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Financial Instruments – Replacement of IAS 39

Date recorded:


The Boards discussed whether both fair value and amortised cost information should be prominently disclosed on the face of the financial statements (for example, through parenthetical disclosure or reconciling information on the face of the financial statements). One benefit would be to allow investors to more easily compare financial statements prepared under the FASB's and IASB's respective approaches. Additionally, it was noted that some investors are looking for both fair value and amortised cost information in a timely manner. Some questioned whether providing both fair value and amortised cost on the face of the statement of financial position would be confusing to readers of financial statements.

A majority of the IASB members present indicated that they would not necessarily object to requiring entities to provide both fair value and amortised cost information on the face of the statement of financial position for financial instruments that under the IASB's approach are classified as amortised cost. The IASB agreed to consider this issue further at a future board meeting along with the issue of whether requiring prominent disclosure of changes in fair value in separate pro-forma statements to illustrate the impact on accumulated other comprehensive income and shareholders' equity. (The FASB has previously agreed to propose prominent disclosure on the financial statements of both fair value and amortised cost information for financial instruments that under the FASB's approach are classified as fair value through other comprehensive income.)

Core Principles

Subject to further refinement, the two Boards agreed on the following core principles for convergence of the FASB's and IASB's approaches to the accounting for financial instruments (note – the core principles outlined below are based on observer notes of the deliberations and are subject to refinement by the Boards):

  1. The new requirements should enhance comparability for the benefit of investors.
  2. The new requirements should provide transparency of risk exposures in management business strategies.
  3. Prominent and timely fair value information is relevant for financial instruments with highly variable cash flows or held for trading purposes.
  4. Both amortised cost and fair value information is relevant for financial instruments with principal amounts held for collection or payment of the contractual cash flows rather than for sale or settlement with a third party.
  5. The new requirements should be less complex to implement.
  6. The impairment approach for financial assets held for collection of contractual cash flows should be consistent.

Related to principle 4, some Board members expressed concern about the relevance of fair value information for financial liabilities due to the impact of own credit risk on fair value measurements of liabilities. The Boards agreed to post to their respective project websites the core principles for accounting for financial instruments after the refinements are made.

Work Plan for Convergence

The FASB staff informed the Boards that the FASB anticipates issuing an exposure draft on the accounting for financial instruments project in the first quarter of 2010. In addition, the following work plan was identified:

  • Both Boards will jointly deliberate improvements to hedge accounting in November and December.
  • The expert advisory panel will focus on both the IASB's and FASB's proposed impairment models.
  • Understand differences and identify specific financial instruments that will be impacted by the classification and measurement models being developed by the two Boards.
  • Jointly deliberate issues related to credit risk in liability measurement.
  • Issue final standard in late 2010.


The Boards exchanged questions about their respective approaches to credit impairment which focused on what information can be used to determine whether a credit impairment exists. IASB members asked whether the FASB's approach could result in the recognition of a loss on initial recognition of a portfolio of loans if there is an expectation of credit losses in the portfolio. FASB members indicated that they had not yet deliberated the details of FASB's approach. No decisions were made.

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