Summary comment letter analysis

The staff presented a summary of their comment letter analysis of comments received on Exposure Draft ED/2009/8 Rate-regulated Activities. No technical decisions were made, but significant scheduling issues were addressed and it is now unlikely that the original timetable for redeliberation and approval of an IFRS can be sustained. Since many of the routes open to the Board would involve re-exposure of the proposals, the earliest that an IFRS could be issued is now estimated to be Q3 or Q4 2011.

The Observer Note for this meeting is available on the IASB's Project Page. It presents a comprehensive and balanced assessment of the key issues raised as a result of the ED. Outside the utilities sector respondents, respondents agreeing with the ED's proposals and those who did not support them were evenly balanced. The utilities sector, particularly from North America, was strongly supportive of the ED.

The staff were not satisfied that they had sufficient international consensus to recommend any direction for the Board at this time. They asked the Board to allow them to undertake further research and analysis on the fundamental issue of whether assets and liabilities arising as a result of the actions of a regulator exist in accordance with the current IASB Framework and consistently with other IFRSs.

While supporting the staff's desire to explore further the issues identified in the comment letters, several Board members were concerned that the results of that analysis would not lead them to come to a different conclusion on the fundamental issue identified by the staff.

At least one Board Member noted that in his discussions with national standard-setters and other constituents, it was obvious that the ED had not convinced those constituents. The IASB's model was not well understood and had not been accepted. Another Board member remained concerned about the inference that the ED was an 'industry-specific', almost jurisdiction-specific proposal. He was opposed to such standards and would seek to have the IFRS apply generally (that is, look at the fundamental issue broadly).

Another Board Member noted that having opened the debate, the IASB had to act in some way, or risk a lack of comparability in the future. He noted that some aspects of FAS 71 (the US standard) are incompatible with IFRSs, and the Board needed to make that clear in any IFRS or other communication.

The staff noted that they would require at least two months to conduct the additional analysis and consequently redeliberations of the ED could not begin until late Q2 2010.

The Board agreed the staff's request for more time to analyse the technical merits of the fundamental issue identified.

Transition relief for first-time adopters

The Board agreed to remove from the ED 2009/8 project and approve as an Amendment to IFRS 1 the proposal that an entity with operations subject to rate regulation be permitted to elect to use the carrying amount of items of property, plant, and equipment held, or previously held, for use in such operations as their deemed cost at the date of transition to IFRSs. This was exposed in September 2008; comments were received by 23 January 2009; and the Board completed its redeliberations in May 2009. Finalisation of the amendments was postponed with the intention that they be incorporated in the standard on Rate-regulated Activities. The staff was confident that all due process steps with respect to the 'deemed cost' exception had been completed and that the amendment could be issued without further delay. The Amendment would be included in the next omnibus Improvements to IFRS, due to be issued in April 2010.