This meeting was the formal semi-annual encounter between the IASB and the principal accounting standards bodies in the European Union. The meeting was an opportunity for European groups to raise issues of concern with the IASB, to share progress on EU-level initiatives and to exchange information.

PAAinE Activities

Several European representatives spoke of the various initiatives being pursued by the Pro-active Accounting Activities in Europe group, noting the release of two discussion papers in recent months: one on distinguishing between debt and equity and another on pension accounting. They also noted that a discussion paper addressing aspects of the IASB's project on financial statement presentation (phase II) was expected later this year. In addition, the French standard-setter is 'stress testing' the working definition of an asset developed by the IASB and FASB in the elements phase of the Conceptual Framework project. The EFRAG chairman noted that, although typically one national standard-setter leads the drafting of a discussion paper with the assistance of others, many other national standard-setters (including some outside Europe) review them and offer comments. He also noted that the PAAinE initiative is an integral part of involving the accounting profession and others in Europe in IASB projects at an early stage and is a way of feeding information to the IASB in a structured and constructive manner.

IASB-FASB Memorandum of Understanding

At the invitation of the EFRAG chairman, IASB Chairman Sir David Tweedie outlined the reasons behind the potential reconsideration of the 2006 IASB-FASB Memorandum of Understanding scheduled for debate on 21 April 2008 as part of the joint IASB-FASB meeting.

In response, acknowledging that neither Board had debated the memorandum prepared by a working group of Board members and staff of both Boards, various European representatives expressed willingness to cooperate with the IASB in any way to make the IASB more efficient. They also suggested relative priorities from a European perspective, noting in particular insurance and leasing were high priorities (even though insurance is not included in the MOU), while down-playing debt-equity classification (although this is described as critical for US acceptance of IFRS). They also expressed the hope that discussion papers on all remaining chapters of the IASB Conceptual Framework be issued by 2009.

Current Financial Market Situation

The context of this discussion was "how is the IASB planning to react to the 'credit crunch' and how can EFRAG and the national standard-setters assist?"

All participants noted that the IASB was being bombarded by (often conflicting) requests for action by various supra-national bodies. Prompt action was being demanded, often with little (if any) understanding of the IASB's operating practices and due process requirements.

The IASB is focussing on consolidation and derecognition issues, including both IAS 27 and SIC 12. It is likely that any revisions will still require the careful use of judgement around the 'control' line. In addition, disclosures similar to those in FAS 157 Fair Value Measurements and some enhancement of the disclosures in IFRS 7 Financial Instruments: Disclosures may be proposed. It was also likely that the IASB would hold roundtable sessions before an exposure draft is published, so that there is as much consensus as possible before the ED.

At the same time, the IASB is working with a panel of valuation experts on issues of measuring financial instruments in illiquid markets. However, many at the IASB are convinced that the current credit crisis is a banking business model problem more than an accounting standards problem, and that possible alternatives proposed recently in the financial press (such as rolling averages or directors' valuations) inhibited transparency and did not help capital markets.

EU Endorsement of IFRSs

The EFRAG chairman and staff reported that nine final IASB and IFRIC documents were in the queue for EU endorsement. Given the new EU comitology process - involving the Commission, a Parliamentary Committee, and the Council after recommendations from the Accounting Regulatory Committee (ARC) and EFRAG - for a document to be endorsed by the end of the year, it had to have cleared the ARC by August. EFRAG was hopeful that the current queue could be cleared this year, but offered no guarantees.