• Trustees had been expected to consider the comments received to Phase 1 of the Constitution Review – relating to the proposed Monitoring Group and the size and composition of the IASB. However, the analysis of comments was not yet complete, and discussion was deferred.
• Regarding Phase 2 of the Constitution Review, Trustees agreed to publish a consultation document inviting comment on which issues should be addressed in Phase 2, for a 120-day comment period, without waiting for completion of Phase 1. The detailed notes downloadable above identify some of the issues that will be proposed for inclusion.
• Trustees issued a Press Release (PDF 179k) expressing their unanimous support for the approach that the IASB Announced on 3 October 2008 to accelerate its response to the credit crisis, including suspension of normal due process to eliminate certain differences with US GAAP.
• Trustees approved an update to the IASB Due Process Handbook.
• The report of the IASB Chairman was divided into two main sections: (a) IASB response to the credit crisis and (b) updating of the IASB-FASB Memorandum of Understanding. Response to the credit crisis will include 'very fast-track' amendments on:
  • consolidation,
  • derecognition,
  • financial instruments disclosures, and
  • reclassifications out of fair value through P&L.
• Trustees received a report on the IFRS for Private Entities (SMEs) and expressed strong support for the project.
• Trustees decided that whether the IASB should establish formal cooperative relationships with bodies that set standards other than accounting standard should be an issue in Phase 2 of the Constitution Review, though Trustees' initial reactions were negative.
• Regarding funding, £14 million of funding for 2008 has been raised out of a budget of £16 million. Due to the current global credit crisis, there is a risk of loss of funding to IASCF of approximately £500,000 due to attrition of donors.

Meeting of Representatives of the IASB and EFRAG13 October 2008, London

• Credit Crisis
  • Fair value measurement
  • Disclosures
  • Consolidations
  • Derecognition
• Distinguishing equity from liabilities
• Financial Statement Presentation
  • The IASB/FASB project
  • Update on PAAinE project
• IASC Foundation Trustees meeting
• Update on other PAAinE (Proactive Accounting Activities in Europe) work
  • Pensions
  • Possible new projects
• IASB/FASB Memorandum of Understanding

In addition we are urgently putting changes to our accounting rules to ensure Banks in the EU can avail of the same flexibility that is offered to banks in the US. Namely this will provide the option for individual banks if they want to move assets from their trading books to their banking books. This is a comitology measure which I hope the Parliament will be able to give its agreement as a matter of urgency. In the meantime I would hope that national supervisors would apply these new provisions already so that banks, who wished to, could avail of this new possibility for their third quarter results. In addition there is the IASB's acceptance of the US SEC's clarification of the use of fair value accounting when there is no active market information. This is also highly relevant for banks and should be used for third quarter reporting.

The nine issues the VRG discussed are:

• VRG Issue No. 2008-11: IASB's Expert Advisory Panel White Paper
• VRG Issue No. 2008-12: Fair Value Disclosure
• VRG Issue No. 2008-13: Observable Versus Unobservable Inputs
• VRG Issue No. 2008-14: Fair Value Measurement of Liabilities Under Statement 157
• VRG Issue No. 2008-15: Allocation of In-Use Valuation to Individual Unit of Account
• VRG Issue No. 2008-16: Fair Value of Accounts Receivables, Accounts Payable, and Accrued Liabilities in a Business Combination
• VRG Issue No. 2008-17: Identification and Allocation of Market Participant Synergies
• VRG Issue No. 2008-18: Fair Value of a Noncontrolling Interest and a Previously Held Equity Interest
• VRG Issue No. 2008-19: Impact of Valuing Contingent Liabilities Under FAS 141(R) — Gross Versus Net Analysis

Generally Accepted Accounting Principles require many investments in stocks and bonds to be measured at fair value. Investments carried at cost must be assessed for impairment at the time of reporting and, if determined to be impaired, must be written down to their estimated fair value as at the balance sheet date. Basically, Canadian companies are being asked to make a realistic estimate of the holding's fair value as at the balance sheet date and then clearly explain to investors how that figure was determined. In determining a holding's fair value, companies must estimate the price that market participants would sell for, or buy at, in an active liquid market, if there were one.

In times of financial crisis, it is natural to ask: 'What went wrong?' Some people blame the current crisis on the increased use of fair value accounting for financial instruments. Yes, measuring fair value in turbulent times can be very difficult, but the huge swings in market prices reflect the reality of the marketplace. Do we really want financial statements based on management's guess as to what market prices might be in 'normal' conditions at some point in the future? There is a growing realization that the accounting requirements are not to blame. Fair value accounting tells investors and the public 'the way it is'.

In reaching this common view, the Trustees emphasised that they do not and would not take positions on the specific technical content of IFRSs; the Trustees therefore reaffirmed their commitment to preserving the independence of the IASB's standard-setting process. With more than 100 countries now using IFRSs, the Trustees highlighted the fact that any weakening of the IASB's independence would be likely to reduce transparency, potentially lead to a weakening of standards worldwide, and would ultimately undermine investor confidence at a fragile time for the world's markets.