IASB Chairman and Senior Technical Directors’ reports

Date recorded:

Mr Hoogervorst began his remarks by echoing Mr Prada’s thanks to the DRSC, noting also that Germany continued in its active and constructive support of the IASB.

The Accounting Standards Advisory Forum, which had met three times (twice in person and once by teleconference), had ‘exceeded his expectations.’  The quality of the discussions was very high.  The views were mixed, but this was to be expected, and they helped to identify areas of consensus for the IASB.  He noted that the ASAF had expressed broad support for a ‘behavioural change’ in disclosures, including when and when not to disclose matters.  The IASB was urged to get on with (rather than slow down, for once) standard-setting in this area. 

He noted that there was broad consensus among ASAF for putting leases on balanced sheet.  Unfortunately, there was far less consensus about how this should be done.  IASB re-deliberations had not begun.

EFRAG had presented its ‘Bulletin’ on prudence and its place in the conceptual framework.  There had been broad agreement among ASAF that ‘prudence’ should be discussed, with several important provisos.  These included the absence of bias, no return of ‘hidden reserves’ (‘cookie jars’) and articulating the concept in such a way that it was not contradictory to the principle of neutrality.

Moving to the leases project directly, he noted that a majority of users want leases ‘on balance sheet’, but it was also clear that analysts would probably continue to make their own adjustments and that these often over-estimated the amount of leverage in the balance sheet.

Recent decisions on financial instrument impairment had clarified the threshold between the ‘good book’ and the ‘bad book’ and had also clarified the unit of account in this situation.  In addition, the IASB had stated explicitly that considerations such as loan-to-value and unemployment indicators must be taken into account when assessing impairment.  It was not appropriate to rely solely on delinquency.  He noted that the FASB continued to pursue a single measurement method, but was looking further at the timing of recognition.  It was obvious from feedback received so far that respondents are unhappy about recognising 100% lifetime losses on Day 1

Revenue recognition: a couple of ‘hiccups’ had arisen as a result of drafting, but Mr Hoogervorst was confident (adamant) that re-deliberations would be complete by the October IASB meetings.

Comments on the insurance contracts ED close in late October and it was clear that the IASB would not be able to please everyone in all countries.  The IASB was committed to finding an acceptable solution.

Suzanne Lloyd addressed aspects of IFRS 9, in particular removing the mandatory effective date of the Standard and the amendments related to the presentation of changes in the value of ‘own debt.’  In addition, she noted and explained the rationale for allowing the amendments to corporate hedge accounting.  She gave a high-level presentation on why the IASB’s revisions should assist preparers to report and users understand a company’s risk management policies and how the hedging strategy helps to mitigate risk.

Ms Lloyd noted that work on portfolio hedging continues.

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