Convergence+Project

Project Due May 5th, 2010

[] Norwalk agreement

[] Convergence update page FASB

[] revenue recog. comment letters

Your task is to update the chief accounting officer of one of the companies who wrote a comment letter to the SEC specifically about the issues raised in the company comment letter found on the third link on the convergence page wiki. A lot has happened between June 2009 and March 2010. Give a concise, clear update on the issues and determine if any progress has been made relative to your company's point of view. Draw in other company's concerns, magazine articles from cfo.com, accounting today, business week, WSJ, etc

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[] loans with no guarantor



Sample Project: Professor Hannon Ac312- Financial Analyst Project Gregory Hayes //Chief Financial Officer & Sr. VP// United Technologies Corporation 1 Financial Plaza Hartford, CT 06101 November 24, 2009 Dear Mr. Gregory Hayes: I have recently joined your team in the Pratt & Whitney Power Systems division. I enjoy work with your staff and being apart of a company that has such a rich history in powering our nation’s freedom and leading change through out all the divisions of UTC. Although, UTC roots are found within our nation; its branches reach across the globe; UTC can boast 186 offices around the world with 60% of revenue driven internationally. [1] Recently, I have had first-hand experience with our international companies. In July Power Systems acquired Turboden, whose Organic Rankine Cycle technology will further our success in renewable energy sector. I worked with many people to prepare Turbonen to report within US GAAP Standards. This took a lot of hard work; nevertheless, Turboden is now in compliance with US GAAP. A company should examine the benefits-to-cost ratio before buying a foreign company because it has a lot of cost associated with the conversion to US GAAP that might overwhelm the benefits. As CFO of United Technologies Corporation, you must come across the dilemma of converting foreign companies financial statements into compliance with US GAAP. So, I have decided to look more into the Business Combinations project; this will make the acquisition run smoother with a lower cost. The FASB and IASB are examining the acquisition method. This will directly affect UTC because it will give more concise guidance on combinations of both domestic and foreign companies and the effect on financial statements. United Technologies Corporation is in the forefront in moving forward in IFRS reporting. I would like to give you a high level understanding about convergence and supporting documents that I have summarized and analyzed in more detail. I believe by doing this you can move through this paper with the power to read up on the points you feel you need a better understanding of. **//(Note: I have inserted hyperlinks through out this document to make it easier to cross-reference supporting documents by//** **//using//** **//CTRL + Click over hyperlinks//****//.)//** In December 2007 the acquisition method came into affect. This was done through FASB Statement No. 141, //Business Combinations// //(Please refer to// //__FASB_Statement___////__N__////__o141__// //)// and No. 160, //Non Controlling Interest in Consolidated Financial Statements.// (Please refer to //__FASB_Statement_No160__// ) In January 2008, the FASB revised //IFRS 3////,// //Business Combinations// (Please refer to //__IFRS_3_Business_Combinations__// //)// and amended //IAS 27////,// //Consolidated and Separate Financial// //Statements// (Please refer to //__IAS_27_Consolidated_and_Separate_Financi__// ). With these changes the FASB declared the Business Combinations project completed in January of 2008. As Stated, UTC has taken an active role in IFRS reporting. They have been spotlighted as a company leading the way in IFRS reporting, showing up in numerous news articles and forms. On December 17, 2007, UTC’s Margret Smyth was invited to sit in a round table and discuss the practical issues surrounding the use of IFRS in the U.S. in recent years and its potential expanded use in the future (Please refer to //__RoundTable_10172007__// ). UTC was also featured on IFRS.com //Case Study: Laying the Groundwork for IFRS// (Please refer to //__IFRScom_laying_groundwork__// ). The effects of IFRS on United Technologies Corporation’s financial statements can be found in our footnotes. Our footnotes have significantly altered in the years showing compliance with IFRS and years that do not (please refer to //__UTC_footnotes__// ). I believe are foot notes will grow a significant amount when the switch to IFRS happens. Also, we should relook at the above FASB Statement No. 160, which discusses more intimately disclosers. After researching this in more detail, I believe the most significant changes to the way that UTC reports on the Financial Statements will be found in the disclosures. IFRS requires a lot more disclosures then US GAAP does. I believe this is due to the fact that there is a lot of room for judgment, and the disclosures are necessary so that there is more clarity in reporting. I think that it is great that UTC is in the forefront of the switch to IFRS but I believe that it will happen later then expected due to the lack of support in other government sanctions (e.g. the IRS). I hope that this can give you an understanding of IFRS Business Combinations Project. UTC most recent slogan is “Leading Change” and I hope that we can continue to do that in financial reporting as well as our continued technological success in building, power and aerospace technology. Regards, **xxxxxxxxxxxxx**

**__FASB Statement No.__** **__141__****__,__** **__Business Combinations__** FASB Statement No. 141, Business Combinations is over 350 pages so I will give you a brief overview of the statement. This statement sets the guidelines for a company who has acquired a business. It defines an acquirer as the entity that obtains control of one or more business. The acquisition date being the date the control is moved over, and should be reported in fair value. This statement requires the acquisition method (purchase method) be used for business combinations. Also, requires that intangible assets and goodwill be recognized separately. For “//Recognizing and// //Measuring// //the Identifiable Assets Acquired, and Liabilities Assumed, and Any Noncontrolling// //I////n////t////e////res////t in the// //Acquiree//” it talks about how one should recognize the assets acquired, the liabilities assumed, and any noncontrolling interest at the acquisition date at the fair value. One major change is that the cost incurred within the acquisition should be reported separately from the acquisition. One should use step acquisition which means that the acquisition is completed in stages. At each stage on should identify cost of investment, fair value of net assets, and goodwill. In FASB Statement No. 141, Business Combinations, it talks about the requirement for the acquirer to recognize assets and liabilities arising from contractual contingencies at the point of the acquisition and like always at fair value. It also talks about how to tell the difference between a normal liability and contingencies. Goodwill should be recognized at the acquisition date and measured at residual value. Contingent consideration arrangements give the acquirer the right to return of previously transferred considerations as long as the requirements have been met. A bargain purchase is a business combination in which the total Acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in e acquiree,” With that said this means that the acquirer must report the earnings as a gain. This statement directly correlates and supports IFRS 3 which I discuss in more detail below. [2] **FASB Statement No. 141, Business Combinations Revised 2007 can be found at** [|**__http://www.fasb.or__**][|**__g__**][|**__/pdf/fas141r.pdf__**] **__Ho__****__m__****__e__**

**__FASB Statement__** **__No. 160__** FASB Statement No. 160 discusses noncontrolling interest which is the “portion of equity in a subsidiary not attributable, directly or indirectly, to a parent.” The statement effectively alters or clarifies five parts. The first describes the classification of ownership interest which states that it should be reported in equity but separate from the acquirer’s equity. Consolidated net income should be clearly identifiable within the income statement. If there are any changes in the acquirer’s ownership it should be reported as changes in equity. Any gain or loss on a deconsolidation of the aquiree should be measured at fair value. One must disclose information that shows what interest is of the acquirer and which is noncontrolling. This statement correlates with the amendments to IAS 27, //Consolidated and Separate Financial Statements.// We will talk in more detail about that in the IAS 27 section bellow//.// [3] **FASB Statement No. 160, Non Controlling Interest in Consolidated Financial Statements can be found at****:** [|**__http://www.fasb.org/pdf/f__**][|**__a__**][|**__s160.pdf__**] **.** **__Home__**

**__IFRS__** **0****__3 Business Combinations__** IFRS 03 deals with 3 new core principles which are: “ (a) recognises and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; (b) recognises and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination.” [4] This basically means that an acquirer should report the asset and liabilities that they got in the acquisition at fair value at the acquisition date. They should also show a significant and detail discloser so that an investor can see what the effects of the acquisition made. You can do this by using the acquisition method, which is described in detail in FASB 141. Both IFRS 03 and FASB Statement No 141 both use the acquisition method rather then pooling-of-interests method; however, FASB 141 measures noncontrolling interest fair value at the acquisition date and IFRS gives you a choice between that and proportionate interest in the identifiable net assets. **IFRS 03****,** **Business Combinations** **can be found at****:** [|**__http://www.iasb.org/NR/rdonlyres/50580D48-A443-4347-BFDA-558B520C20E0/0/IFRS3.pdf__**] **.** **__Home__**

**__IAS 27 Consolidated and Separate Financial Statements__** This Statement, together with the FASB Statement No. 160, “provide similar guidance for accounting for changes in a parent’s ownership interest and deconsolidation of a subsidiary and similar disclosure requirements. Thus, the issuance of this Statement eliminates a source of noncomparable financial reporting.” IAS 27 specifies: “(a) the circumstances in which an entity must consolidate the financial statements of another entity (being a subsidiary); (b) the accounting for changes in the level of ownership interest in a subsidiary; (c) the accounting for the loss of control of a subsidiary; and (d) the information that an entity must disclose to enable users of the financial statements to evaluate the nature of the relationship between the entity and its subsidiaries.” A company should group (consolidate)similar transactions and events with the same accounting policies.Noncontrolling interestsfalls under equity, but should be separatefrom the acquire.Finally a company should make clear in their disclosers the difference in the acquirer and the acquiree. [5] **IAS 27****,** **Consolidated and Separate Financial Statements can** **be found at****:** [|**__http://www.iasplus.com/standard/ias27.htm__**] **__Home__**

**__United States__** **__SEC__** **__Round Table (__****__December 17, 2007__****__):__** **__P__****__ractical issues surrounding the use of IFRS in the__** **__U.S.__** **__in recent years and its potential expanded use in the future__** Margaret Smyth, United Technologies Corporation’s Vice President and Controller,talked about UTC commitment to switching over to IFRS. The way UTC is coming about it is by seeing how other large corporations have done it and figuring out the best possible way to do so. The decision to move into IFRS reporting was first made by all of the senior leaders of United Technologies, the presidents of our six businesses, as well as our CEO and president. Then, theCFOs and the controllers group; finally, it went to an audit committee that gave their blessing. There is a project team at the Gold Buildingwith each member representing a business unit. Ms. Smyth says she hopes that UTC will be in complete compliance with IFRS in 2010. Some issues we might face is LIFO accounting that some of our business units use this will not be in compliance with IFRS, and will need to give the IRS a check for the switch. She believes that if we can get tax reporting inline with IFRS it will be an incentiveto us to go ahead with it because of the cost benefits. She also talks about compliance with XBRL and the thought that it is aligned with US GAAP and not IFRS. [6] **You can read the full transcript at:** [|**__http://www.sec.gov/spotlight/ifrsroadmap/ifrsround121707-transcript.pdf__**] **__Home__**

**__IFRS.com__** **//__Case Study: Laying the Groundwork for IFRS__//** //(03/30/2009)// Matthew Bitney, a manager in UTC’s IFRS reporting department, breaks down IFRS coming to the United States by the positives and the negatives. The positives are that the UTC is not the first company to switch to IFRS so there is a lot of help and guidance on the transition. He also believes that it will open new capital markets. It will make it easier for companies to make acquisitions with other countries and make it so that UTC can have a better understanding of what they are getting into before the buy. He also talks about the moving the financial records to US GAAP, which we did with Turboden. However, he sees issues with comparability, "IFRS leaves a lot of room for preparers to use their judgment in the way they report financial results.”Although, UTC has no debt covenantshe warns others about that and believes it need to be revised. Also, he brings up the point Ms. Smyth did in the round table discussion, the SEC at this time is not liaised with the IRS and other government regulatory agencies; this may cause serious repercussions in the future. He is also concerned on cost savings, but believes with time the cost associated with the switch will go down. He also points at the increase of footnotes with may raise 100-150 percent [7] **You can read this Case Study** **at:** [|**__http://www.ifrs.com/overview/Financial_Management/groundwork.html__**] **__Home__**

**__United Technologies Corporation’s__** **__Footnotes__** I have looked at the footnotes for UTC’s (ticker: UTX) 10-Q 2nd quarter (10-Q2) and 10-Q 3rd quarter (10-Q3). In Note 1: Acquisitions, Dispositions, Goodwill and Other Intangible Assets, section Business Acquisitions UTC announces that it has begun to use FASB 141 Revised. It talks about the fact that it will still be measuring at fair value with the acquisition method and discusses the changesthat will come along with the switch. //“////Acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense.////” (10-Q2, pg 7)// UTC releases that the first 6 months showed $197 million in investments in business. This directly relates to the disclosers required in FASB 141 R and IFRS 03. They have also gone back and if they see an acquisition that is subject to FASB 141 R they made sure that the assets and liabilities are accounted and assumed by the acquisition date. They also note that there were no significant acquisitions that were effected by FASB 141 R in the first half of 2009. UTC then looks at the major acquisitions of Q2. Otis, which had 52M gain on remeasurement to fair value which is a direct result of IFRS 141 R. The merge between Carrier and Watsco which Carrier received 3M in common stock, 40% noncontrolling interest. It does not appear that this was affected by the changes. In the 10-Q3, they begin again with the discloser that they are adhering to the FASB 141 R. They repeat much of what we saw in the 10-Q2 about the changes this entails. I expect that this format will also be in the year end foot notes. One change in the footnotes is that Carrier recognized a gain of about 57M in Q3 “ asa result of its contribution of the majority of its U.S.residential sales and distribution businesses in this new venture.” //(10-Q3, pg 7)// **You can** **find UTC 2****nd** **Quarter 10-Q** **and 3****rd** **Quarter 10-Q** **at:** [|**__http://www.sec.gov/cgi-bin/browse-edgar?company=&match=&CIK=utx&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany__**] **__Home__** Page 2

[1] [|__http://www.sec.gov/spotlight/ifrsroadmap/ifrsround121707-transcript.pdf__], PG 0017, line 3 [2] FASB, [|__http://www.fasb.org/pdf/fas141r.pdf__] [3] FASB, [|__http://www.fasb.org/summary/stsum160.shtml__] [4] IASB, [|__http://www.iasb.org/NR/rdonlyres/50580D48-A443-4347-BFDA-558B520C20E0/0/IFRS3.pdf__] [5] International Accounting Standards Board, [|__http://www.iasb.org/NR/rdonlyres/51A969A8-CC91-4C2C-97D7-BF6ACD8466DA/0/IAS27.pdf__]. [6] SEC, [|__http://www.sec.gov/spotlight/ifrsroadm__][|__a__][|__p/ifrsround121707-transcript.pdf__]. [7] IFRS.com, [|__http://www.ifrs.com/overview/Financial_Managemen__][|__t__][|__/groundwork.html__].

Project Writer's voice. Write a brief report to the CFO of the company explaining the history and background of convergence, the current project status on your focus point, and the present position of the IASB and the FASB. Write about the implications to your company if the final decision is swayed towards the IASB psoition and if it moves more towards the FASB position. Note: the company you chose should be a very large international company


 * ||  || **IASB** UpdateFrom the International Accounting Standards Board || [[image:http://eifrs.iasb.org/eifrs/static/images/hexagon.gif width="97" height="99" caption="IASB Logo"]] ||
 * March 2010 ||
 * ||  || **Welcome to IASB Update**
 * ||  || **Welcome to IASB Update**

This IASB Update is a staff summary of the tentative decisions reached by the Board at a public meeting. As a project progresses, the Board can, and sometimes does, modify its earlier tentative decisions. Tentative decisions do not change existing requirements until those decisions are incorporated in a new or amended standard.

The International Accounting Standards Board met in London on 15-24 March 2010. The US Financial Accounting Standards Board (FASB) joined the IASB for some sessions. The boards discussed:


 * **[|Annual improvements]**
 * **[|Consolidation]**
 * **[|Derecognition]**
 * **[|Fair value measurement]**
 * **[|Financial instruments: classification and measurement]**
 * **[|Financial instruments: updates]**
 * **[|IFRIC update]**
 * **[|Income taxes]**
 * **[|Insurance contracts]**
 * **[|Joint arrangements]**
 * **[|Leases]**
 * **[|Liabilities - IFRS to replace IAS 37]**
 * **[|Revenue recognition]**
 * **[|SAC Update]** || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  || **Contact us**

30 Cannon Street London EC4M 6XH United Kingdom
 * International Accounting**
 * Standards Board**

Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: **iasb@iasb.org** Website: **www.iasb.org** ||
 * **Future board meetings**

The IASB meets at least once a month for up to five days. The next Board meetings in 2010 are:


 * 19 - 23 April**
 * 17 - 21 May**

To see all Board meetings for 2010, **click here**. ||
 * **Archive of IASB Update Newsletter**

**Click here** for archived copies of past issues of IASB Update on the IASB website. ||
 * **Podcast summaries**

To listen to a short Board meeting audio summary (podcast)or previous Board meetings, **click here**. ||  || The Board discussed eight of the proposed //Improvements to IFRSs// from the exposure draft published in August 2009. On the basis of the comments that the Board received from respondents and the recommendations of the IFRIC, the Board tentatively decided to finalise six of the improvements. The amendment clarifies that if a first-time adopter changes its accounting policies or its use of the exemptions in IFRS 1 after it has published an interim financial report in accordance with IAS 34//Interim Financial Reporting// for part of the period covered by its first IFRS financial statements, it will be required to explain those changes and update the reconciliations to IFRS from previous GAAP of its equity and total comprehensive income. The amendment clarifies the accounting for replaced and un-replaced share-based payments in connection with a business combination. The Board also tentatively decided how the transition provisions apply and to reflect in the Basis for Conclusions the rationale for the distinction in accounting for replaced share-based payment transactions of the acquiree depending on whether they expire or not as a result of the business combination. The amendment states that an entity shall present the changes in components of equity either in the statement of changes in equity or in the notes to the financial statements. The Board also tentatively decided to retain the current wording of paragraph 107 of IAS 1 - subject to minor edits - to emphasise that dividends recognised as distributions need be disclosed separately. The Board conditionally decided to finalise the amendment to enhance consistency with the terminology changes made in the forthcoming conceptual framework that will replace the Framework. This tentative decision is subject to the relevant chapters of the forthcoming conceptual framework being issued before finalisation and issue of //Improvements to IFRSs//. The amendment clarifies that the consequential amendments made to IAS 21, IAS 28 and IAS 31 as a result of the 2008 amendment of IAS 27 require prospective application. The Board tentatively decided to clarify that the fair value of awards in paragraph AG2(a) reflects, for example, the amount of discounts or incentives that would otherwise be offered to customers who have not earned award credits from an initial sale. In addition, the Board amended the Illustrative Examples to extend the examples to the possible redemption in goods rather than in cash only. The Board considered the illustrative examples relating to the proposed amendment for IFRS 3//Business Combinations - Measurement of non-controlling interests// and asked the staff to revise these in the light of some concerns that had been raised. The Board discussed a revision to the proposed IFRS 1 amendment relating to the extension of the 'deemed cost' exemption in paragraph D8 of IFRS 1. At its meeting in February 2010, the Board decided to finalise the original amendment that extends the 'deemed cost' exemption to event-driven revaluations that occurred during the period covered by the entity's first IFRS financial statements. The amendment also states that entities that had previously applied IFRS 1 could apply the amendment retrospectively in the first annual period after the amendment is effective. However, some entities that had the type of event-driven revaluations described in the amendment adopted IFRS before IFRS 1 was issued. At this meeting, the Board tentatively decided to extend the proposed amendment to paragraph D8 of IFRS 1 to be available for such entities. The Board also tentatively decided to remove from the Annual Improvements process, without finalisation, two proposed amendments that had been included in the Improvements to IFRSs exposure draft in August 2009: Go to the project page on the IASB website [|**Go to the top of this page**]  The Board discussed consolidations in three separate sessions, all of which were held jointly with the FASB. The IASB and the FASB continued to deliberate the control model being developed for the purposes of determining when one entity should consolidate another, and discussed the following topics: The boards tentatively decided:
 * 
 * IFRS 1** //First-time Adoption of International Financial Reporting Standards// **- Accounting policy changes in the year of adoption**
 * IFRS 3** //Business Combinations// **- Un-replaced and voluntarily replaced share-based payment transactions**
 * IAS 1** //Presentation of Financial Statements// **- Clarification of statement of changes in equity**
 * IAS 8** //Accounting Policies, Changes in Accounting Estimates and Errors// **- Change in terminology to the qualitative characteristics**
 * IAS 27** //Consolidated and Separate Financial Statements// **- Transition requirements for amendments made as a result of IAS 27 (as amended in 2008) to IAS 21, IAS 28 and IAS 31**
 * IFRIC 13** //Customer Loyalty Programmes// **- Fair value of award credits**
 * Review of illustrative examples to previously recommended proposed amendment**
 * Revision to proposed improvement to IFRS 1**
 * Proposed amendments recommended for removal, without finalisation, from Annual Improvements**
 * IFRS 5 //Non-current Assets Held for Sale and Discontinued Operations// - Application of IFRS 5 to loss of significant influence over an associate or loss of joint control over a jointly controlled entity. Following the Board's February 2010 tentative decisions relating to the//Joint Arrangements// project and the definition of 'significant economic events', the Board tentatively decided to bring the issue back as a sweep issue at a future meeting.
 * IAS 40 //Investment Property// - Change from fair value model to cost model. The Board asked the IFRIC to reconsider this issue as part of the next //Annual Improvements// cycle in light of the comments received.
 * The** //control// **model**
 * When assessing control of an entity controlled by voting rights when are a reporting entity’s voting rights sufficient to give it the ability to direct the activities of the entity
 * How to determine whether a decision maker is an agent or a principal.
 * Whether the involvement and interests of related parties should be considered to be those of the reporting entity.
 * The description of a structured entity.
 * A reporting entity has the power to direct the activities of another entity when it has the current ability to direct the activities of the entity that significantly affect the returns.
 * The reporting entity can have that current ability to direct the activities by different means:
 * By having the contractual ability to direct the activities, which can arise from having:
 * 1) More than half of the voting rights in an entity controlled by voting rights
 * 2) Contractual rights within other contractual arrangements that related to the substantive activities of the entity
 * 3) A combination of contractual rights within other contractual arrangements and holding voting rights in the entity.
 * By holding less than half of the voting rights in an entity considering relevant facts and circumstances.

The FASB tentatively decided that the guidance for variable interest entities in Codification Topic 810 (specific to US GAAP), except for the implementation guidance, would be replaced by the control principles established within this project with the expectation that the guidance established in this project will produce consolidation results consistent with those reached under the Variable Interest Entity subsections of Topic 810. The boards tentatively decided that:
 * The assessment of whether a reporting entity has the current ability to direct the activities of an entity includes an assessment of both the reporting entity's rights (and whether they are sufficient to give the reporting entity power), and whether the rights held by other parties could prevent the reporting entity from having the ability to direct.
 * In situations in which a reporting entity does not have the contractual ability to direct the activities (eg when it holds less than half of the voting rights in an entity), a reporting entity may need to rely on other indicators of power to provide evidence of having the ability to direct, such as whether it can obtain additional voting rights from holding potential voting rights or whether the entity's operations are dependent on the reporting entity. In some situations, considering the size of the reporting entity's holding of voting rights relative to the size and dispersion of holds of other vote holders, together with voting patterns at previous shareholders meetings, could provide sufficient evidence of having the ability to direct.
 * Principal-Agency relationship**
 * 1) when assessing whether a decision-maker is an agent or a principal, the assessment should be made on the basis of the overall relationship between the decision-maker, the entity being managed and the other interest holders, and should consider all of the following factors:
 * 2) Scope of decision-making authority
 * 3) Rights held by other parties
 * 4) Remunerations of the decision-maker
 * 5) The decision-maker's exposure to variability of returns because of other interest that it holds in the entity.
 * 6) when assessing control, the involvement and interests of a related party should be considered to be those of the reporting entity when the nature of the reporting entity's relationship with that related party is such that the related party is acting on behalf of the reporting entity. The boards tentatively agreed that this would also be the case where those that direct the activities of the reporting entity also have the ability to direct another entity to act on behalf of the reporting entity. The boards also tentatively decided that the final standard will include a list of potential related parties. The boards tentatively agreed to include guidance in the final standard that is similar to that in ASC Paragraph 810-10-25-44 to address situations in which a reporting entity, together with its related parties, as a group, meets the control requirements.
 * 7) a description of a structured entity should be included in the next due process document. That description would incorporate some of the factors that describe a //variable interest entity// in US GAAP (ASC Topic 810-10, as amended by FASB Statement No.167), but the description would not include all of the current guidance that is in Topic 810-10.

The boards discussed a reporting entity's disclosures for subsidiaries. The boards tentatively decided that, subject to wording changes, as a general disclosure principle, a reporting entity should disclose information that help users of financial statements to understand: The boards also tentatively decided that a reporting entity could provide the disclosures on an aggregated basis, unless separate disclosure would provide more decision-useful information. The final disclosure requirements will contain application guidance on how the information could be aggregated. The boards tentatively decided that, to comply with the general disclosure principle, a reporting entity should disclose: The boards asked the staff to conduct further research on disclosures relating to: The boards discussed reputational risk in the context of requiring disclosures for implicit obligations of support that a reporting entity may have with another entity. The boards tentatively decided to require disclosures regarding the provision of support to another entity when there was no contractual or constructive obligation to do so and whether it has any current intentions to provide support or other assistance in the future. The boards will continue to deliberate disclosures for consolidated and unconsolidated entities at the April 2010 joint board meeting. Go to the project page on the IASB website [|**Go to the top of this page**]  At this meeting, the Board continued its discussions of the new derecognition approach for financial assets. The Board also discussed the feedback received on the disclosures proposed in the//Derecognition// Exposure Draft. At this meeting, the Board tentatively decided to make an exception to the derecognition approach to require that a sale of a financial asset that is accompanied by an agreement that entitles and obligates the seller to repurchase the same, or substantially the same, asset before maturity of the asset, should be accounted for as a secured borrowing. The Board tentatively decided that for a financial asset to meet the 'substantially the same asset' requirement, it must have all of the following characteristics:
 * Disclosures**
 * 1) the composition (and changes in the composition) of the group;
 * 2) the effect of legal structures within the group, and changes to those structures, on the reporting entity's ability to access and use assets and resources of consolidated entities;
 * 3) the nature of, and changes in, the risks associated with the reporting entity's involvement with structured entities.
 * 1) all significant judgements and assumptions in determining whether it controls another entity and any changes in its control assessments that require significant judgement and the reasons for those changes; and
 * 2) the nature of restrictions that are a consequence of assets and liabilities by the parent or its subsidiaries.
 * 1) summarised financial information on subsidiaries;
 * 2) the interest that the non-controlling interests have in the group; and
 * 3) a reporting entity's risk exposure from its involvement with subsidiaries.
 * Sale and repurchase agreements and similar transactions**
 * the same primary obligor (except for debt guaranteed by a sovereign government, central bank, government-sponsored enterprise or agency thereof, in which case the guarantor and the terms of the guarantee must be the same);
 * identical form and type so as to provide the same risks and rights;
 * the same maturity (or in the case of mortgage backed pass-through and pay-through securities, similar remaining weighted-average maturities that result in approximately the same market yield);
 * identical contractual interest rates;
 * similar assets as collateral; and
 * the same aggregate unpaid principal amount or principal amounts within accepted 'good delivery' standards for the type of security involved.

The Board also tentatively decided to provide the following application guidance for the 'same primary obligor' and 'similar assets as collateral' conditions:
 * //The same primary obligor//: the exchange of pools of single-family loans would not meet this criterion, because the mortgages comprising the pool do not have the same primary obligor, and would therefore not be considered substantially the same.
 * //Similar assets as collateral//: mortgage-backed pass-through and pay-through securities must be collateralised by a similar pool of mortgages, such as single-family residential mortgages, to meet this characteristic.

The Board also discussed how the derecognition approach for financial assets would apply to pass-through arrangements, non-recourse loans and SPEs that issue beneficial interests in the 'assets' of the SPE. The Board tentatively decided the following:
 * Pass-through arrangements, non-recourse loans and accounting for assets and liabilities of SPEs**
 * The derecognition approach will not include the pass-through criteria in IAS 39.19 because the approach addresses the issues that the pass-through criteria are designed to address. However, the next due process document will include application guidance on how the derecognition approach addresses the pass-through requirements.
 * The application of the derecognition approach will not necessarily result in special-purpose entities (SPEs) becoming 'empty shells'. The Board concluded that whether an SPE will be empty depends on the nature of the beneficial interests issued (ie whether the beneficial interests entitle the holders of such instruments to the cash flows of an asset or a to portfolio of assets or to an interest in the entity).
 * For non-recourse loans that are effectively pass-through arrangements, the debtor should not recognise the securing asset and nor should it recognise a liability. Rather, the parties involved (creditor and debtor) should only recognise their related interests in the underlying asset, or in parts of the underlying asset. Non-recourse loans are in effect pass-through arrangements if the primary source from which the debtor is expected to obtain cash to pay the principal and interest on the loan is the securing asset. In these arrangements, the debtor effectively promises or agrees to pass the cash flows of the asset to the creditor.

The Board tentatively decided that the next due process document would incorporate the derecognition disclosures, and related objectives, proposed in the ED, with the clarification that for assets that are derecognised and in which the entity has more than one type of continuing involvement, the disclosures should be aggregated. Go to the project page on the IASB website [|**Go to the top of this page**]  The Board tentatively decided to exclude the following IFRSs from the scope of an IFRS on fair value measurement:
 * Disclosures**
 * Scope**
 * IFRS 2 //Share-based Payment//. In some situations, IFRS 2 requires that vesting conditions, other than market conditions, and reload features are not be taken into account when measuring the value of share-based payment transactions. This means that fair value in some contexts in IFRS 2 is actually 'fair value based'. To amend IFRS 2 to distinguish between measures that are fair value and those that are fair-value-based, new measurement guidance would need to be created for the fair-value-based measures. Such measurement guidance might result in an unintended change in practice with regard to measuring the value of share-based payment transactions.
 * IAS 17 //Leases//. Applying the proposed fair value measurement guidance might significantly change classifications of leases and the timing of recognising gains or losses for sale and leaseback transactions. The IASB, jointly with the FASB, is currently reviewing the accounting for lease agreements. Both boards plan to replace IAS 17 within the first half of 2011. If the IASB includes IAS 17 in the scope of an IFRS on fair value measurement, this might require entities to make significant changes to their accounting systems, first for the IFRS on fair value measurements and secondly for the IFRS on lease accounting.

The Board also tentatively decided:
 * in IFRS 3 //Business Combinations//, to retain the term 'fair value' when referring to the measurement of reacquired rights.
 * in IAS 39 //Financial Instruments: Recognition and Measurement//, to retain the term 'fair value' for measuring financial liabilities with a demand feature.
 * in IAS 19 //Employee Benefits//, not to describe the measurement of the reimbursement rights as the present value of the related obligation as a practical expedient for determining fair value.
 * not to exclude the measurement of award credits in IFRIC 13 Customer Loyalty Programmes from the scope of an IFRS on fair value measurement.

The Board tentatively decided that each of the IFRSs that are excluded from the scope of an IFRS on fair value measurement will state the reasons for that decision and why the term 'fair value' was nevertheless retained in that standard. In January 2010, the IASB tentatively decided to address the recognition of day 1 gains or losses separately from the fair value measurement project. Although the issue will not be addressed in the fair value measurement project, that project team will prepare an analysis on the basis of which the IASB will consider amending IAS 39 //Financial Instruments: Recognition and Measurement//. The project team plans to bring this issue to the IASB at a future meeting. No decisions were made on this issue.
 * Recognition of day 1 gains or losses of financial instruments**

The Board deliberated disclosures about fair value measurements jointly with the FASB. The boards tentatively decided: The boards also tentatively decided to require a sensitivity analysis disclosure for all Level 3 fair value measurements unless another standard does not require such a disclosure. The objective of the sensitivity analysis disclosure is to provide users of financial statements with information about measurement uncertainty for Level 3 fair value measurements. That is, the disclosure does not represent a worst-case scenario and is not forward looking. In addition, the boards tentatively decided that the sensitivity analysis disclosure should consider the effect of the correlation between inputs when relevant. The IASB tentatively decided to require entities to disclose information about fair value measurements for financial instruments in an entity's interim financial statements. Go to the project page on the IASB website [|**Go to the top of this page**]  At the February meeting, the Board tentatively decided to retain the existing classification and measurement requirements in IAS 39 for financial liabilities. However, the Board also tentatively decided to propose changes to the fair value option (FVO) in order to address widespread concerns about recognising gains or losses arising from changes in an entity's own credit risk. At this meeting, the Board confirmed the tentative decisions about the FVO, but agreed to describe alternatives for particular aspects of the decisions and ask respondents for feedback. In addition, the Board tentatively decided to propose full retrospective application for the proposals on the FVO. The Board confirmed its previous decision that there will not be a cost exception for any derivative liabilities on investments in unquoted equity instruments. The Board also decided that the transition for such derivative liabilities previously measured at cost should be the same as the requirements in IFRS 9 //Financial Instruments// for any derivative asset on investments that were in unquoted equity instruments previously measured at cost. The Board tentatively decided to carry forward the subsequent measurement requirements in IAS 39 for loan commitment liabilities and financial guarantee contracts. Go to the project page on the IASB website [|**Go to the top of this page**] 
 * Disclosures about fair value measurements**
 * to define 'class' on the basis of the following principles:
 * an entity should determine the appropriate classes of assets and liabilities based on the nature, characteristics and risks of the assets and liabilities, and their classification in the fair value hierarchy
 * a class of assets and liabilities will often require greater disaggregation than the entity's line items in the statement of financial position
 * judgment is needed to determine the appropriate classes of assets and liabilities.
 * not to require an entity to disclose information about the change in the nonperformance risk of a non-financial liability
 * to require an entity to disclose its policy for determining when transfers between levels of the fair value hierarchy are recognised
 * to require an entity to disclose information about fair value measurements only after initial recognition
 * for assets and liabilities that are recognised at fair value at each reporting period, to require an entity to disclose a reconciliation of activity within Level 3 of the fair value hierarchy and information about transfers between Levels 1 and 2. For assets and liabilities reameasured at fair value only in specific circumstances, an entity does not need to disclose this information.
 * to require an entity to disclose fair value information by level in the fair value hierarchy for items that are not measured at fair value in the statement of financial position
 * not to include guidance for assessing the significance of an input or of significant changes in fair value.
 * Fair value option**
 * Cost exception for particular derivative liabilities**
 * Other issues**

The Board discussed the feedback received from the outreach efforts with preparers, auditors, regulators and users of financial statements. The staff also presented a summary of discussions to date from the Expert Advisory Panel. No decisions were made. The Board discussed the feedback received to date from the outreach efforts with users of financial statements. No decisions were made. Go to the project page on the IASB website [|**Go to the top of this page**]
 * Amortised cost and impairment**
 * Hedge accounting**



The Director of Implementation Activities reported on the IFRIC's meeting on 4 and 5 March 2010. Details of the meeting were published in IFRIC Update, available here.

[|**Go to the top of this page**]  The Board discussed possible revisions to the objective and the scope of the income tax project. The Board decided that the objective of the project is to resolve problems in practice under IAS 12, without changing the fundamental approach under IAS 12, and preferably without increasing divergence from US GAAP. The Board also decided that the scope of the project would include the following: In addition, the Board indicated that it would explore the possibility of resolving the issue of the tax effect of dividends by entities, such as real estate investment trusts and co-operative societies. The Board also discussed the issue of deferred tax on remeasurement of investment property at fair value. The Board directed the staff to explore the possibility of an exception for investment property measured using the fair value model under IAS 40, based on the lower of tax consequences of sale or of use. The staff will bring proposals on the above issues to Board meetings starting in the third quarter of 2010. Go to the project page on the IASB website [|**Go to the top of this page**]  The Board discussed Insurance Contracts in six separate sessions, all of which were held jointly with the FASB. The proposed measurement model for insurance contracts includes a residual margin, determined at inception as the difference between (a) the expected premiums and (b) the expected claims and expenses plus a risk adjustment. At this meeting, the boards discussed how the insurer should subsequently release the residual margin to profit or loss. The boards tentatively decided that the insurer should release the residual margin over the coverage period in a systematic way that best reflects the exposure from providing insurance coverage, as follows: The boards also discussed risk adjustments in the proposed measurement of insurance contracts, including a brief analysis of methodologies that could be used to calculate risk adjustments. To support this discussion on risk adjustment, the boards also discussed the role of risk adjustments in option pricing models. The purpose of this discussion was educational. Consequently, no decisions were taken.
 * 1) Uncertain tax positions, but only after the Board completes its current deliberations on IAS 37
 * 2) Deferred tax on remeasurement of investment property at fair value
 * 3) Introduction of the proposals in the ED //Income Tax// on:
 * 4) the introduction of an initial step to consider whether the recovery of an asset or settlement of liability will affect taxable profit
 * 5) the recognition of a deferred tax asset in full and an offsetting valuation allowance to the extent necessary
 * 6) guidance on assessing the need for a valuation allowance
 * 7) guidance on the meaning of substantive enactment
 * 8) the allocation of current and deferred taxes within a group that files a consolidated tax return.
 * Next steps**
 * Measurement**
 * on the basis of passage of time; but
 * if the insurer expects to incur benefits and claims in a pattern that differs significantly from passage of time, the residual margin should be released on the basis of the expected benefits and claims.

The boards will discuss at a future meeting whether the residual margin should accrete interest. The boards discussed acquisition costs for insurance contracts. FASB tentatively affirmed its previous tentative decision that an insurer:
 * Acquisition costs**
 * should recognise all acquisition costs as an expense when incurred; and
 * should not recognise any corresponding amount of the premium as revenue (or income) at inception.

The IASB tentatively decided to exclude from the initial measurement of the residual margin an amount equal to the incremental acquisition costs. The staff will investigate whether that tentative decision is best implemented by: (a) excluding the acquisition costs from the premium to which the contract liability is calibrated; or (b) including the acquisition costs in the contract cash flows at the inception of the contract.

The boards noted that some acquisition costs may be recoverable in some circumstances either from the policyholder or from third parties. The boards asked the staff to consider whether investigating those circumstances would make it easier for the boards to reach a common approach to acquisition costs. The boards tentatively decided to use the current definition of an insurance contract in IFRS 4 Insurance Contracts and the related guidance in Appendix B of IFRS 4 in the exposure draft. Specifically:
 * Definition**
 * that compensation rather than indemnification be used in the definition of an insurance contract in describing the benefit provided to the policyholder;
 * that the guidance in IFRS 4 be used in determining whether insurance risk is significant, subject to matters discussed below.

The boards asked that when the staff bring back the topic of unbundling, they should consider the notion of significant insurance risk in the context of multiple-element contracts. The boards discussed the role of timing risk in defining insurance risk and tentatively decided:
 * to change the factors considered in evaluating the significance of insurance risk from absolute amounts to present values; and
 * to amend the guidance in IFRS 4 to explain that contractual terms that delay timely reimbursement to the policyholder can significantly reduce insurance risk, so that some contracts containing such terms might not meet the definition of an insurance contract.

The boards also discussed how to assess possible outcomes when determining whether insurance risk exists:
 * the IASB expressed an initial preference for considering the range of possible outcomes.
 * the FASB expressed an initial preference for considering whether there are outcomes in which the present value of the net cash outflows can exceed the present value of the premiums.

The boards will reconsider these initial preferences at a future meeting. The boards tentatively decided that the scope of a standard on insurance contracts will exclude:
 * Scope**
 * warranties issued directly by a manufacturer, dealer or retailer
 * residual value guarantees embedded in a lease
 * residual value guarantees provided by a manufacturer, dealer or retailer
 * employers' assets and liabilities under employee benefit plans and retirement benefit obligations reported by defined benefit retirement plans
 * contingent consideration payable or receivable in a business combination.

The boards expressed an initial preference that the scope of the standard should exclude fixed-fee service contracts, but noted that it would be undesirable to exclude contracts merely because they pay benefits in kind rather than in cash. The boards will consider this initial preference at a future meeting at which they will they discuss whether to include health contracts within the scope of the standard. The boards will also discuss at a future meeting whether financial guarantee contracts should be within the scope of the standard.

Go to the project page on the IASB website [|**Go to the top of this page**]

 The Board continued its deliberations on the proposals in the exposure draft ED 9 //Joint Arrangements//. The Board tentatively decided that Jointly Controlled Entities (JCEs) will transition from proportionate consolidation to the equity method, by aggregating at their respective carrying values the proportionate consolidated assets and liabilities into a single line item. The investment will need to be tested for impairment in accordance to IAS 36 //Impairment of Assets// at the date at which the standard is applied, and at the corresponding comparative periods. The Board also had a preliminary discussion relating to the transitional provisions for JCEs that will have to transition their accounting from the equity method to the accounting for shares of assets and liabilities. The Board reached no decisions on this issue, but, they stated that the objective for these transitional provisions should be for an entity to account for the (shares of) assets and liabilities retrospectively. The Board tentatively decided:
 * Transitional provisions**
 * Disclosures**
 * to align the disclosure objectives for joint arrangements and associates;
 * not to require disclosure of the basis of joint control;
 * to require a list and description of investments in individually-material joint arrangements and associates;
 * to require that an entity discloses commitments relating to its joint arrangements, including its share of commitments incurred jointly with other parties;
 * to require an entity to disclose contingent liabilities relating to its joint arrangements and associates, including its share of contingent liabilities incurred jointly with other parties or investors;
 * not to require summarised financial information for joint operations;
 * that the summarised financial information to be presented for joint ventures and associates should be the same, independently of the measurement method by which the joint venture or associate is being accounted for; and
 * to align the disclosure of information relating to the fact that a joint venture or associate is not accounted for using the equity method, and to provide the fair value of investments in joint ventures and associates for which there are published price quotations.

The Board also had a preliminary discussion relating to the aggregation and level of detail of the summarised financial information required for joint ventures and associates. The Board reached no decisions on this issue. The Board will continue its discussion at future meetings, with the aim of publishing an IFRS in the second quarter of 2010. Go to the project page on the IASB website [|**Go to the top of this page**] 

The Board deliberated leases in three separate sessions, all of which were held jointly with the FASB. The boards tentatively approved a set of disclosure requirements for the forthcoming exposure draft. An entity should disclose the quantitative and qualitative financial information that identifies and explains the amounts recognised in its financial statements arising from lease contracts. That disclosure should include:
 * Lessee disclosure requirements**
 * A general description of the lessee's leasing activities, including disaggregated information about its leasing activities (eg by nature or function).
 * If a lessee applies a simplified form of lease accounting for short-term leases, that fact should be disclosed. The lessee should also disclose the amounts recognised in the financial statements under the simplified model.
 * If a lessee enters into a sale and leaseback transaction, the lessee should disclose that fact, any material terms and conditions related to that transaction, and any gains or losses arising from that transaction, separately from other types of sales of assets
 * A lessee should provide a reconciliation between opening and closing balances for its right-of-use assets and its obligation to pay rentals.
 * A lessee should provide a narrative disclosure of its assumptions and estimates on the amortisation method used, options, contingent rentals, residual value guarantees, and the discount rate used.
 * A lessee should disclose a maturity analysis of the gross obligation to pay rentals showing the remaining contractual maturities and total obligations. The lessee would also have to reconcile the total gross obligation to the total obligation to pay rentals presented in the financial statements. In addition, the lessee would disclose a maturity analysis on an annual basis for the first five years and a lump sum figure for the remaining amounts.
 * A lessee should disclose the quantitative and qualitative financial information that helps users to evaluate the nature and extent of the amount, timing and uncertainty of future cash flows arising from lease contracts, and the way in which the lessee manages those uncertainties.

The boards also tentatively decided not to require the fair value disclosures of a lessee's obligation to pay rentals. The boards tentatively decided:
 * Lessor transitional provisions**
 * To require the lessor to recognise and measure all outstanding leases as of the date of initial application of the proposed new leases requirements, using a simplified retrospective approach. Under that approach, the lessor's receivable would be measured at the present value of the remaining lease payments. The performance obligation should be measured on the same basis as the receivable.
 * The original rate that the lessor is charging the lessee should be used to discount the lease payments.
 * A lessor should reinstate previously derecognised leased assets at depreciated cost, adjusted for impairment and revaluation (IFRS preparers only).
 * For IFRS preparers, transition disclosures should be required in accordance with the guidance in IAS 8 //Accounting Policies, Changes in Accounting Estimates and Errors// without the disclosure of adjusted basic and diluted earnings per share.

The boards tentatively decided that initial measurement of assets and liabilities arising in lease contracts should be determined at the inception of the lease. The boards tentatively decided that: The boards tentatively decided that: For the first three items described above, the boards will ask for comments in an Exposure Draft on leases about whether the lessee's asset, liability and expenses should be presented on the face of the financial statements or in the notes to the financial statements. The boards tentatively decided that the lessor would present the leased asset, the lease receivable, and the performance obligation separately in the statement of financial position totaling to a net lease asset or a net lease liability. The IASB tentatively decided that interest income, lease income, and depreciation expense would be presented separately in the statement of comprehensive income. The FASB tentatively decided that interest income, lease income, and depreciation expense would be presented separately in the statement of comprehensive income totaling to a net lease income or net lease expense. The boards tentatively decided that: The IASB indicated that it would like to reconsider an alternative accounting model for lessors (the 'derecognition approach'). The boards will continue discussion of lessee and lessor accounting at the April 2010 meeting. Go to the project page on the IASB website [|**Go to the top of this page**]
 * Measurement at initial recognition**
 * Lessor accounting for residual value guarantees**
 * The lease receivable recognised by the lessor would include amounts payable under a residual value guarantee, if the amount could be measured reliably.
 * The receivable would be measured using an expected outcome technique; however, not every possible scenario would need to be taken into account when measuring the receivable.
 * The carrying amount of the receivable would be reassessed at each reporting date if any new facts or circumstances indicate that there is a material change in the receivable.
 * Any change in the receivable arising from a change in amounts payable under a residual value guarantee would be treated as an adjustment to the lessor's receivable and performance obligation, consistent with the boards' tentative decision on the accounting for contingent rentals.
 * Residual value guarantees from an unrelated third party should be accounted for in accordance with the accounting for other guarantees.
 * Presentation by Lessees**
 * A lessee would present separately its obligation to pay rentals from other financial liabilities on the face of the statement of financial position.
 * A lessee would present its right-of-use asset with property, plant, and equipment, but separately from other assets that are owned but not leased, on the face of the statement of financial position.
 * Both amortization and interest expense arising in lease contracts would be separated from other amortization expense and other interest expense either on the face of the statement of comprehensive income or in the notes of financial statements.
 * Both cash repayments of amounts borrowed and interest payments arising in lease contracts would be classified as financing activities separately in the statement of cash flows. The boards instructed the staff to consider how total cash rentals paid in the period should be presented or disclosed in the financial statements.
 * Presentation by Lessors**
 * Repayments of the lease receivable would be classified as operating activities in the statement of cash flows.
 * Interest income arising from the lease receivable would be classified as operating activities in the statement of cash flows.
 * Lessor Accounting Model**

 The Board decided to extend to 19 May 2010 the comment period for the exposure draft //Measurement of Liabilities in IAS 37//. The extension is to give respondents more time to understand the recognition requirements of the IFRS before they finalise their comments on the revised measurement proposals. Go to the project page on the IASB website [|**Go to the top of this page**]

 The Board deliberated revenue recognition jointly with the FASB. The boards tentatively approved a revised set of disclosure requirements for the forthcoming exposure draft, including requirements for an entity: The revised disclosure proposal can be found in the observer notes for the meeting. The boards tentatively decided that: (a) the costs of obtaining a contract (eg selling, advertising and marketing costs); (b) costs that relate to satisfied performance obligations in the contract (ie costs relating to goods and services already transferred); and (c) abnormal amounts of wasted labour, material or other fulfilment costs. (a) generate or enhance a resource that the entity will use to satisfy performance obligations in a contract; (b) relate directly to a contract (or anticipated contract); and (c) are probable of recovery under a contract.
 * Disclosure**
 * to disaggregate the amount of revenue recognised, to make clear how that disaggregation relates to amounts presented or disclosed in accordance with other standards;
 * to disclose the amount and expected timing of the satisfaction of its remaining performance obligations in contracts with an original duration of more than one year.
 * Contract costs**
 * an entity should recognise the following costs as expenses when incurred:
 * if the costs incurred in fulfilling a contract do not give rise to an asset eligible for recognition in accordance with other standards (eg inventory; property, plant or equipment; software), an entity should recognise an asset if the costs:
 * an entity should amortise the asset as the goods or services to which the asset relates are transferred to the customer.
 * an entity should test the asset for impairment by comparing its carrying amount to the amount recoverable under the contract (ie the amount of consideration allocated to remaining performance obligations less the direct costs of satisfying those performance obligations).

The IASB tentatively decided to withdraw from IAS 2 //Inventory// the guidance on inventories of a service provider. The boards considered how an entity should account for a contract that includes some components that are within the scope of the revenue standard but that also includes other components that are within the scope of other standards. The boards tentatively decided that if other standards specify how to separate or measure components of a contract, an entity should apply those requirements. Otherwise, the entity should apply the principles of the revenue standard. The boards plan to publish the exposure draft in the second quarter of 2010. They do not plan to discuss any further issues, except any issues arising from (a) consideration of consequential amendments and (b) their review of the draft exposure draft. Go to the project page on the IASB website [|**Go to the top of this page**]
 * Components**
 * Next steps**

 Paul Cherry, the Chairman of the Standards Advisory Council of the International Accounting Standards Board, gave the Board an update via video from Toronto of the SAC meeting held in London in February. A recording of the meeting and a staff summary will be available on the IASB website shortly. [|**Go to the top of this page**] ||  ||   || You are receiving this email because the email nhannon@gmail.com] was subscribed to our email list. To unsubscribe from this list click here. ||
 * Note that the information published in this newsletter originates from various sources and is accurate to the best of our knowledge. However, the International Accounting Standards Board and the International Accounting Standards Committee Foundation does not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise. ||
 * [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||   ||
 * Copyright © IASCF ISSN 1474-2675


 * ||  || **IASB** UpdateFrom the International Accounting Standards Board || [[image:http://eifrs.iasb.org/eifrs/static/images/hexagon.gif width="97" height="99" caption="IASB Logo"]] ||
 * 3 March 2010 ||
 * ||  ||
 * ||  ||

This IASB Update is a staff summary of the tentative decisions reached by the Board at a public meeting. As a project progresses, the Board can, and sometimes does, modify its earlier tentative decisions. Tentative decisions do not change existing requirements until those decisions are incorporated in a new or amended standard.

The International Accounting Standards Board met in London on 3 March 2010, when they discussed:


 * **[|Financial instruments: hedge accounting]**

The IASB also met with the US Financial Accounting Standards Board, who participated via video conference, on 3 March. They discussed:


 * **[|Financial statement presentation]**
 * **[|Fair value measurement]** || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  || **Contact us**

30 Cannon Street London EC4M 6XH United Kingdom
 * International Accounting**
 * Standards Board**

Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: **iasb@iasb.org** Website: **www.iasb.org** ||
 * **Future board meetings**

The IASB meets at least once a month for up to five days. The next meetings in 2010 are:


 * 11 March**
 * 15 - 19 March**
 * 22 - 24 March**

To see all Board meetings for 2010, **click here**. ||
 * **Archive of IASB Update Newsletter**

**Click here** for archived copies of past issues of IASB Update on the IASB website. ||
 * **Podcast summaries**

To listen to past Board meeting audio summaries (podcasts), **click here**. ||  || The Board continued an existing discussion on eligibility for designation as a hedged item in a hedge accounting relationship. The Board tentatively decided that derivatives could be designated as hedged items in several situations, including the situation when the hedged exposure is a combination of a derivative and a non-derivative. The Board also tentatively decided that proportions of nominal amounts and one-sided risks would be eligible for designation as hedged items. Go to the project page on the IASB website [|**Go to the top of this page**]
 * 

Joint meeting
|| The boards addressed the transition and effective date provisions to be included in the exposure draft on financial statement presentation. The boards tentatively decided that the exposure draft should indicate their preference for requiring an entity to adopt the financial statement presentation provisions on a full retrospective basis. Accordingly an entity would apply the financial statement presentation requirements to previously-issued financial statements. This would entail, for each prior period, reclassifications, new groupings and disaggregation of comparative information presented and disclosed as if the new presentation provisions had always been applied. The boards indicated that the effective date for the final standard would provide adequate lead time for reporting entities to prepare for and implement the changes proposed. The exposure draft will include a question soliciting information about the amount of time needed to implement those changes. The boards noted that they plan to consider the effective dates and transition for standards to be completed by 30 June 2011 collectively, and that they may therefore modify their previously-stated preferences in the case of some individual standards. As part of that consideration, the boards will address whether early adoption of the financial statement presentation standard should be permitted. The IASB considered the related implications for IFRS 1 //First-Time Adoption of International Financial Reporting Standards// and tentatively decided that:
 * 
 * IFRS 1 should not provide any exceptions to, or exemptions from, the financial statement presentation standard for first-time adopters of IFRSs.
 * first-time adopters should be permitted to adopt that standard early.

Go to the project page on the IASB website [|**Go to the top of this page**]

 The boards discussed the staff's plan for developing educational material to accompany an IFRS on fair value measurement. This educational material will describe at a high-level the thought process that one might go through to meet the objective of a fair value measurement. The educational material will be published by the IASC Foundation. IASB and FASB staff will liaise during its development.

Go to the project page on the IASB website [|**Go to the top of this page**] ||  ||   || You are receiving this email because the email [nhannon@gmail.com] was subscribed to our email list. To unsubscribe from this list click here. ||
 * Note that the information published in this newsletter originates from various sources and is accurate to the best of our knowledge. However, the International Accounting Standards Board and the International Accounting Standards Committee Foundation does not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise. ||
 * [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||   ||
 * Copyright © IASCF ISSN 1474-2675


 * **IASB** UpdateFrom the International Accounting Standards Board || [[image:http://eifrs.iasb.org/eifrs/static/images/hexagon.gif width="97" height="99" caption="IASB Logo"]] ||
 * 2 and 10 February 2010 ||
 * ||  ||
 * ||  ||
 * ||  ||

This IASB Update is a staff summary of the tentative decisions reached by the Board at a public meeting. As a project progresses, the Board can, and sometimes does, modify its earlier tentative decisions. Tentative decisions do not change existing requirements until those decisions are incorporated in a new or amended standard.

The International Accounting Standards Board met in London on 2 February 2010 for an additional Board meeting. The US Financial Accounting Standards Board (FASB) participated via video conference. The boards discussed:


 * **[|Presentation of other comprehensive income]**
 * **[|Financial instruments with characteristics of equity]**
 * **[|Financial instruments: hedge accounting]**
 * **[|Leases]**

The IASB also met in London on 10 February 2010 for an additional Board meeting. The US FASB participated via video conference for the Insurance contracts and Financial instruments: classification and measurement sessions.


 * **[|Annual improvements (IASB only meeting)]**
 * **[|Financial instruments: classification and measurement]**
 * **[|Insurance contracts]** || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  || **Contact us**

30 Cannon Street London EC4M 6XH United Kingdom
 * International Accounting**
 * Standards Board**

Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: **iasb@iasb.org** Website: **www.iasb.org** ||
 * **Future board meetings**

The IASB meets at least once a month for up to five days. The next Board meetings in 2010 are:


 * 15 - 19 February**
 * 15 - 19 March**

To see all Board meetings for 2010, **click here**. ||
 * **Archive of IASB Update Newsletter**

**Click here** for archived copies of past issues of IASB Update on the IASB website. ||
 * **Podcast summaries**

To listen to a short Board meeting audio summary (podcast), **click here**. ||  || The boards discussed the following issues:
 * 

1. Presentation of the sections of the statement of comprehensive income 2. The timeline for the issuance of an exposure draft.

The boards tentatively decided that: The boards also affirmed that the income tax effect related to each component of other comprehensive income, including reclassification adjustments, may be displayed on the face of the statement together with the component to which they relate. Alternatively, the income tax effect of each component of other comprehensive income may be displayed in the notes to the financial statements. The boards also affirmed their decision not to change the requirements as to which items must be presented in other comprehensive income. Those requirements are in other standards, which the boards are not amending. The FASB affirmed that reclassifications between other comprehensive income and net income should be displayed in the same level of detail as when the items were originally reported. The IASB affirmed that the components of other comprehensive income that are not reclassified upon derecognition should be presented together and that the components of other comprehensive income that are reclassified upon derecognition should be presented together. The boards directed the staff to draft an exposure draft for vote by written ballot. The boards tentatively decided that the exposure draft should be issued simultaneously with the FASB's proposed Update on financial instruments and the IASB's exposure draft on post-employment benefits. A new Presentation of Other Comprehensive Income project page on the website is being finalised and will be available shortly. [|**Go to the top of this page**]
 * Presenting the sections of the statement of comprehensive income**
 * An entity must present a continuous statement showing clearly and separately either profit or loss or net income and other comprehensive income. An entity reporting comprehensive income is permitted to use different titles for these sections on condition that the meaning is clear.
 * The components of each section of the statement must be reported consistently. The boards affirmed the existing requirements that provide the option to display components of other comprehensive income either:
 * net of related income tax expense; or
 * before related income tax effects, with one amount shown for the aggregate income tax effects on the face of the continuous statement of comprehensive income.
 * Timeline for issuing an exposure draft**
 * Presentation of Other Comprehensive Income project webpage**

 This was not discussed at this meeting because of lack of time. Go to the project page on the IASB website [|**Go to the top of this page**]

 The boards discussed possible objectives for hedge accounting and whether hedging risk components (bifurcation-by-risk) should be permitted. No decision was made on the objective. The IASB tentatively decided to permit bifurcation-by-risk for financial items and indicated a leaning toward permitting bifurcation-by-risk for non-financial items. Furthermore, the IASB requested that the staff explore for consideration at a future meeting a possible approach that the hedged item must be both separately identifiable and measurable for the purpose of determining hedge effectiveness. The FASB decided to explore bifurcation-by-risk for financial items and requested the staff to develop possible approaches for consideration at a future meeting. Go to the project page on the IASB website [|**Go to the top of this page**]

 At this meeting, the boards tentatively decided that:
 * The definition of a lease should not be limited to property, plant and equipment. However, the proposed new leases requirements do not apply to assets other than property, plant and equipment.
 * A lease is defined as a type of contract.
 * A lease must convey the right to use an asset.
 * The right to use an asset is conveyed if:
 * 1) the contract conveys the right to use a specified asset. The proposed new leases requirements will provide additional guidance about what constitutes a specified asset; and
 * 2) the contract conveys the right to control the use of the underlying asset. The current leases guidance regarding when a lease conveys the right to control the use of the underlying asset would be included in the proposed new leases requirements. However, the current guidance would be rewritten to help clarify its meaning.
 * A lease is for a period of time.
 * The definition of a lease should explicitly state that the right to use an asset is conveyed in exchange for consideration.

The boards therefore tentatively agreed with the following proposed definition of a lease: A lease is a contract in which the right to use a specified asset is conveyed, for a period of time, in exchange for consideration. The boards will continue discussing lessee and lessor accounting issues at the February 2010 joint meeting. Go to the project page on the IASB website [|**Go to the top of this page**]

10 February joint meeting
|| The Board approved the project plan and timetable for issuing Improvements to IFRSs in April 2010, based on the exposure draft published in August 2009. The Board discussed nine of the proposed improvements to IFRSs. On the basis of the comments that the Board had received from respondents and the recommendation of the IFRIC, the Board tentatively decided to finalise six of the improvements:
 * 
 * Exemption in paragraph D8 of IFRS 1 //First-time Adoption of International Financial Reporting Standards// - revaluation basis as deemed cost: the amendment extends the exemption to also apply to revaluations that occurred after the date of transition to IFRSs but during the period covered by the first IFRS financial statements, with resulting adjustments recognised at the measurement date directly in retained earnings.
 * IFRS 3 (revised 2008) //Business Combinations// - Measurement of non-controlling interests (NCI): the amendment clarifies that the choice for measuring the NCI in the acquiree applies only to components of NCI that are present ownership instruments that entitle their holders to a proportionate share of the entity's net assets in the event of liquidation.
 * IFRS 3 (revised 2008) - transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised IFRS: an entity should apply the requirements from IFRS 3 (issued 2004) as reproduced in the revised IFRS 3.
 * IFRS 7 //Financial Instruments: Disclosures// - clarification of disclosures: the amendment clarifies and amends the qualitative, quantitative and credit risk disclosures.
 * IAS 28 //Investments in Associates// - partial use of fair value for measurement of associates: enables a parent entity to measure part of the investment in an associate at fair value in its consolidated financial statements when that part is designated as at fair value through profit or loss in accordance with the scope exclusion in paragraph 1 of IAS 28. The Board decided not to include in the forthcoming IFRS on joint arrangements equivalent guidance on the partial use of fair value for the measurement of investments in joint ventures.
 * IAS 34 //Interim Financial Reporting// - significant events and transactions: emphasis on disclosure principles and addition of guidance on how to apply these principles.

In several cases the proposed final wording of the improvements was modified in the light of suggestions made in the comment letters. The revised, proposed, amendments can be viewed on the Annual Improvements page of the IASB website. The Board noted that the requirements that relate to the accounting for contingent consideration acquired in a business combination are contained in more than one IFRS. The Board asked the IFRIC to provide a recommendation on how to present the guidance on contingent consideration within one standard. The Board also decided to remove from the annual improvements project, without finalisation, three proposed amendments that had been included in the Improvements to IFRSs exposure drafts in either August 2008 or August 2009. The Board made this decision on the grounds that these issues should be reconsidered taking into account the broad replacement project IAS 39 //Financial Instruments: Recognition and Measurement// rather than on a piecemeal basis:
 * IAS 27 //Consolidated and Separate financial Statements// - impairment of investments in associates in the separate financial statements of the investor,
 * Two issues concerning IAS 39 that were originally part of the //Improvements to IFRSs//ED published in August 2008:
 * bifurcation of embedded foreign currency derivative,
 * application of the fair value option.

At the March 2010 IFRIC and IASB meetings, the staff will present an analysis to the IFRIC and to the Board of the comment letters for the following issues included in the Improvements to IFRSs ED published in August 2009:
 * IFRS 1 - Accounting policy changes in the year of adoption,
 * IFRS 3 - Un-replaced and voluntarily replaced share-based payment awards,
 * IFRS 5 //Non-current Assets Held for Sale and Discontinued Operations// - application of IFRS 5 to loss of significant influence over an associate or a jointly-controlled entity,
 * IAS 1 //Presentation of Financial Statements// - clarification of statement of changes in equity,
 * IAS 8 //Accounting policies, Changes in Accounting Estimates and Errors// - change in terminology for the qualitative characteristics,
 * IAS 27 - transition requirements for amendments made as a result of IAS 27 (revised 2008) to IAS 21, IAS 28 and IAS 31,
 * IAS 40 //Investment Property// - change from fair value model to cost model,
 * IFRIC 13 //Customer Loyalty Programmes// - fair value of award credit.

Go to the project page on the IASB website [|**Go to the top of this page**]

 The boards began their discussion of how to measure financial liabilities. The boards affirmed their previous tentative decisions that financial liabilities that are not held to pay contractual cash flows should be measured at fair value through profit or loss. The IASB tentatively decided that financial liabilities that are held to pay contractual cash flows and have 'non-vanilla' contractual cash flow characteristics should be bifurcated into a host and the embedded features. These components would be separately measured. This tentative decision responds to issues raised about recognising gains or losses arising from changes in an entity's own credit risk. The FASB did not make any decisions about financial liabilities that are held to pay contractual cash flows that contain embedded derivatives, and that under the FASB's current tentative model would be required to be measured at fair value with changes in fair value recognised in net income. The FASB will first consider whether and how to address changes in an entity's own credit risk for financial liabilities with 'vanilla' contractual cash flow characteristics. Under the FASB's current tentative model, these changes would be required to be measured at fair value with changes in fair value recognised in other comprehensive income. Go to the project page on the IASB website [|**Go to the top of this page**]

 The boards discussed the accounting for reinsurance contracts by both the reinsurer (principally its obligations) and the cedant (its reinsurance assets-recoverables on business written). The boards tentatively decided that:
 * Reinsurance**

The boards discussed an analysis of symmetry between policyholder accounting and the accounting by the issuer of the insurance contract. The boards tentatively decided not to carry out any further discussion on the following two points before issuing an exposure draft on accounting by insurers for insurance contracts:
 * A reinsurer should use the same recognition and measurement approach for the reinsurance contracts that it issues as all other insurers use for the insurance contracts that they have issued.
 * A cedant should recognise and measure its reinsurance asset (reinsurance recoverable) using the same recognition and measurement approach that it uses for the reinsured portion of the underlying insurance contracts that it has issued (this tentative decision is subject to further staff research, as described below). This measurement approach includes:
 * the expected present value of the cash flows required to fulfil the reinsured portion of the insurer's obligations.
 * the addition of the risk margin (but not the residual margin) included in the measurement of the reinsured portion of the contract liability.
 * the addition of the residual margin implied by the pricing of the reinsurance contract.
 * the impact on the reinsurance asset of possible impairment and coverage disputes, measured using the building block approach, in other words an expected value basis, rather than an incurred loss basis.
 * Can the residual margin implied by the pricing of the reinsurance contract be negative?
 * How do the building blocks of the proposed measurement approach interact with the impairment test of the reinsurance asset?
 * The staff will develop an example to test how the proposed measurement approach applies to the cedant and the reinsurer.
 * A cedant should not offset reinsurance balances against related direct reinsurance balances (balance sheet and income statement) unless legal requirements for offsetting are met.
 * A cedant should not derecognise the related direct insurance liabilities upon entering into a reinsurance contract unless the obligation specified in the insurance contract is [legally] discharged, cancelled, or expired.
 * The cedant should credit, and the reinsurer should charge, to the income statement ceding commissions for proportional reinsurance contracts in a manner consistent with the treatment of acquisition costs. The staff will investigate whether this treatment requires amendment if applied to non-proportional reinsurance contracts, and will consider how to distinguish ceding commissions from other contractual cash flows.
 * Policyholder accounting**


 * any differences in measurement that might arise if the boards' proposals for insurers were applied to policyholders, except in relation to acquisition costs and participating features.
 * non-reinsurance policyholder accounting.

The boards will continue their discussion of this project at the joint board meeting on 16-18 February. Go to the project page on the IASB website [|**Go to the top of this page**] ||  ||   || You are receiving this email because the email [nhannon@gmail.com] was subscribed to our email list. To unsubscribe from this list click here. ||
 * Next steps**
 * Note that the information published in this newsletter originates from various sources and is accurate to the best of our knowledge. However, the International Accounting Standards Board and the International Accounting Standards Committee Foundation does not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise. ||
 * [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||   ||
 * Copyright © IASCF ISSN 1474-2675

=Convergence with the International Accounting Standards Board (IASB)= [|**Visit the IASB website**]
 * FASB and IASB Reaffirm Commitment to Enhance Consistency, Comparability and Efficiency in Global Capital Markets**
 * [|News Release]
 * [|Memorandum of Understanding]

In October 2002, the FASB and the International Accounting Standards Board (IASB) announced the issuance of a memorandum of understanding ("Norwalk Agreement"), marking a significant step toward formalizing their commitment to the convergence of U.S. and international accounting standards. The FASB has undertaken the following six key initiatives to further the goal of convergence of U.S. GAAP with International Financial Reporting Standards (IFRS): [|**Conceptual Framework Project Update**] [|**Business Combinations Project Update**] [|**Financial Statement Presentation**] [|**Revenue Recognition Project Update**] [|**Short-Term Convergence Project Update**] [|**FASB Activities Related to IASB Projects**] [|**Convergence Research Project Update**] The //IASC-U.S. Comparison Report, 2nd ed.// (1999), a comprehensive study of International Accounting Standards and U.S. GAAP, is available from the FASB. Standard setters, financial statement preparers and auditors, and regulators should be aware of similarities and differences between the financial reports that would be produced under IASC standards and those produced under national standards. This report compares each of the IASC's "core standards" (up to and including IAS 39) to its U.S. GAAP counterparts in areas such as scope, definitions, recognition and measurement requirements, and display and disclosure requirements. [|**Information on the //IASC-U.S. Comparison Report, 2nd ed.//**] As a result of these and other initiatives, the FASB expects to make significant progress toward international convergence in the next few years. However, because of the volume of differences and the complex nature of some issues, the FASB anticipates that many differences between U.S. and international standards will persist well beyond 2005. (By 2005, all EU-listed public companies are being required by the European Union to prepare their consolidated financial statements using IASB Standards.) (November 2004) (June 2004) (May 2004) (October 2003) (May 2003) (November 2002)
 * [|**Norwalk Agreement**]
 * [|**October 29, 2002 Press release**]
 * 1) **Joint projects being conducted with the IASB.** Joint projects are those that standard setters have agreed to conduct simultaneously in a coordinated manner. Joint projects involve the sharing of staff resources, and every effort is made to keep joint projects on a similar time schedule at each Board. Currently, the FASB and IASB are conducting joint projects to address Revenue Recognition and Business Combinations.
 * 1) **The short-term convergence project.** The short-term convergence project is an active agenda project that is being conducted jointly with the IASB, and it is expected to result in one or more standards that will achieve convergence in certain areas. The scope of the short-term convergence project is limited to those differences between U.S. GAAP and IFRS in which convergence around a high-quality solution appears achievable in the short-term. Because of the nature of the differences, it is expected that a high-quality solution can usually be achieved by selecting between existing U.S. GAAP and IFRS.
 * 1) **Liaison IASB member on site at the FASB offices.** One of the most visible features of the FASB’s daily operations that promotes convergence is the presence of a full time IASB member in residence at the FASB offices. James J. Leisenring, a former FASB Board member, is the IASB member currently filling the role of liaison Board member to the FASB. The role was created to facilitate information exchange and increase cooperation between the FASB and the IASB.
 * 2) **FASB monitoring of IASB projects.** IASB projects are monitored by the FASB based upon the FASB’s level of interest in the topic being addressed.
 * 1) **The convergence research project.** The FASB staff is currently working on a research project related to convergence. The project seeks to identify all of the substantive differences between U.S. GAAP and IFRS and to catalog those differences according to the Board’s strategy for resolving them. The project scope includes differences in standards addressing recognition, measurement, presentation or disclosure. Any topic in which a specific accounting treatment would be permissible under one basis of accounting but would not be permissible under the other basis of accounting is included in the project scope.
 * 1) **Explicit consideration of convergence potential in all Board agenda decisions.** Within the framework of the Board’s agenda criteria, all topics formally considered for addition to the FASB’s agenda need to be assessed for the possibilities for cooperation with the IASB (or another standard setter). Factors that the Board considers in assessing topics for the agenda include (a) the possibility that resolution would increase convergence of standards worldwide, (b) the opportunities the topic presents for cooperation with other standard setters, and (c) whether appropriate and sufficient resources are available for a joint or other cooperative effort.
 * Related Articles**
 * Article from //The FASB Report//—[|"FASB and IASB Hold Joint Meeting"]**
 * Article from //The FASB Report//—[|"Historic First Meeting between the Financial Accounting Foundation and the International Accounting Standards Committee Foundation"]**
 * Article from //The FASB Report//—[|"FASB and IASB Discuss Plans for the Future"]**
 * Article from //The FASB Report//—[|"Canada Draws International Accounting Leaders from Around the Globe"]**
 * Article from //The FASB Report//—[|"International Convergence Impacts FASB Policies and Procedures"]**
 * Article from //The FASB Report//—[|"FASB Works with IASB toward Global Convergence"]**


 * || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  ||||   ||
 * **IASB** UpdateFrom the International Accounting Standards Board || [[image:http://eifrs.iasb.org/eifrs/static/images/hexagon.gif width="97" height="99"]] ||
 * January 2010 ||
 * ||  || **Welcome to IASB Update**
 * ||  || **Welcome to IASB Update**

This IASB Update is a staff summary of the tentative decisions reached by the Board at a public meeting. As a project progresses, the Board can, and sometimes does, modify its earlier tentative decisions. Tentative decisions do not change existing requirements until those decisions are incorporated in a new or amended standard.

* **Financial crisis** The International Accounting Standards Board met in London on 20 - 22 January 2010, when it discussed: * **Financial crisis ***** [|Amendments to IFRS 1]**
 * **[|Consolidation]**
 * **[|Fair value measurement]**
 * **[|Financial instruments: classification and measurement]**
 * **[|Financial instruments: hedge accounting]**
 * **[|Financial instruments with characteristics of equity]**
 * **[|Financial statement presentation]**
 * **[|Insurance contracts]**
 * **[|Leases]**
 * **[|Revenue recognition]**
 * [|Derecognition]
 * [|Financial instruments: hedge accounting]
 * **[|Discontinued operations]**
 * **[|Financial statement presentation]**
 * **[|IFRIC Update]**
 * **[|Post-employment benefits]** || [[image:http://eifrs.iasb.org/eifrs/static/images/spacer.gif]] ||  || **Contact us**

30 Cannon Street London EC4M 6XH United Kingdom
 * International Accounting**
 * Standards Board**

Tel: +44 (0)20 7246 6410 Fax: +44 (0)20 7246 6411 E-mail: **iasb@iasb.org** Website: **www.iasb.org** ||
 * **Future board meetings**

The IASB meets at least once a month for up to five days. The next Board meetings in 2010 are:


 * 15 - 19 February**
 * 2 February (PM)**
 * 10 February (PM)**
 * 15 - 19 March**

To see all Board meetings for 2010, **click here**. ||
 * **Archive of IASB Update Newsletter**

**Click here** for archived copies of past issues of IASB Update on the IASB website. ||
 * **Podcast summaries**

To listen to a short Board meeting audio summary (podcast), **click here**. ||  ||
 * **Joint meeting with FASB**

Financial crisis Consolidation
 * The IASB and the FASB discussed the following issues relating to the control model being developed for the purposes of determining when one entity should consolidate another:


 * Control through voting rights (including control with less than half of the voting rights in an entity)
 * Options and convertible instruments
 * Agency relationships (including kick-out rights)

//Control through voting rights// The boards tentatively decided that, when assessing control of entities controlled through voting rights:


 * a reporting entity that holds more than half of the voting rights in an entity meets the power element of the control definition, in the absence of other arrangements.
 * a reporting entity (with less than half of the voting rights in an entity) that has the legal or contractual ability to direct those activities of the entity that significantly affect the returns meets the power element of the control definition.

The IASB tentatively decided that a reporting entity with less than half of the voting rights meets the power element of the control definition in situations in which the reporting entity holds significantly more voting rights than any other party or organised group of shareholders, and in which the other shareholdings are widely dispersed. The FASB tentatively decided that such a reporting entity must have demonstrated that it has directed the activities of the entity that significantly affect the returns in order to meet the power element of the control definition. //Options and convertible instruments// The boards tentatively decided that a reporting entity should consider options and convertible instruments when assessing whether it has the power through voting rights to direct the activities of an entity that significantly affect the returns. The consideration of whether a reporting entity has the power to direct the activities of the other entity would include not only a reporting entity's voting rights in another entity, but also an assessment of all the facts and circumstances associated with the options or convertible instruments. //Agency relationships// The IASB and the FASB discussed what factors should be considered when determining whether a party that has been delegated decision-making authority should be considered to be an agent. The boards also discussed whether kick-out rights that are exercisable on agreement by more than one unrelated party could be substantive and should be considered when assessing agency relationships. The boards did not reach any decisions on agency relationships. This topic will be discussed further by the IASB and FASB at their February 2010 joint Board meeting. Go to the project page on the IASB website [|**Go to the top of this page**]

The boards discussed the following topics:
 * Fair value measurement**


 * Definition of fair value
 * Measuring fair value when markets become less active
 * Fair value at initial recognition
 * Recognition of day 1 gains or losses
 * Measuring liabilities at fair value
 * Non-performance risk
 * Restrictions on the transfer of a liability
 * Measuring own equity instruments at fair value
 * Market participant view
 * Reference market

//Definition of fair value// The boards tentatively decided:


 * to retain the term 'fair value'
 * to define fair value as an exit price. The boards will discuss where that definition should be used in a future meeting when they address the scope of a converged fair value measurement standard.

//Measuring fair value when markets become less active// The boards tentatively decided that the guidance for measuring fair value in markets that have become less active: The boards also tentatively decided that an entity should consider observable transaction prices unless there is evidence that the transaction is not orderly. If an entity does not have sufficient information to determine whether a transaction is orderly, it performs further analysis to measure fair value.
 * pertains to when there has been a significant decline in the volume and level of activity for the asset or liability.
 * focuses on whether an observed transaction price is orderly, not on the level of activity in a market.

//Fair value at initial recognition// The boards tentatively decided that the transaction price might not represent the fair value of an asset or liability at initial recognition if, for example, any of the following conditions exist:


 * the transaction is between related parties
 * the transaction takes place under duress or the seller is forced to accept the price in the transaction
 * the unit of account represented by the transaction is different from the unit of account for the asset or liability measured at fair value
 * the market in which the transaction takes place is different from the market in which the entity would sell the asset or transfer the liability.

//Day one gains or losses// The IASB tentatively decided not to address the recognition of day one gains or losses as part of the fair value measurement project. The boards will discuss the recognition of day one gains or losses at a future meeting.

//Measuring liabilities at fair value// The boards tentatively decided:


 * that in the absence of a quoted price in an active market representing the transfer of a liability, an entity measures the fair value of a liability as follows:
 * 1) using the quoted price of the identical liability when traded as an asset (ie a Level 1 measurement), if that price is available
 * 2) if that price is not available, using quoted prices for similar liabilities or similar liabilities when traded as assets (ie a Level 2 measurement)
 * 3) if observable inputs are not available, using another valuation technique such as:
 * 4) an income approach (eg a present value technique) or
 * 5) a market approach (eg using the amount that a market participant would pay to transfer the identical liability or receive to enter into the identical liability)
 * to describe the compensation a market participant would demand for taking on an obligation in the application of a present value technique
 * to clarify that the transfer of a liability assumes that a market participant transferee has the knowledge and ability to fulfil the identical obligation
 * that an entity must determine whether the fair value of a liability when traded as an asset (the corresponding asset) represents the fair value of the liability. If an entity determines that the fair value of the corresponding asset does not represent the fair value of the liability, it must make adjustments to the fair value of the asset to the extent that its fair value does not represent the fair value of the liability
 * that the fair value of a corresponding asset represents the fair value of the liability whether or not that asset is traded on an exchange
 * that the fair value of the corresponding asset should be measured using the methodology market participants would use
 * that a quoted price for a corresponding asset in an active market is also a Level 1 fair value measurement for the liability when no adjustments to that quoted price are required.

//Non-performance risk// The boards tentatively decided:


 * that the fair value of a liability includes the effect of non-performance risk
 * to clarify what, in addition to credit risk, non-performance risk represents.

//Restrictions on the transfer of a liability// The boards tentatively decided that the fair value of a liability should not be adjusted further for the effect of a restriction on its transfer if the restriction is already included in the other inputs to the fair value measurement.

//Measuring own equity instruments at fair value// The boards tentatively decided to include guidance for measuring the fair value of an entity's own equity instruments in a converged fair value measurement standard. //Market participant view// The boards tentatively decided:


 * to confirm that a fair value measurement is market-based and reflects the assumptions that market participants would use in pricing the asset or liability
 * that market participants should be assumed to have a reasonable understanding about the asset or liability and about the transaction, based on all available information, including information that might be obtained through due diligence efforts that are usual and customary
 * that 'independence' in the description of market participants means that market participants are independent of each other; that is, they are not related parties
 * that a price in a related party transaction may be used as an input to a fair value measurement if the transaction was entered into at market terms
 * that the unobservable inputs derived from an entity's own data, adjusted for any reasonably available information that market participants would take into account, are considered market participant assumptions and meet the objective of a fair value measurement.

//Reference market// The boards tentatively decided:


 * that the reference market for a fair value measurement is the principal (or most advantageous) market provided that the entity has access to that market.
 * to clarify that:
 * 1) the principal market is the market with the greatest volume and level of activity for the asset or liability
 * 2) there is a presumption that the principal market is the market in which the entity normally transacts. Entities do not need to perform an exhaustive search for markets that might have more activity than the market in which they normally transact
 * 3) the determination of the most advantageous market considers both transaction costs and transportation costs.

Go to the project page on the IASB website [|**Go to the top of this page**]


 * Financial instruments: classification and measurement**

//Financial liabilities// The boards reviewed their respective prior discussions related to the classification and measurement of financial liabilities. No decisions were made. Go to the project page on the IASB website [|**Go to the top of this page**]

The boards discussed possible timelines for completing the hedge accounting phase of the joint financial instruments project and the issues that might be addressed under each timeline. The boards tentatively decided to address hedge accounting comprehensively. However, in light of the FASB's goal to publish a comprehensive exposure draft on financial instruments in March 2010, and of the IASB's goal to publish in the first quarter of 2010 an exposure draft on the remaining main phases of the project to replace IAS 39, the boards will first jointly consider hedge accounting issues relating to financial hedged items, together with issues that are more directly related to the boards' respective decisions to date on the classification and measurement models for financial instruments. The boards will subsequently discuss other hedge accounting issues, including hedge accounting for non-financial hedged items and portfolio hedge accounting. The boards expect to address all hedge accounting issues in the first half of 2010. Go to the project page on the IASB website [|**Go to the top of this page**]
 * Financial instruments: hedge accounting**

The boards decided not to adopt any of the approaches that they have previously considered. Instead, they directed the staff to analyse a possible amendment to IAS 32 //Financial Instruments: Presentation//. The effects of that possible amendment have not yet been specified but the following are some possibilities:
 * Financial instruments with characteristics of equity**


 * A requirement to classify as equity shares puttable only if specified certain events occur, such as the death or retirement of the holder
 * A requirement to separate some puttable shares into equity and liability components
 * A slight relaxation of the provision that to qualify as equity, a financial instrument involving exchanges of equity instruments for cash must require an exchange of a fixed number of shares for a fixed amount of cash.

Go to the project page on the IASB website [|**Go to the top of this page**]

The boards continued their deliberations on the proposals in the discussion paper //Preliminary Views on Financial Statement Presentation//. Specifically, the boards considered disaggregation by function and nature and segment disclosures (agenda paper 7A). //Background// The discussion paper proposed that within each category on the statement of comprehensive income, an entity should disaggregate its items of income and expense by function. Each of these functions should be further disaggregated by nature to the extent that such by-nature information enhances the usefulness of the statement of comprehensive income in predicting an entity's future cash flows. If that by-nature presentation is impractical on the face of the statement of comprehensive income, an entity should present the information in the notes to financial statements. The discussion paper also proposed that if, in the opinion of management, presenting disaggregated information by function does not provide relevant information, an entity can disaggregate its items of comprehensive income by their nature within each category on the statement of comprehensive income. In October 2009, the boards tentatively decided to retain the discussion paper proposal that an entity should disaggregate income and expense items by nature and by function. Furthermore, an entity with more than one reportable segment should present that disaggregated information in its segment note, while an entity with only one reportable segment should present that disaggregated information on its statement of comprehensive income. //Tentative decisions// At their January joint meeting, the boards tentatively decided that the exposure draft:
 * Financial statement presentation**


 * will specify that an entity with only one reportable segment may present its disaggregated by-nature information in a single note disclosure, rather than presenting that information on the statement of comprehensive income. An entity that presents its by-nature information in a note disclosure must also include its by-function information in the same note.
 * will specify that an entity with more than one reportable segment must present its disaggregated by-nature information in its segment note, and must also include its by-function information in the same note.
 * will specify that an entity that disaggregates income and expense items by both function and nature in the notes to financial statements should present its by-function information on the statement of comprehensive income.
 * will retain the discussion paper proposal that an entity should disaggregate its income and expense items in a manner that presents useful information for assessing the amount, timing and certainty of future cash flows. Consequently, if disaggregation by function does not enhance the usefulness for that purpose of the information on the statement of comprehensive income, an entity should instead disaggregate its income and expense items by nature only.

The boards also considered amendments to Accounting Standards Codification Topic 280 //Segment Reporting// and IFRS 8 //Operating Segments//. The boards tentatively decided that the exposure draft:


 * will require an entity that presents by-nature income and expense information in its segment note to classify items consistently between the statement of comprehensive income and the segment note.
 * will require an entity to present information about its operating segment activities that do not meet the criteria to be presented as a reportable segment separately from information about its corporate activities;
 * will require an entity to reconcile the operating profit (loss) of its reportable segments to its consolidated operating profit presented on the statement of comprehensive income.

Go to the project page on the IASB website [|**Go to the top of this page**]

The boards discussed the following topics:
 * Insurance contracts**


 * measurement and risk adjustments;
 * day-one losses;
 * the treatment of the residual margin; and
 * policyholder behaviour.

//Measurement and risk adjustments// At their joint meeting in December, the boards tentatively decided that the measurement approach should portray a current assessment of the insurer's obligation, using the following building blocks:


 * the unbiased, probability-weighted average of future cash flows expected to arise as the insurer fulfils the contract;
 * the time value of money;
 * a risk adjustment for the effects of uncertainty about the amount and timing of future cash flows; and
 * an amount that eliminates any gain at inception of the contract.

In this meeting, the boards tentatively decided that: The boards also decided tentatively that:
 * these building blocks should be used to measure the combination of rights and obligations arising from an insurance contract rather than to measure the rights separately from the obligations. That combination of rights and obligations should be presented on a net basis.
 * the objective for measuring an insurance contract should refer to a value rather than cost. The staff will refine the description of that objective.


 * the risk adjustment should be the amount the insurer requires for bearing the uncertainty that arises from having to fulfil the net obligation arising from an insurance contract. The staff will develop guidance on how to determine the risk adjustment.
 * the risk adjustment should be updated (remeasured) each reporting period.

//Day-one losses// In the proposed accounting approach, a loss arises at inception if, after applying a risk adjustment, the expected present value of cash outflows exceeds the expected present value of cash inflows. The boards tentatively decided that an entity should recognise that loss in profit or loss at inception. //Treatment of residual margins// The proposed accounting approach eliminates any gain at inception by including a residual margin in the measurement of the combination of rights and obligations arising from the insurance contracts. The boards tentatively decided :


 * to develop specific guidance on how the residual margin should be released to profit or loss over time.
 * that the insurer should not adjust the residual margin in subsequent reporting periods for changes in estimates.

//Policyholder behaviour// The boards discussed features that enable policyholders to take actions that change the amount, timing, uncertainty or nature of benefits that they will receive (policyholder options). The IASB reaffirmed its view that the policyholder options, as well as options, forwards, and guarantees related to existing coverage, should be included in the measurement of the insurance contract on a look through basis using the expected value of future cash flows (to the extent that those options are within the boundary of the existing contract). As a consequence, no deposit floor would apply. For a future discussion, the staff will develop material to identify the boundary of an existing contract. The FASB discussed policyholder options. Views diverged and no clear consensus emerged. The FASB will return to the topic of policyholder behaviour at a future meeting. The boards also discussed how to treat options, forwards, and guarantees that do not relate to the existing insurance contract coverage. The boards tentatively decided to exclude such features from the measurement of that contract. Instead, those features should be recognised and measured as new insurance contracts or other stand-alone instruments, according to their nature. //Next steps// The boards expect to continue their discussion of this project at an additional joint meeting on 10 February. Go to the project page on the IASB website [|**Go to the top of this page**]

The boards discussed:
 * Leases**


 * How to measure leases after initial recognition with options and contingent rentals under the amortised cost-based approach
 * Whether to provide a concession for short-term leases; and
 * How to account for investment properties held by lessors.

//Measurement after initial recognition of leases with options and contingent rentals under amortised cost// The boards tentatively decided that:


 * The lessee's discount rate should not be revised when there are subsequent changes in the expected lease term.
 * The lessee's discount rate should not be revised when there are subsequent changes in the amounts payable under contingent rentals unless the rentals are contingent on variable reference interest rates.
 * The discount rate used by the lessor should not be revised when there are subsequent changes in the expected lease term.
 * The discount rate used by the lessor should not be revised when there are subsequent changes in the amounts payable under contingent rentals unless the rentals are contingent on variable reference interest rates.

//Concession for short-term leases// The boards tentatively decided:


 * to permit lessees to use a simplified form of lease accounting for short-term leases.
 * that under this simplified accounting, the lessee would recognise the gross amounts payable and a corresponding right-of-use asset under a short-term lease in the statement of financial position.
 * to provide an optional concession for short-term leases for lessors.
 * that short-term leases would be defined as those leases that have a maximum possible lease term of less than 12 months.

//Investment properties// The boards tentatively decided that the new lessor accounting requirements would be required if the lessor measures its investment properties at cost. The IASB tentatively decided that if a lessor of investment properties measures its investment properties at fair value in accordance with IAS 40 //Investment Property//, it would not apply the new lessor accounting requirements to the lease.

Because the FASB does not have an option to fair value investment properties, it instructed the FASB staff to prepare an agenda request discussing whether to permit or require investment properties to be carried at fair value under US GAAP. The boards will continue discussion of lessee and lessor accounting at the February 2010 meeting. Go to the project page on the IASB website [|**Go to the top of this page**]

The boards considered the disclosure requirements for the proposed revenue recognition model and tentatively decided:
 * Revenue recognition**


 * to specify a high-level disclosure objective similar to the objectives in FASB ASC Section 605-25-50 //Multiple Element Arrangements-Disclosure// and IFRS 7 //Financial Instruments: Disclosures//
 * to require an entity to disclose:
 * 1) the nature of contracts that it enters into with customers and the related accounting policies;
 * 2) the principal judgements used in accounting for contracts with customers;
 * 3) a reconciliation of the beginning and ending net contract position(s);
 * 4) the total amount of outstanding performance obligations and the expected timing of their satisfaction; and
 * 5) information about onerous contracts, including the extent and amount of such contracts and the reasons for them becoming onerous.

//Next steps// The boards will continue their discussion of disclosures and consider scope and transition at the forthcoming meetings. Go to the project page on the IASB website [|**Go to the top of this page**]


 * IASB meeting**

Financial crisis Derecognition

The Board discussed the requirements in IAS 32 //Financial Instruments: Presentation// for offsetting a financial asset and a financial liability. The Board did not make any decisions at this meeting. The Board will continue discussions on the issue at future meetings. Go to the project page on the IASB website [|**Go to the top of this page**]


 * Financial instruments: hedge accounting**

//The objective of hedge accounting// The Board discussed two possible objectives for hedge accounting. The Board discussed the possible objectives in the context of whether risk components could qualify for hedge accounting under any hedge accounting approach that the Board might propose. The Board noted that a hedge accounting objective should permit or require hedge accounting for risk components if a risk component is separately identifiable and measurable for the purpose of determining hedge ineffectiveness. The Board also noted that a hedge accounting objective and the treatment of risk components should apply to both financial and non-financial hedged items. No decisions were made.

Go to the project page on the IASB website [|**Go to the top of this page**]

The Board deliberated the comments received on the exposure draft //Limited Exemptions from Comparative IFRS 7 Disclosures for First-time Adopters// (Amendment to IFRS 1) published in November 2009. To avoid the potential use of hindsight and to ensure that first-time adopters are not disadvantaged as compared with current IFRS preparers, the Board decided that first-time adopters should be permitted to use the same transition provisions permitted for existing preparers of financial statements prepared in accordance with IFRSs that are included in //Improving Disclosures about Financial Instruments// (Amendments to IFRS 7). Additionally, the Board amended paragraph 44G of IFRS 7 //Financial Instruments: Disclosures// to clarify its conclusions and intended transition for //Improving Disclosures about Financial Instruments//(Amendments to IFRS 7, issued in March 2009). The Board clarified that an entity need not provide comparative information for the disclosures required by the amendments for: (a) any periods presented ending before 1 January 2009 and (b) any statement of financial position as at a date before 31 December 2009. The Board expects to issue the amendment in January 2010. Go to the project page on the IASB website [|**Go to the top of this page**]
 * Amendments to IFRS 1**

The Board decided that the comment period for the exposure draft (re-exposure of proposals to amend IFRS 5 //Non-current Assets Held for Sale and Discontinued Operations//) should be 60 days. Go to the project page on the IASB website [|**Go to the top of this page**]
 * Discontinued operations**

The Board continued its deliberations on the proposals in the discussion paper //Preliminary Views on Financial Statement Presentation//. Specifically, the Board considered: //Segment disclosures// The Board continued its discussion from the February 19 joint meeting on possible amendments to IFRS 8 //Operating Segments// to accommodate the core presentation principles of cohesiveness and disaggregation. The Board decided to not make any amendments to IFRS 8 other than the amendments to which they had tentatively agreed at the joint meeting. //Financial services entity issues// The Board considered whether, and if so to what extent, the exposure draft on financial statement presentation should be applied by a financial services entity. The Board agreed that many of its tentative decisions to change proposals in the discussion paper address the concerns expressed by financial services entities. The only tentative decision that the Board specifically discussed that related to a financial services entity is the requirement to present a direct method statement of cash flows. The Board discussed different ways in which a financial services entity might present cash flow information in the financial statements. The Board asked the staff to do more research and outreach on this issue for discussion at a future meeting. //Costs and benefits// The Board was provided with a summary of the information received about the overall costs of the proposed presentation model. In prior meetings, the IASB and the FASB have discussed both the costs and benefits of individual aspects of the proposed presentation model. The boards have made a number of tentative decisions that should reduce the costs of implementing the proposed model but retain its expected benefits. The Board asked the staff to continue its outreach on the changes proposed for preparing a direct method cash flow statement. The Board did not ask for any other cost/benefit information prior to issuing the exposure draft. //Net debt information// The Board continued its discussion on net debt from the September 2009 meeting. In September, the IASB had expressed an interest in presenting information about net debt in the notes to financial statements. At the January 2010 meeting, the Board tentatively decided to require the analysis of changes in specific line items (all the line items in the debt category, cash, any short-term investments, and finance leases) to be included in a single note disclosure. These line items typically constitute what users of financial statements sometimes refer to as net debt. Go to the project page on the IASB website [|**Go to the top of this page**]
 * Financial statement presentation**
 * segment disclosures (joint meeting agenda paper 7A);
 * financial services entity issues (joint meeting agenda paper 7B); and
 * costs and benefits (joint meeting agenda paper 7C).

The Director of Implementation Activities reported on the IFRIC's meeting on 7 and 8 January 2010. Details of the meeting were published in IFRIC Update, available **here**. [|**Go to the top of this page**]
 * IFRIC Update**

//Disclosures// The Board considered proposed disclosures to be included in the forthcoming exposure draft on post-employment benefits. The Board asked the staff to reduce and streamline the disclosures. The Board will consider the revised set of disclosures at a future meeting. //Termination benefits// The Board discussed termination benefits and tentatively decided that:
 * Post-employment benefits**


 * the definition of termination benefits should not include benefits provided in exchange for future employee service; and
 * an entity should recognise termination benefits when it no longer has the ability to withdraw an offer of those benefits.

The Board expects to publish the final amendments for termination benefits in the first quarter of 2010.

Go to the project page on the IASB website [|**Go to the top of this page**]** ||  ||   ||   ||   ||


 * Note that the information published in this newsletter originates from various sources and is accurate to the best of our knowledge. However, the International Accounting Standards Board and the International Accounting Standards Committee Foundation does not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this publication, whether such loss is caused by negligence or otherwise. ||
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