Financial Instruments
No technical decisions were made during this session.
The Board discussed the primary objectives of, possible extent of IASB involvement with, a suggested outline of, and proposed timetable for the IASB-FASB Discussion Paper or Preliminary Views on financial instruments.
Primary objectives
The Board confirmed that the primary objectives of the Discussion Paper should be to:
- describe the major issues in current accounting standards and practice related to financial instruments;
- describe the boards' long term objectives with regard to accounting for financial instruments and the reasons that the boards established those objectives;
- present preliminary views on any individual issues on which a majority of the members of either Board have agreed, tentative conclusions supported by a significant minority of members of the boards, and any other results of the boards' deliberations that would aid constituents in preparing responses to the questions in the document;
- ask constituents for their opinions about the issues and possible alternative resolutions that may have been identified, and to request suggestions from constituents about possible ways to achieve the boards' long term objectives with the least cost and disruption in practice; and
- demonstrate to constituents the interaction between the issues related to the long-term objectives for financial instruments and other projects the boards are undertaking (such as the financial statement presentation project). The due process document should demonstrate the progress made on addressing issues relating to the accounting for financial instruments in the other projects.
Extent of Board involvement
The Board agreed that:
- the Discussion Paper should contain preliminary views, to the extent that the boards have reached them already either in this project (such as the long-term objectives of the boards and the decision not to undertake efforts with the single objective of eliminating reconciling items in SEC filings) or in other related projects;
- the Discussion Paper should contain the preliminary views of the boards on other issues to the extent that the staff and boards believe that it might be possible to reach those preliminary views in the timeframe we have; and
- to the extent that the boards have not discussed (or have not reached) preliminary views on specific issues, the Discussion Paper should include a neutral discussion of those issues (and state that no view has been reached).
Possible contents of Discussion Paper
The Board agreed that:
- The Discussion Paper should be drafted from a 'broad scope' position. That is that financial instruments (broadly defined) is the appropriate basis for the scope of the document, subject to whatever exceptions the boards think it desirable to make or additional items the boards wish to include. The board agreed with the staff that a scope that included all contracts requiring delivery or exchanges would be easier to describe and implement, as well as easier to justify conceptually.
- The Discussion Paper should not address derecognition issues relating to the transfer of financial assets: these should be included in a separate discussion paper. That DP should also include other derecognition issues (for example, relating to financial liability extinguishment or debt modification).
- In drafting the Discussion Paper, the long-term objective of fair value measurement should be assumed. The Board stressed that there might be some instruments for which a fair value measure would not be appropriate and that having this general principle would assist the boards to identify those contracts for which fair value was not an appropriate measure and to apply that principle consistently.
Timetable
The Board noted the current timetable, which plans for a Discussion Paper with Preliminary Views to be released in November 2007. Several Board Members noted the timetable was 'ambitious', but encouraged the staff to get on with it.