• The definition of fair value now includes the notion of a reference market. The transaction price is presumed to be fair value, but in certain instances (when the transaction did not take place in the reference market and the entity would trade in a more advantageous market for the item), the actual transaction price may be rebutted.
• The fair value of a liability must incorporate the entity's own credit standing.
• The Working Draft increases to five the number of levels in the fair value hierarchy. The levels are based on the nature of the inputs used to establish estimated fair value and descend in reliability from Level 1, constituting market inputs that reflect quoted prices for identical assets or liabilities, to Level 5, representing values that are significantly based on entity inputs that are extrapolated or interpolated but that are not corroborated by other market data.
• The Working Draft prohibits the use of blockage adjustments in estimating the fair value of large blocks of financial instruments.

We concur with the proposed amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates (IAS 21) on the basis that the accounting treatment in the consolidated financial statements should not depend either on the currency in which the monetary item is denominated or on which entity within the group transacts with the foreign operation. We express some concern about requiring that the Technical Correction be applied retrospectively.

We believe that the guidance proposed by the Basel Committee on Banking Supervision will be perceived as an additional set of accounting rules applying to the banking industry in order to limit the use of the fair value option. We recognise that on page 1 of the Consultative Document it is stated that the Committee does not consider this proposal to be a set of additional accounting requirements, but we believe that this will be the effect, in practice. We are strongly of the view that the objective of the International Accounting Standards Board (IASB) is to set high quality accounting standards that entities across all industries have an equal opportunity to apply. We believe Banking Supervision has an important but separate and different objective and we support the Committee's work in promoting Prudential Supervision. We are concerned therefore that the proposals in the Consultative Document go beyond addressing the regulatory objective and will hinder the ability of a specific industry to apply an explicit option in the IASB's accounting standards.

• 1. The company must be viewed from the perspective of a current investor in the company's common equity.
• 2. Fair value information is the only information relevant for financial decision making.
• 3. Recognition and disclosure must be determined by the relevance of the information to investment decision making and not based upon measurement reliability alone.
• 4. All economic transactions and events should be completely and accurately recognized as they occur in the financial statements.
• 5. Investors' wealth assessments must determine the materiality threshold.
• 6. Financial reporting must be neutral.
• 7. All changes in net assets must be recorded in a single financial statement, the Statement of Changes in Net Assets Available to Common Shareowners.
• 8. The Statement of Changes in Net Assets Available to Common Shareowners should include timely recognition of all changes in fair values of assets and liabilities.
• 9. The Cash Flow Statement provides information essential to the analysis of a company and should be prepared using the direct method only.
• 10. Changes affecting each of the financial statements must be reported and explained on a disaggregated basis.
• 11. Individual line items should be reported based upon the nature of the items rather than the function for which they are used.
• 12. Disclosures must provide all the additional information investors require to understand the items recognized in the financial statements, their measurement properties, and risk exposures.

We question the need for piecemeal changes to IAS 19 Employee Benefits, a Standard that the IASB acknowledges requires significant revision. We acknowledge the existence of the IASB's Short-term Convergence project, however we believe constituents would be better served in this particular instance by having to deal with these amendments as part of a broader proposal addressing IAS 19 as a whole.

We question the relevance of the distinction between voluntary and involuntary termination benefits and disagree with the proposed change in the point of liability recognition. If, at the time that an entity offers benefits, the entity has committed itself (either legally or constructively) and raised a valid expectation on the part of the employee that it will fulfil its responsibility should the employee accept the offer, a liability has been created. The key issue is whether an employee is required to provide future services in return for the termination benefits (whether voluntary or involuntary), in which case those benefits should be recognised as the services are provided. We agree with the immediate recognition of termination benefits where these are not offered to employees in exchange for the employees' future service.

With the exception of the proposals for restructuring provisions, we do not support the ED, which we see as largely unnecessary. In our view, the majority of the Board's proposals are premature and pre-judge matters that should be discussed in the context of the review of the IASB Framework rather than as an amendment of IAS 37. We think that IAS 37 is operating satisfactorily within the current operating model and environment. In addition, we do not think that the Board's choice of a single measurement attribute is appropriate. As such, we find the majority of the changes proposed in the ED fail to achieve an improvement in financial reporting.