In summary, we believe the tentative agenda decision wording does not provide sufficient clarity and that additional interpretive guidance is needed. We believe there are three important interpretative issues that need to be addressed:

• (i) how to apply the effective interest rate to debt instruments with a market-based reset;
• (ii) when should an entity apply AG7 compared to AG8; and
• (iii) for inflation linked debt, is it possible to analogise with IAS 29 in the case when an entity is not applying that standard.

Use of IFRSs in the United States The support that you've shown for the implementation of interactive data reporting not only in the United States but around the world has been matched by your consistent support for the international convergence of accounting standards, in particular US GAAP and IFRS. You have been supportive of our decision to eliminate the reconciliation to US GAAP for financial statements prepared using IFRS, and you have offered helpful insights on our Concept Release on whether, and under what circumstances, US issuers should be allowed to prepare their financial statements using IFRS. That's a vitally important topic the Commission is scheduled to take up in the form of a proposed rulemaking later this summer.

Oil and gas reserve accounting and disclosure Early this summer, we also expect to propose amendments to our oil and gas reserve accounting and disclosure requirements, to reflect technological changes in the substantiation of proven reserves.

A list of potential key issues to discuss includes the following:

• Should IFRS and US GAAP ultimately converge?
• If so, how?
• If so, when?
• If so, for whom? Public companies, 'publicly accountable entities', private companies, not-for-profits?
• If so, how will IFRS be interpreted across borders? What role will the SEC, PCAOB, and the international audit firms have in interpreting IFRS? Do the interpretations have to be the same across borders?
• How would we prepare the US for the cultural shift to IFRS? Can the US cope with significantly less implementation guidance?
• How do we assure constituents that their views will be heard and their ongoing needs will be met by an international standard setter?
• Once converged, should there be only one standard setter?
• What is the future role of the FASB?
• Would US GAAP go away? What happens to the SEC guidance on financial reporting?
• What are the implications for XBRL and the US GAAP Codification?
• How would we mobilize the educational community to begin teaching IFRS?
• How and when will the CPA exam change?
• What are the banking and other regulatory issues that need to be addressed? Do US tax policies and other federal or state laws that interact with US GAAP need to be amended?
• What other major issues should be considered?
• What are the next steps in the process?

This EITF Snapshot covers six issues discussed by the EITF at the meeting:

• Issue 07-5 Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock – consensus reached
• Issue 08-1 Revenue Recognition for a Single Unit of Accounting – no decision reached
• Issue 08-2 Lessor Revenue Recognition for Maintenance Services – recommended for removal from the EITF's agenda.
• Issue 08-3 Accounting by Lessees for Maintenance Deposits Under Lease Arrangements – consensus reached
• Issue 08-4 Transition Guidance for Conforming Changes to Issue No. 98-5 – consensus reached
• Issue 08-5 Issuer's Accounting for Liabilities Measured at Fair Value With a Third-Party Guarantee – consensus for exposure

Deloitte responds to European Commission audit liability recommendations:

Deloitte Touche Tohmatsu commends the European Commission (EC) for its intensive consideration of the complex issue of limiting civil liability for statutory auditors and audit firms. According to the Commission's statement, the recommendation aims to encourage new entrants into the audit market and to protect European capital markets by ensuring that audit firms remain viable in an environment where there is an increasing trend towards litigation and a lack of sufficient insurance cover in the sector.

This recommendation also proposes principles to be followed by member states when adopting the recommendation, including limitations not applying in the case of intentional misconduct on the part of the auditor and a right to fair compensation by damages parties.

Deloitte believes the European Commission gave very careful consideration to issuing this recommendation, and it will help achieve the Commission's goals and objectives.

Among other things, the ED proposes to:

• Eliminate (with two exceptions) the ability of an entity to designate individual risks as the hedged risk in a fair value or cash flow hedge. This would mean that the financial statements would reflect information about the risks in the hedged item or transaction whether or not the entity chooses to manage those risks as part of a particular hedging relationship. The two exceptions would be (a) interest rate risk related to the entity's own issued debt (that is, its liability for funds borrowed), if hedged at inception, and (b) foreign currency exchange risk.
• Eliminate the 'shortcut method' by which hedge effectiveness is presumed if the 'critical terms' of the hedging instrument and hedged item are deemed to match.
• Modify the effectiveness threshold necessary for applying hedge accounting from highly effective to reasonably effective at offsetting changes in fair value or variability in cash flows.
• Require an effectiveness evaluation at inception of the hedging relationship but not require ongoing effectiveness testing unless circumstances suggest a hedge is no longer reasonably effective.