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Classification and measurement (IASB and FASB)

Date recorded:

At this meeting the IASB and the FASB discussed the plans for the upcoming joint re-deliberations of their projects on classification and measurement of financial instruments. No questions were asked to the Boards at this meeting.

The outlined project plan takes into consideration the fact that the two boards have different starting points coming into the re-deliberations. The IASB proposed limited amendments to existing classification and measurement requirements for financial instruments in IFRS 9. On the other hand, the FASB proposed a comprehensive new classification and measurement model for financial instruments. Consequently, some of the topics will be re-deliberated jointly whereas other topics will be re-deliberated separately. 

The project plan can be summarised as follows:

July 2013 (IASB only): The staff will ask the IASB to consider transition requirements for the ‘own credit’ provisions in IFRS 9 and IFRS 9’s mandatory effective date.

September 2013 (joint): Contractual cash flow characteristics assessment:

  • The objective of amortised cost measurement and the fundamental principles underpinning the ‘solely payments of principal and interest condition’ (‘solely P&I condition’).
  • The meaning of ‘principal’ and ‘interest’, including the meaning of ‘time value of money’.
  • The application of solely P&I condition to particular features, including de minimis features (i.e. features that can only ever have an insignificant effect on the contractual cash flows), contingencies (including those that are unlikely to occur) and prepayment/extension features.

In addition to the solely P&I condition discussions, the boards will discuss feedback from respective stakeholder groups on other issues related to the contractual cash flow assessment.  For these topics, some discussions will be held jointly, and some separately. 

Business model assessment:

  • Whether or not to retain the three classification and measurement categories for financial assets.
  • Consider the articulation of the objectives for the business models and related issues (such as which category is the residual and whether the business model should be ‘mandatory’ or optional in particular circumstances).
  • Consider enhancements to, and the potential for further alignment of, the application guidance on determining the business model within which the financial assets are managed.

Subsequent meetings (joint): Various other topics will also be discussed at meetings after the September 2013 meeting where the boards will be asked whether they would like to:

  • Confirm or reconsider particular aspects of their respective proposals on reclassification of financial assets upon a change in the business model.
  • Confirm their respective proposals on the fair value option or whether they would like to more closely align their positions and/or consider changes to when the fair value option may be available.

The staff will ask the boards to separately consider transition and disclosure requirements.  The staff anticipate that re-deliberations will be substantially completed by the end of 2013. 

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