We comment on financial instruments ED

  • Deloitte Comment Letter Image

15 Sep 2009

Deloitte Touche Tohmatsu has submitted comments on the IASB Exposure Draft Financial Instruments: Classification and Measurement.

The ED is the first part of a three-phase project to replace IAS 39 Financial Instruments: Recognition and Measurement. The other two phases of the IAS 39 project are addressing Impairment and Provisioning and Hedge Accounting. Additionally, the Board's project on Derecognition of Financial Instruments will also result in amendments to IAS 39. The IASB plans to complete the replacement of IAS 39 during 2010, although mandatory application will not be before January 2012. The Classification and Measurement ED proposes that a financial asset or financial liability should be measured at amortised cost if two conditions are met:
  • The instrument has basic loan features
  • The instrument is managed on a contractual yield basis
A financial asset or financial liability that does not meet both conditions would be measured at fair value. You will find more information about the Proposals in the ED Here.

An excerpt from our letter of comment on the ED: Assessing the relative merits of the replacement to IAS 39 in parts clearly limits our ability to evaluate the proposals comprehensively as there are many areas that are yet to be finalised with which the classification and measurement proposals will interact. We therefore look forward to the issue of EDs on the other aspects of this project in order for us to understand and fully assess the replacement to IAS 39 in its entirety....

We support the IASB's approach for a mixed measurement model for both financial assets and financial liabilities. We believe amortised cost is a meaningful measurement attribute for certain financial instruments in certain circumstances when it is accompanied by fair value disclosures. Focusing on whether financial instruments have basic loan features and how the entity manages those instruments is a meaningful approach to determining whether an instrument can be measured at amortised cost. We have specific concerns and recommendations about how to make the amortised cost criteria more relevant and meaningful which are included in the appendix to this letter.

Click to download Our Comment letter (PDF 141k). All past letters comment are Here.


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