Date recorded:

Based on the IASB and FASB's decision in June 2010 to amend their convergence workplan, the IASB's derecognition project has been removed from the current priority list to be reconsidered again sometime after June 2011. Instead, the Boards have agreed that their near term focus should be on increasing the level of transparency and comparability with respect to disclosures of transfers of financial assets between IFRS and U.S. GAAP. Additionally, the Board will be performing post implementation reviews of the FASB's recently adopted guidance for derecognition of financial assets within ASU 2009-16 (FAS 166) to help in determining the future direction of the project.

The IASB staff has performed an assessment of the disclosure requirements proposed within ED/2009/3 Derecognition and those within the FASB's new standard to identify any differences and if, and how, they could best be eliminated. After completing that assessment, the IASB staff believes that while differences may exist with respect to geography and that certain transactions may not be disclosed identically because of the differences with respect to the derecognition models, that broadly the disclosures between the FASB's standard and the IASB's ED are similar.

The one notable exception to the above is with respect to servicing assets and servicing liabilities in which the IASB ED does not require specific disclosures because the subsequent accounting for those assets and liabilities is not included within the scope of IAS 39. While the staff believes there may be some usefulness to such disclosures, it recommends that the Board address the disclosures as part of a more comprehensive consideration of the accounting for servicing assets and servicing liabilities. The Board agreed with the staff recommendation that addressing disclosures of servicing assets and servicing liabilities should not be done as part of the near term disclosures project.

The staff also addressed the question of to what extent the proposed disclosures within the derecognition ED would overlap with the proposed disclosures within the pending consolidation standard. With respect to transfers of financial assets to consolidated subsidiaries, the staff does not believe there would be any overlap as a transfer would not have occurred on a consolidated basis and derecognition would not have been achieved. For transfers to nonconsolidated entities, the staff believes there is the potential for overlap; however, this primarily stems from the consolidation disclosures focus on the entity while the derecognition disclosures focus on transactions. As a result, the staff believes that any overlap would still provide useful information regarding an entity's activities and risk exposures and recommends maintaining the proposed disclosures. The Board agreed with the staff recommendation.

The Board then proceeded to discuss the effective date and transition requirements for the derecognition disclosures. The staff proposed an effective date of 1 January 2011. The staff also discussed whether retrospective application or prospective application was more appropriate. The staff believes that retrospective information would provide the most useful information, but given the nature and lifecycle of derecognition transactions, applying retrospective disclosure requirements could be quite costly and difficult to apply. As a result, the staff recommended that the disclosure requirements would only apply to those derecognition transactions entered into subsequent to 1 January 2011. However, entities would not be precluded from applying retrospective application if they felt that it provided more useful information. The Board agreed with the staff recommendations regarding effective date and transition requirements.

The staff will now complete drafting in preparation for a ballot vote on the new requirements. Additionally, the staff mentioned that given the decision to move the reconsideration of derecognition until 2011, the staff would also begin the process of moving the current derecognition requirements within IAS 39 into IFRS 9.

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