IASB issued IFRS 9 Financial Instruments

The International Accounting Standards Board (IASB) issued today a new International Financial Reporting Standard (IFRS) on the classification and measurement of financial assets. Publication of the IFRS represents the completion of the first part of a three-part project to replace IAS 39Financial Instruments: Recognition and Measurement with a new standard - IFRS 9Financial Instruments. Proposals addressing the second part, the impairment methodology for financial assets were published for public comment at the beginning of November, while proposals on the third part, on hedge accounting, continue to be developed.

he new standard enhances the ability of investors and other users of financial information to understand the accounting of financial assets and reduces complexity – an objective endorsed by the Group of 20 leaders (G20) and other stakeholders internationally. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new standard also requires a single impairment method to be used, replacing the many different impairment methods in IAS 39. Thus IFRS 9 improves comparability and makes financial statements easier to understand for investors and other users.

The IASB has received broad support for its approach. This became evident during the unprecedented global scale of consultation and outreach activity it undertook in order to refine proposals contained within the exposure draft published in July 2009. Round table discussions were held in Asia, Europe and the United States. Interactive webcasts, each attracting thousands of registered participants, have been held, often on a weekly basis. In addition, more than a hundred meetings have been held with interested parties around the world during the past four months.

The views expressed to the IASB during its consultations resulted in the proposals being modified to address concerns raised and to improve the standard. For example, IFRS 9 requires the business model of an entity to be assessed first to avoid the need to consider the contractual cash flow characteristics of every individual asset. It requires reclassification of assets if the business model of an entity changes. The IASB changed the accounting that was proposed for structured credit-linked investments and for purchases of distressed debt. The IASB also addressed concerns expressed about the problems created by the mismatch in timings between the mandatory effective date of IFRS 9 and the likely effective date of a new standard on insurance contracts.

Furthermore, in response to suggestions made by some respondents, the IASB decided not to finalise requirements for financial liabilities in IFRS 9. The IASB has begun the process of giving further consideration to the classification and measurement of financial liabilities and it expects to issue final requirements during 2010.

A feedback statement providing comprehensive details of how the IASB has responded to comments received through the consultation process is available for download by clicking here.

The effective date for mandatory adoption of IFRS 9 Financial Instruments is 1 January 2013. Consistent with requests by the G20 leaders and others, early adoption is permitted for 2009 year-end financial statements.

Commenting on IFRS 9, Sir David Tweedie, Chairman of the IASB, said:

We have delivered on our commitment to the G20 and stakeholders internationally to provide an improved financial instrument standard for the classification and measurement of financial assets for use in 2009. Benefiting from unprecedented levels of consultation with stakeholders around the world, the IASB has made significant changes in its initial proposals to improve the standard, provide enhanced transparency and respond to stakeholder concerns.

IFRS 9 Financial Instruments is available for eIFRS subscribers from today.

Source : www.IASB.org

IASB and FASB reaffirm to improve IFRS and U.S.GAAP and to bring about their convergence

At their joint meeting last week, the International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) reaffirmed their commitment to improve International Financial Reporting Standards (IFRS) and U.S. generally accepted accounting principles (U.S. GAAP) and to bring about their convergence. The Boards also agreed to intensify their efforts to complete the major joint projects described in their 2006 Memorandum of Understanding (MoU), as updated in 2008.

Today, as a further affirmation of that commitment, the IASB and FASB issued a joint statement describing their plans and milestone targets for completing the major MoU projects in 2011. The statement, which is available by clicking here [PDF] also describes the values and principles underpinning the Boards’ collaboration and significant successes achieved thus far.

In affirming their commitment to developing a common set of high quality standards, the Boards took note of the support of the leaders of the Group of 20 nations, the Financial Crisis Advisory Group of the FASB and IASB, and the Monitoring Board of the International Accounting Standards Committee (IASC) Foundation for the joint convergence efforts underway.

Commenting on the update, Sir David Tweedie, chairman of the IASB, said:

The two boards are committed to improving financial reporting internationally by completing the convergence programme described in the Memorandum of Understanding. The statement published today describes a series of important and concrete steps that will help us to achieve our June 2011 targets.

Robert Herz, chairman of the FASB, said:

Our successful joint meeting with the IASB in late October demonstrated that improvements in financial reporting and convergence are very much on track. Our joint efforts have and will continue to produce significant benefits to investors and the economy at large. We will continue our dual objectives of working toward global convergence while addressing reporting issues of critical importance to U.S. investors and financial markets.

In the interest of timely and continued progress, the two Boards also committed to monthly joint meetings and to provide transparency and accountability by providing quarterly updates on their progress on convergence projects.

The IASB and the FASB will hold their next joint meeting via videoconference later this month.

The Trustees of the IASC Foundation and the Trustees of the FAF also issued a statement of support today available by clicking here [PDF].

Source : IASB.org