Financial Instruments

Date recorded:

It was noted that EFRAG had responded positively to the IASB's request that IFRS constituents respond to the FASB's exposure draft on financial instruments. The EFRAG response had 'very clearly rejected' the FASB's model and expressed support for the fundamental approach in IFRS 9.

Various aspects of the IASB's project were discussed. The key messages were:

  • EFRAG encouraged the IASB to revisit the amortised cost/ fair value dividing line as it redeliberates the expected loss model
  • EFRAG prefers a frozen credit spread
  • The IASB suggested that the final package on impairment may be expressed differently but would achieve equivalent outcomes
  • It was suggested the IASB and the FASB could explain better what the expected loss model is intended to capture, i.e., the best information available today, not expectations about conditions in the future
  • The Hedging chapter ED is expected in the fourth quarter of 2010. The model being explored is a more fundamental re-think than the FASB's proposals. It would concentrate on the economics and rationale underlying hedging activities. Some current requirements would remain (designation and documentation), but 'bright lines' would be removed.


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