We welcome the Board’s effort to improve accounting for financial instruments. We support the Board’s objective of providing financial statement users with more timely and representative information about an entity’s involvement with financial instruments, and we share the Board’s desire to reduce excessive complexity in the accounting for financial instruments. In addition, we support the Board’s steps toward achieving the goal of a single set of high-quality global accounting standards in this important area. In our view, however, the proposed ASU falls short of accomplishing these objectives, and accordingly we do not support the issuance of the proposed ASU as a final standard.

To support well-functioning global capital markets, a single converged financial reporting model for financial instruments for the benefit of financial statements users should be a top priority. We are concerned, therefore, that the FASB and IASB are developing divergent models for how to account for financial instruments. The model in the proposed ASU is significantly different from the classification and measurement model for financial assets in IFRS 9 and from the proposed model for financial liabilities in the IASB’s exposure draft ED/2010/4. In addition, the credit impairment models being proposed by the two boards differ in important respects. Further, the IASB is currently deliberating an approach to hedge accounting that is different from that in the proposed ASU. If the development of a common set of high-quality global accounting standards is to be achieved, the accounting for financial instruments must be a key area of focus. Accordingly, we strongly encourage the two boards to work collaboratively with a common goal of achieving convergence in this important area by agreeing to a single converged high-quality accounting standard for financial instruments.