Notes from IASC Foundation trustees meeting
22 Jun 2005
The Trustees of the IASC Foundation met in Paris on 21 June 2005. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the meeting.
IASC Foundation Trustees' Meeting21 June 2005, Paris Approval of the March 2005 Minutes and Introductory Remarks The March 2005 meeting minutes were approved without any additional comments from the Trustees. Joint Meeting with IASB Consideration of specific topics on IASB's agenda and work programme and convergence IASB Chairman, Sir David Tweedie, opened by noting that the Board's main objective through the end of 2004 was preparing a stable platform of IFRSs for 2005 and starting in 2005 the main objective is global convergence. Stable platform Sir David reviewed the main stable platform projects – the Improvements Project completed in December 2003 and IFRSs 2 through 6 issued in 2004. He noted that in 2005 only one new standard is foreseen: IFRS 7 Financial Instruments: Disclosures. That standard will be effective as of 2007, but earlier application will be allowed. With regard to the European 'IAS 39 carve-out', the IASB last week issued an amendment to IAS 39 Financial Instruments: Recognition and Measurement modifying the fair value option so as to allow the standard to be fully endorsed in Europe. EFRAG has recommended that the European Commission approve the amendment. As for the second 'carved-out' item, hedge accounting for core deposits, the issue is not currently included on the IASB's agenda. Convergence and Work Programme The IASB Chairman explained that the current approach to convergence is not to try to reconcile differences but rather to involve several parties in new projects. He cited several examples:
IASB
Lastly, comments were made that the FASB is also completing work on guidance on how to measure fair value (not when to apply it, only how to measure it once the decision has been taken to use it as a measurement basis) that the IASB may take into consideration. In addition, the IASB is looking at an amendment to IAS 38 Intangible Assets following the publication of and negative reactions in Europe to IFRIC 3 Emission Rights. Additional comments raised Trustees raised the following points:
Conceptual Framework IASB Member James Leisenring made a presentation to the Trustees on conceptual frameworks. He reminded that the objective of financial reporting is to provide information useful information to investors, creditors, and other non-management outsiders. In response to a Trustee's question, he indicated that this information may sometimes differ from management information. Mr. Leisenring highlighted the areas most often the subject of controversy: inability to agree on what should be profit or loss, measurement, timing of recognition, uncontrolled volatility, and display of items in profit or loss. He also illustrated the differences in the definitions of assets, liabilities, income, and expenses under the IASB and FASB Frameworks. Mr. Leisenring explained that the current IASB Framework is a 'balance sheet approach' under which revenue, expenses, gains, and losses are defined by reference to assets and liabilities, as well as the importance placed on the Framework in the IFRS hierarchy. He concluded by discussing why the Framework is essential:
It was explained that the current IASB-FASB Framework project will focus on providing more robust definitions of elements to be recognised in the financial statements and that this project was part of a request for convergence of frameworks around the world. The reactions of the Trustees after the presentation were varied, many requesting clarification on the technical consequences of the views presented. Performance Reporting The aim of the Performance Reporting project is to:
The project is being addressed simultaneously by the IASB and FASB as a result of urgent user demands. Both boards have acknowledged the need to segregate the financing element included in the performance reporting package. The project consists of two distinct phases:
A number of Trustees commented that Segment A proposals may bring about more fundamental changes than expected, in particular what non-sophisticated users perceive as being 'the bottom line' of the income statement. They questioned whether the timing of the project (including the choice to release an Exposure Draft on Segment A) was appropriate due to expected controversy in many parts of the world. It was ultimately concluded that it is the responsibility of the IASB to determine the timetable for this project but that they should be aware of the concerns expressed by the Trustees. Other decisions in Segment A that received no specific comments were:
Approval of the Constitution Review Report Before voting on the Constitution Review Report, the Trustees discussed a proposal by the IASC Foundation Chairman, Paul Volcker, to establish a high-level advisory group that would be consulted during the process of nominating new Trustees and considering renewals. The group would be consultative only and Trustees would take the ultimate decisions regarding appointments. The Trustees were in favour of setting up such an advisory group. It was explained that this proposal would address certain concerns expressed in Europe and add a breadth of views to the selection process. It was contemplated whether the terms of reference for such a group should be formalised for inclusion in the revised Constitution. The Trustees decided unanimously that this should not be done, to allow flexibility. It could be incorporated as an amendment in the future, after assessment of this consultative process. It was noted that nine Trustee positions are up for renewal this year. The revised Constitution was duly voted in with 1 July 2005 as effective date. It was agreed that the three additional Trustees (as required by the revised Constitution) would be appointed at year-end together with those replacements necessary when the existing Trustees' terms ended. A comprehensive summary of the changes to the Constitution may be found in our News Story of 18 June 2005. Also, click here for more information about the Constitution Review. This summary is based on notes taken by observers at the IASCF Trustees meeting and should not be regarded as an official or final summary. |