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Liabilities and Equity

Date recorded:

At the December 2007 Board meeting the IASB decided to issue a Discussion Paper on Financial Instruments with Characteristics of Equity.

The objective of this session was to:

  • Discuss the content of the staff draft of the IASB Invitation to Comment to be included in the Discussion Paper
  • Discuss the questions for respondents included in the IASB Invitation to Comment
  • Provide the Board with an oral summary of the FIWG discussions.

The staff informed the Board that the overall response from the FIWG was positive. The only area of concern was communication of the timeline of the project and the interaction if the IASB project with the progress of the FASB project. One Board member pointed out that, at this stage, this project is not on the active agenda of the IASB and that the Board will deliberate adding it to its agenda in due course. However, it would be welcomed that both Boards will move in tandem when they come to exposure draft stage. Another concern was that respondents should be asked about the interaction with other IASB projects.

The Board members seemed not to support this proposal. They saw it as the Board's duty to ensure proper interaction between Board projects.

While the Board agreed to the main body of the staff paper, except for some drafting proposals, the questions to respondents that were proposed in addition to the questions from the FASB document in Appendix B seemed to be more controversial. Two questions in the staff draft will be dropped:

  • B1.b: How important is it that the IASB develops a common, high quality standard used in both US and IFRS jurisdictions in the short to medium term?
  • B3: How would you address the interaction between this project and the IASB's other projects on the conceptual framework, financial instruments, and financial statement presentation? Are certain projects precedential?

It was also agreed that the question on the appropriateness of the principles set out for all types of entities and jurisdictions (B5) should be expanded to cover all approaches mentioned in the document. One Board member noted that respondents could also be asked if 'economic compulsion' should also be a principle and whether this should be addressed. The staff informed the Board that they will prepare a pre-ballot draft based on the outcome of this meeting.

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