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Financial Instruments

Date recorded:

FASB amendments on fair value measurement and other-than-temporary impairments

The Board received a summary of responses to their request for views on FSP FAS 115-2 and FAS 124-2 Recognition and Presentation of Other-Than-Temporary Impairments.

The board received over 60 letters giving views on the FSP which were primarily from financial institutions, prudential regulators and national standard setters.

No respondents recommended full adoption of the FSP. Responses were broadly split into those that recommended limited amendments to the impairment rules of IAS 39 and those that recommended no immediate change but instead for the staff to focus on the broader IAS 39 project addressing methods of measurement and characteristics for categorising financial instruments.

Those that recommended limited amendments had a variety of suggestions, with banking entities focussing on attempting to achieve a level playing field with US GAAP and address the issue of the perceived overstatement of losses under the current model.

Board members recalled that at past round table discussions and in various comment letters received (including those to this FSP and the January ED on Investments in Debt Instruments) the general feedback has been an opposition to short term piecemeal changes to IAS 39 without due process.

It was noted that if amendments to the impairment rules was dealt with as a separate project it would put pressure on time and resources dedicated to the broader IAS 39 project. Further, if sufficient time is to be given for deliberation and due process any final amendment to the impairment rules would not be issued long before the final amendments arising from the broader IAS 39 project. Board members highlighted that if the impairment rules were first changed as part of a separate project then changed again (or removed) as part of the broader IAS 39 project this would lead to two changes to the standard in a short space of time increasing the cost of implementation for preparers.

As a result the Board unanimously decided there should be no piecemeal change to the impairment rules of IAS 39 but instead a focus on the broader IAS 39 project which should consider the suggestions received in the request for views on the FSP.

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