Financial Instruments: Replacement of IAS 39

Date recorded:

The purpose of this session was to gauge views from Board members on certain aspects of the project on a comprehensive review of financial instruments accounting. This project was added by both the FASB and the IASB in November and December 2008 respectively. The Board was not asked to make formal decisions.

The staff discussed possible objectives for this project. Staff proposed to define the following project objective: To improve usefulness of financial reporting for financial instruments for users. The Board indicated agreement with this objective.

By a nine to five majority, the Board also confirmed its view that conceptually the long-term goal must be fair value measurement for all financial instruments, but that a mixed-attribute model would be the appropriate answer in the short-term.

The staff then tried to identify possible ways of drawing a line between what is measured at fair value and what is measured at a different basis (presumably, amortised cost).

The Board discussed whether management intent (or 'business model') is the appropriate distinguishing feature. There seemed to be agreement that this is not the case. Many Board members had sympathy that the characteristics of a financial instrument are important in deciding on the measurement attribute. There seemed to be consensus that there will not be only one criterion to base the measurement decision upon.

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