Mde Flores noted that EFRAG remained committed to supporting the IASB's efforts to achieve the June 2011 target date for the MoU/ Convergence projects. However, high quality should not be sacrificed in the effort to meet that target. Although June 2011 would see a significant turnover of Board members including a new Chair and Vice-Chair, continuity was provided for by the IFRSF Constitution. She also noted the continued support from the G20 and FSB for the convergence agenda, notwithstanding the re-scheduling that had been done in the past six months.

Sir David noted the comments. While recognising what EFRAG was saying, he stressed that the IASB did not want to give the US Securities and Exchange Commission 'any excuses' to postpone the decision on the use of IFRSs by US domestic issuers due in mid-2011. In addition, the FBS and G20 have been explicit that the financial instruments material must be 'done' by June 2011. Sir David noted that work was complete on several MoU projects, including Derecognition; Consolidation (round table meetings are being held in the US); Fair Value Measurement guidance; and Employee Benefits. Other projects (including financial statement presentation), while staff work would continue in the background, would generally not have Board meeting time until after June 2011. Meeting time would be given to the four priority projects: Leases, Revenue, Insurance and Financial Instruments.

There was a general discussion of the revised project timeline. Sir David noted that the US SEC was content with the re-prioritisation of the IASB's agenda and was content to have items such as financial statement presentation and liabilities/ equity delivered later than June 2011. His indication remains that the SEC 'is trying' to adopt IFRSs. If, however, that decision goes against IFRSs, the future might be very different indeed. Mde Flores noted that it was in the interests of both EFRAG and the IASB to cooperate to achieve a positive result on the major projects.

EFRAG continues to support one principle as the foundation of the IASB's revenue recognition standard, but clarity was needed if this was to be achieved. In particular, challenges in certain areas were noted, in particular long-term contracts, service contracts; and in particular industries, including telecommunications and long-term construction activities.

The project staff noted that these themes had already been identified in the outreach activities conducted during the exposure period. In addition, outreach activities would continue as the Board redeliberated the proposals: these activities would include 'workshops' in which prepares would be encouraged to apply the proposals to a sample of transactions. These workshops would be practical exercises, to get to the detail of the proposals, without being full-scale field tests. There were also targeted discussions in certain jurisdictions and industries that had identified serious concerns/ issues with the proposals.

An IASB member noted also that the themes were consistent to those raised at the revenue roundtable discussions and similar constituent meetings. Partly, constituents were simply nervous about abandoning the familiar and adopting a new Standard. Others were concerned about losing the 'accounting for costs' guidance that is embedded in many US GAAP revenue-related pronouncements. The IASB would have to consider how to address these concerns, potentially adding implementation guidance.

There was some discussion of revenue recognition in the telecommunications industry. An IASB member suggested that some in the industry were not applying IFRSs properly at the moment. Others in the meeting noted that analysts following the industry were not unhappy with the information they were receiving. If the users were content and thought current practices were appropriate, where was the necessity for change? In addition, an EFRAG member stressed that legal restrictions/ requirements in a particular jurisdiction might cause difficulties for the Standard and warned that the legal and accounting parameters should not be 'un-aligned'.

The IASB re-iterated that the extended outreach activities were being designed to address these issues.

EFRAG stated its support for the right-of-use model for lessees, but noted at the same time that there needed to be a more robust distinction between services and leases. In addition, the lease of an intangible asset did not fit well with the model as currently articulated. EFRAG were worried that the lessor-side was not well developed: they would prefer to see consistent measurement principles for both lessors and lessees and that to deliver an IFRS that did so might involve a delay in the June 2011 target date. EFRAG preferred a derecognition model for lessors; in addition, they had sympathy with Stephen Cooper's Alternative View in the ED.

The IASB staff again outlined their outreach activities and their plan for the post-exposure period. In particular, preparers will be asked to think about complexities for their current lease contracts and implementation costs were the ED to be implemented as exposed. In addition, there were round table meetings and workshop events planned.

The IASB staff also noted that the messages in problem areas highlighted by EFRAG were consistent with what they had heard in the outreach and comments to date. The staff noted that some constituents would prefer the IASB to retain the current lessor model – even though it has a measurement basis that is not consistent with the lessee side – and finalise the lessee proposals. Because lessor accounting at present does have the leased asset 'on balance sheet', it is not seen by some as being as critical as lessee accounting.

EFRAG expressed some concerns about the proposed finalisation of the IFRS on consolidation, in particular that the IFRS might be accompanied by an ED on investment companies. The IASB did acknowledge that this was slightly unfortunate, but that the fund management industry, particularly in North America, had existing financial reporting practices that allowed fund managers not to consolidate what would otherwise be subsidiaries. However, the IASB did acknowledge that it was difficult to gauge how acceptable the Investment Companies proposals would be: the ED could suffer the same fate as the rate-regulated proposals.

There was considerable discussion of the IASB's field testing and the results of outreach on both consolidation and joint arrangements. The IASB staff noted that the outreach had been extensive and very useful. However, much of it had been done under strict confidentiality with the participants and covered hundreds of contracts in many jurisdictions. Consequently, providing detailed feedback on the outreach would be a challenge. However, the staff would provide as comprehensive a feedback statement as possible.

Hedge accounting

EFRAG noted that it was very encouraged with the direction and tentative conclusions on the general (or micro-) hedging proposals. In particular they supported the business model approach and the alignment with risk management and the removing bright lines. However, they also stated that given the G20's focus on global financial institutions, to deliver a financial instrument package without a macro-hedging component would be 'to deliver nothing'.

The IASB noted that the general hedging proposals would be released for comment by mid-December. Accompanying the ED would be a significant amount of material on the IASB's website. The IASB's outreach activities would combine hedging and impairment (see below). With respect to the hedging proposals, the IASB expected to give the staff directions on macro-hedging at a meeting in November. The outreach on and redeliberations of the general hedging ED would inform the IASB's work on macro-hedging, with give and take on both sides. The staff was explicit that IFRS 9 was open to amendment as a result of conclusions reached on subsequent phases of the project, including macro-hedging.

The IASB hoped that the macro-hedging proposals would be issued as an ED by the end of June 2011.

Impairment

The IASB staff explained the current state of play on impairment. Three days of intense debate between the IASB and FASB had confirmed that the Boards were firmly in different camps: the FASB favouring 'Day 1' recognition of all expected losses and the IASB favouring recognising all expected losses over the life of the loan. The Boards were looking for common ground, but it was not certain that they would be able to find it. The US approach was backed by the US banking regulators; the IASB's approach was more in line where the Basel Committee would like them to be. There was common ground – in particular the use of current information and looking forward using reasonable and supportable information suitable to the life of the loan. It was how those general principles were put into practice that caused problems.

The IASB would re-expose the impairment chapter in January with a 60-day comment period. That would give them enough time to complete the chapter by June 2011. As elsewhere, there would be a comprehensive series of workshops and visits – mainly looking at the operational aspects of the proposals.

A brief discussion of the 'OCI ED' (ED/2010/5) followed. EFRAG stated that it would support some elements of the OCI ED being finalised –in particular the categorisation of OCI between elements that would be reclassified to profit and loss and those that would not. Provided that the proposal was redeliberated in public, all necessary due process steps would have been followed. How the IASB finalised the proposals was not a critical issue.

The IASB noted this and said that some elements might be included in annual improvements or, more likely, bundled with the Employee Benefits amendments.

EFRAG noted that they were as surprised as the IASB that the insurance industry, having apparently supported the direction of the IASB's project, should now be shifting in a number of directions! What did this mean for the project?

The IASB noted that outreach and comments received to date noted that insurers did not want any (or at least wanted less) volatility in profit and loss. This might be achieved by 'unlocking' the residual margin in some way; greater use of other comprehensive income; or a greater use of amortised cost. The suggestion that IFRS 9 might be opened to re-introduce an 'available for sale' classification had little chance of gaining sufficient support on the IASB: such a suggestion was to cross a 'red line' for the IASB.

The staff noted also that significant resources—at the FASB as well as at the IASB—were being allocated to outreach and post-exposure activities. It was also noted that successful completion of the insurance project was not critical to the SEC decision.

The meeting discussed the following matters briefly.

Fair Value Measurement guidance: EFRAFG suggested that this standard be limited to financial instruments rather than all items measured at fair value. The IASB responded that the consequential amendments accompanying the IFRS would change those IFRSs for which a current measure other than fair value was the intended attribute. There was some concern that the pre-ballot draft had omitted some obvious candidates for such changes.

EFRAG Pro-active Activities: The IASB supported the EFRAG's ongoing proactive activities and suggested that the most useful topic from their point of view was post-implementation reviews in the EU.

EC consultation on country-by-country reporting: The IASB reassured EFRAG that it had already met with those in favour of country-by-country reporting and were of the opinion that this was not an accounting standards issue. The IASB would not be requiring such disclosure as part of IFRSs, no matter how sympathetic to the aims and objectives of those proposing the disclosure they might be.