bodies, bringing additional technical expertise.

• On the basis of clear financing needs, seek a broad international base of contributors, also including smaller jurisdictions;
• Liaise with European and national business and other relevant organisations to support private sector efforts to create a broad-based voluntary financing system;
• Demonstrate that other regions of the world are contributing equitably to the funding system;
• Agree modalities for regular evaluation of the working of the future funding system with the aim to ensure its efficiency and stability.

The Council invites the Commission and the Economic and Financial Committee to continue monitoring the IASB/IASCF issues, and report to the Council on a regular basis on developments in governance and funding of the IASB and IASCF".

I firmly believe in international competition and open markets. I have always been very firm with Member States and national regulators when protectionist tendencies spring up. It is the same for third countries. Protectionism is for 20th century historians, not for 21st century regulators.

One of our key objectives has been to promote international standards. Carefully crafted, they are a powerful tool to extract the best from globalisation. Take, for example, IFRS accounting standards. Soon we hope that they will be accepted in every significant financial centre: the EU of course, US, China and Japan. One set of accounting rules for those companies who wish to list in the world's best financial markets. Is this not the right mix between competition, efficiency and regulation?

17-20 July 2007, London

Tuesday 17 July 2007 (afternoon only)

• Conceptual Framework – Elements and Recognition
• Earnings per Share The Board will consider some detailed issues that have been identified with the application of the fair value model in certain circumstances, to maintain convergence with FAS 128.
• Share-based payment – Vesting Conditions and Cancellations
• IFRIC Update

Wednesday 18 July 2007 (afternoon only)

• Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation – Re-deliberations of Exposure Draft: sweep issues
• Annual Improvements Process
  • 1. Should IFRS 5 be amended to clarify the accounting in consolidated financial statements of a subsidiary classified as held for sale?
  • 2. Should IAS 36 be amended to conform the disclosures provided for value in use and fair value less costs to sell when discounted cash flow models are used?
  • 3. Should the guidance in IAS 17 relating to the classification of leases of land and buildings be amended?
  • 4. Should IAS 10 be amended to clarify why dividends declared after the balance sheet date are not liabilities?
  • 5. Should IAS 19 be amended to address an inconsistency relating to accounting for plan administration costs?
  • 6. Should the components of borrowing costs in IAS 23 be aligned with the definition in IAS 39?
  • 7. Should IAS 34 be amended to clarify that EPS disclosures need only be given when required by IAS 33?
  • The Board will also be asked to consider some alternative accounting models to address the issues it discussed at the June meeting relating to replanting obligations for biological assets.
  • Transitional provisions and whether early adoption should be encouraged for any or all of the proposed amendments.

Thursday 19 July 2007

• IAS 27 Consolidated and Separate Financial Statements - Formation of a new parent entity
• Post-employment Benefits – Discussion paper issues
  1. Definitions
  2. Classification of benefits in payment
  3. Benefit promises that include a 'higher of' option
  4. Issues relating to the measurement of defined return promises
  5. Update from the working group meeting
• Income Taxes
  • The use of an undistributed or distributed rate to measure deferred tax assets and liabilities
  • Definitions of tax credits and investment tax credits
  • The definition and treatment of special deductions
• Conceptual Framework – Measurement and Reporting Entity

Friday 20 July 2007 (morning only)

• Liabilities – Amendments to IAS 37
  1. Distinguishing a liability from a business risk (including stand ready obligations)
  2. Uncertainty about the existence of a present obligation
  3. Constructive obligations

12-13 July 2007, London Thursday 12 July

• IAS 18 Revenue - Customer contributions– Accounting for the receipt of customer contributions such as an asset (or cash towards the construction or acquisition of an asset) that is then used to provide an ongoing service or an ongoing supply of goods to the customer.
• IAS 18 Revenue – Should interpretive guidance on identifying agency arrangements be provided.
• IAS 27 Consolidated and Separate Financial Statements - De-mergers and other non-cash distributions
• IFRS 2 Share-based Payment - Group cash-settled share-based payment transactions
  • Scheme 1 - The employees of the entity will receive cash payments that are based on the price of the equity instruments of the entity; and
  • Scheme 2 - The employees of the entity will receive cash payments that are based on the price of the equity instruments of the parent of the entity.
  Under both schemes, the parent of the entity (not the entity) has the obligation to make the cash payments to the employees.
• Staff Recommendations for Tentative Agenda Decisions
  • IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – Do the disclosure requirements of IFRS 7 Financial Instruments: Disclosures and IAS 19 Employee Benefits apply to non-current assets (or disposal groups) classified as held for sale and discontinued operations under IFRS 5.
  • IAS 19 Employee Benefits – Allocation of the effects of salary increases

• Review of Tentative Agenda Decisions Published in May 2007 IFRIC Update
  • IAS 12 Income Taxes – Deferred tax arising from un-remitted overseas earnings
  • IAS 39 Financial Instruments: Recognition and Measurement – Gaming transactions
  • IAS 39 Financial Instruments: Recognition and Measurement – Hedging future cash flows with purchased options
  • IAS 39 Financial Instruments: Recognition and Measurement – Hedging multiple risks with a single derivative hedging instrument
  • IAS 39 Financial Instruments: Recognition and Measurement – Scope of IAS 39 paragraph 11A
  • IAS 39 Financial Instruments: Recognition and Measurement – AG 33(d)(iii) of IAS 39
  • IFRS 5 Non-current Assets held for Sale and Discontinued Operations – Plan to sell the controlling interest in a subsidiary