The Board discussed issues surrounding the recognition of hedging instruments and the hedged item in the first IFRS financial statements of an entity. The Board confirmed its decision that the hedging instrument should be recognised at fair value with the offset to retained earnings at the date of transition. The Board considered two options for accounting for the hedged item - fair value or deemed cost. Several members expressed concern that if fair value is not required the hedging relationship would no longer exist, even if there is an effective relationship at the date of transition. However, the Board tentatively agreed to require the hedged item be accounted for similarly to other similar items, which will most likely be deemed cost. There was strong opposition to this approach by some members and therefore, the decision may be re-addressed at a future meeting.

The Board discussed whether final first time application standard should include two approaches - (1) use of current IFRS, with limited exceptions, and (2) IFRSs applicable to each period, with no exceptions (the SIC-8 approach). The Board agreed that using the current IFRSs is a superior solution and should be required.