Date recorded:

Investment companies - disclosures

The Boards discussed the disclosure package for investment companies. The Boards agreed that, in addition to the information currently required to be disclosed (related to fair value under IFRS 7 Financial Instruments: Disclosures), an investment company should be required to disclose whether it has provided any financial or other support to any of its controlled investment that it was not previously contractually required to provide.

The Boards also agreed that an investment company should disclose the nature and extent of any significant restrictions on the ability of its controlled investees to transfer funds to the investment company.

The Boards discussed the proposal to require disclosures of the most recently available summarised financial information for any individually material controlled investee that otherwise would have been consolidated. The Boards disagreed with the proposed disclosures as they noted that if fair value is the most relevant measure, fair value is also the right attribute to be disclosed. As it would often be a level 3 fair value calculation, additional disclosures relevant to the calculation would have to be provided.

One Board member noted that the disclosures on related partiy transactions should be applied in that scenario as they will not be eliminated. The Boards agreed.

The Boards also discussed additional disclosures that are currently required under US GAAP for investment companies. These requirements under US GAAP are standalone requirements for investment companies, whereas under IFRS presentation and disclosure requirements of all other IFRSs would apply to investment companies. The IASB asked the staff to perform a detail comparison of the requirements required under US GAAP and the requirements currently required under IFRSs. The Boards will re-discuss this issue at one of the following meetings.

Disclosures for subsidiaries and unconsolidated structured entities

The Boards continued their discussion about a disclosure package for subsidiaries as well as unconsolidated structured entities. The Boards started by discussing the general disclosure principle. Nonetheless, it was soon clear that the Boards did not agree with the proposed principle as they believed that it confused structured and operating entities as well as consolidated and non-consolidated entities. The FASB members suggested taking the principle in Statement 167 as the basis. The Boards will revisit the principle at the following Board meeting.

On more specific disclosures, the IASB members tentatively agreed to require disclosure of a list of individually material subsidiaries containing the name, country of incorporation and as well as proportion of interest and summarised financial information. The FASB members were reluctant to require such disclosure.

With regards to the unconsolidated structured entities, the Boards decided that a reporting entity has an involvement with an unconsolidated structured entity that is relevant for disclosure purposes when it is exposed to the variability of returns of that entity.

The Boards discussed whether the disclosure requirements for unconsolidated structures entities should apply only to a reporting entity's involvement with entities that exposes the reporting entity to significant variability of returns. Many Board members were uncomfortable with inclusion of the word significant. The FASB members noted that under US GAAP, the reference to significant has been recently deleted. The Boards preliminary agreed not to refer to significant in the next due process document. The IASB asked the FASB to undertake an outreach on the practicalities of that change under US GAAP. Based on the results of such outreach, the Boards would re-discuss the issue at one of the next meetings.

After a brief discussion the IASB agreed to require disclosure of income from involvements with structured entities that the reporting entity has set up or sponsored as well as the fair value of assets recognised by those structured entities at the time that these structured entities are established. Both these disclosures would be requires regardless of whether the assets of the structured entities were acquired from a third party.

The FASB disagreed with this disclosure requirement as they believed it should be covered by the general disclosure principle.

The Boards agreed that the further specific disclosures will be discussed at a next meeting together with the general disclosure objective. In particular the Boards would like the staff to address the question when the financial instruments disclosures are relevant and when the consolidation guidance should apply. Some Board members were uncomfortable with prescribing these disclosures to normal commercial truncations (such as an insurance policy or bank guarantee).

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