Fair Value Measurements — Credit Crisis: Amendments to IFRS 7 Disclosure Requirements

Date recorded:

The purpose of this session was to address the following three issues with regard to the staff draft proposals on amending the liquidity risk and fair value disclosures in IFRS 7:

  • How and when to issue an ED;
  • Comment period; and
  • Transition.

The staff recommended to the Board to publish the ED within the next 2-3 weeks with a 120 day comment period. Although the need for changes is urgent, the staff highlighted that no final document will be published before year-end. Therefore, entities with an annual period beginning 1 January 2009 would not apply the amendments before 1 January 2010, and this would take some pressure from the proposals. Staff noted that, in the light of the public focus on these issues, the Basis for Conclusions in the exposure draft should include a proposed effective date of 1 January 2010.

Board members were mainly concerned about the usual 120 day comment period given the public attention on these issues. Most of the Board members tended towards a 60 day comment period, as the issues addressed were narrow and were not expected to create much resistance from constituents. One Board member asked the staff whether it would be possible to have an earlier effective date. The Chairman mentioned that the endorsement process of one of the significant constituents would need a certain amount of time, so an earlier effective date than proposed would not help.

One Board member noted that the disclosures for fair value might omit the information on hedging activities/relationships if they are not disclosed simultaneously. The staff agreed and confirmed that this was an issue already raised by the IASB's expert advisory panel. However, addressing this would go beyond the scope of this project. It was noted that entities wishing to provide information on hedging activities for which they use their derivatives would not be prohibited to do so.

In the end, the Board agreed with the staff proposal in general, but decided to have a 60 day comment period and propose an effective date of 1 July 2009. The Board also decided to include a question on the effective date in the invitation to comment.

The staff informed the Board that it will present separately, at a future Board meeting, additional issues in IFRS 7 that have been discovered during the discussions with constituents. Staff suggested that many of them could be addressed via the annual improvements process.

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