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Briefing Sheet
November 2010 IASB meetings
December 2010, Issue 223

This Briefing Sheet covers the November 2010 Summary

The November meetings of the IASB
meetings of the IASB1. A number of the sessions took place on 10 – 12 and 16 – 18
involved joint discussion with the FASB2. November. The summary below
combines the outcomes of the
individual sessions from the November
Highlights meetings. In a number of sessions
the IASB held joint discussions with
• The IASB agreed to amend IFRS 1 First-time Adoption of the FASB as indicated throughout. The
International Financial Reporting Standards to remove fixed following projects were discussed:
dates.
●● conceptual framework project
• The IASB is expected to permit presentation of the ●● emissions trading project
remeasurement component of defined benefit plans in profit or ●● fair value measurement project
loss. ●● financial instruments project
●● financial statement presentation
• The Boards defer until after June 2011 substantive deliberations project
on certain projects including: financial statement presentation, ●● IFRS 1 amendment (removal of
financial instruments with characteristic of equity, emissions fixed date) project
trading and the reporting entity phase of conceptual framework. ●● liabilities project
●● post-employment benefits project
●● revenue recognition project.

In addition, the IASB received an

update on recent activities of the
IFRS Interpretations Committee
(Interpretations Committee) and
discussed its technical plan.

Emissions trading project

The IASB and FASB (the Boards)
discussed recognition of liabilities
in a cap and trade scheme. The
Boards supported views that cap the
measurement of the liability for the
KPMG’s update on International allocation at the quantity of allowances
Financial Reporting Standards allocated. However, the Boards did
(IFRSs) developments not reach a consensus on the timing

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of the recognition of a liability in
excess of the initial allocation. Some
members supported the view that an
excess liability should be recognised
throughout the compliance period
as an entity emits. However, others
supported the view that it should be
recognised immediately when the
liability exceeds the allowance allocated
initially.
The Boards decided tentatively that
purchased allowances should be
measured at fair value initially and
subsequently. This is consistent
with the Boards’ previous tentative
decision that allocated allowances
should be measured at fair value
initially and subsequently. The Boards
also discussed measurement of the
quantity of allowances to be returned
or submitted. No decision was made
on this issue.
The Boards discussed whether assets
and liabilities in a cap and trade scheme
should be presented using a gross
presentation or a linked presentation.
Under a linked presentation, assets
and liabilities would be presented gross
but together and total to a net asset
or liability. The IASB preferred gross
presentation; however, it would not
object to a linked presentation. The
FASB decided tentatively that assets
and liabilities should be presented
using a linked presentation. The FASB
also indicated that an entity would not
be required to express the intention
of using a linked presentation as a
condition to use it.
This project will be discussed later
in 2011 after feedback from outreach
activities has been analysed.
Fair value measurement project
Fair value of an entity’s own equity
instruments
The Boards decided tentatively
that the fair value of an entity’s
own equity instruments may be
measured using the guidance on the
fair value measurement of liabilities.
The Boards also decided tentatively
that the objective of the fair value
measurement of a liability or an
entity’s own equity instrument is
to estimate an exit price from the
perspective of a market participant
who holds the corresponding assets at
the measurement date, regardless of
whether it is traded.
Fair value of a group of financial
instruments
The Boards decided tentatively that
the fair value of a group of financial
instruments may be measured on a net
basis only if:
●● it is applied to an entity’s financial
instruments that are managed
to reduce its net exposure to a
particular market or credit risk;
●● there is evidence that the financial
instruments are managed that way;
such evidence includes:
– documented risk management
or investment strategy; and
– report to management about
the net risk exposure from the
financial instruments; and
●● those financial instruments are
measured at fair value in the
statement of financial position.
The Boards decided tentatively that
when measuring the fair value of
financial instruments on a net basis an
entity must:
●● make an accounting policy
decision to measure the fair value
of its financial instruments on a net
basis;
●● disclose that accounting policy; and
●● apply the technique to assess its
net risk exposure consistently.
The Boards also decided tentatively
that:
●● the objective to measure the fair
value of financial instruments on a
net basis is to estimate an exit price
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from the perspective of a market
participant who holds the net risk
position at the measurement date;
●● an entity should consider:
– the availability of Level 1 inputs;
– the timing and legal
enforceability of any credit risk
mitigants; and
– the extent to which the
underlying market risks are
offset;
●● an entity should apply a
methodology for allocating bid-ask
and credit adjustments to the unit
of account consistently; and
●● common methodologies will be
provided although an entity will not
be required to apply a particular
methodology.
Discounts and premiums in fair
value measurement
The Boards decided tentatively that,
in the absence of a Level 1 input for a
fair value measurement, discounts and
premiums may be applied only if:
●● those discounts or premiums are
consistent with the unit of account
specified in another standard; and
●● market participants would take
into account such discounts or
premiums when pricing the asset
or liability.
Disclosure about fair value
measurement
The Boards decided tentatively to
require disclosures of the following
information about Level 3 fair value
measurements:
●● quantitative information of
the unobservable inputs and
assumptions used;
●● a discussion of the sensitivity of
the fair value in relation to changes
in unobservable inputs and any
interrelationships between inputs
that mitigate or increase the effect;
and
●● a description of the valuation control
processes.

The Boards also decided tentatively
to discuss further a potential
disclosure requirement to provide a
measurement uncertainty analysis.
It will be discussed as a separate
part of the fair value measurement
project.
Financial instruments project
Amortised cost and impairment
The Boards discussed the information
to be considered in estimating credit
impairment losses. The Boards
decided tentatively that all available
information should be considered,
including historical data, current
economic conditions and supportable
forecasts of future economic
conditions.
The Boards discussed the outlook
period for estimating credit impairment
losses. The Boards decided tentatively
that such estimate should be based
on the lifetime expected losses of the
financial asset.
The Boards discussed the timing of
the recognition of expected losses.
The Boards narrowed seven alternative
methods to the following three, which
will be discussed further at future
meetings:
●● immediate recognition of losses
expected in an emergence period,
e.g. foreseeable future, that is
shorter than the expected life of the
loan;
●● recognition of lifetime expected
credit losses using a time-
proportionate approach combined
with a good book and bad book; and
●● recognition of lifetime expected
credit losses using notional sub-
portfolios to accommodate “front
loaded” expected loss recognition
patterns.
Hedge accounting
The IASB discussed portfolio fair
value hedge accounting for interest
risk, especially in relation to banks.
The IASB noted that the hedge
ineffectiveness under the current
portfolio fair value hedge accounting
model is appropriate, because
the hedged amount is defined as
a proportion of the total portfolio
when less than the total portfolio is
hedged. However, the IASB noted
during outreach activities that portfolio
fair value hedging is used by banks
to derive intentionally a different
accounting result to hedge accounting
on an individual basis. The IASB
discussed whether the new model
being developed could accommodate
this issue. In addition, the IASB decided
tentatively to consider further the
concept of defining the hedged item as
a bottom layer of an overall portfolio of
prepayable debt instruments.
Asset and liability offsetting
The Boards decided tentatively to
require an entity to offset a recognised
financial asset and financial liability if
it has an unconditional right of offset
and intends to either settle net or
settle simultaneously. In this context
an unconditional right refers to a
right of offset that is enforceable in
all circumstances (including default
by or bankruptcy of a counterparty).
Simultaneous settlement refers to
realisation of an asset and settlement
of a liability at the same moment.
An entity would not be allowed to
offset a recognised financial asset and
financial liability if the entity has only a
conditional right to offset.
Financial statement presentation
project
The Boards decided tentatively:
●● to retain the option to present net
income and other comprehensive
income either in a single continuous
statement or in two separate, but
consecutive, statements;
●● to have the standards effective
as of the beginning of a financial
reporting year that begins after
15 December 2011 under US GAAP
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and on or after 1 January 2012
under IFRS;
●● to confirm the tentative decision to
require full retrospective application
for the standards; and
●● to confirm other tentative decisions,
including:
– the FASB would require
reclassification adjustments
to be presented in both other
comprehensive income and net
income;
– the Boards would allow items of
other comprehensive income to
be presented either net of tax
with related notes or gross of
tax with each item’s tax effect;
and
– earnings per share would
remain to be calculated based
on profit or loss.
The IASB confirmed its tentative
decision to require separate
presentation of items of other
comprehensive income that will be
reclassified through profit or loss and
those that will not be reclassified
through profit or loss.
The FASB confirmed that it will
retain the requirement for separate
presentation of items of other
comprehensive income and net income
attributable to non-controlling interests
and those attributable to the controlling
shareholders.
IFRS 1 amendment (removal of
fixed date) project
The IASB deliberated the comments
received on the exposure draft on
removal of fixed dates from IFRS 1. The
IASB agreed that paragraph B2 and D20
of IFRS 1 should be amended to change
the fixed dates to the “date of transition
to IFRSs” and that the effective date of
the amendment should be 1 July 2011,
with early application permitted.
Liabilities project
The IASB considered requests to
specify situations of uncertainty
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in which a liability exists. The IASB
decided tentatively that in situations
of uncertainty a liability exists if the
available evidence indicates that a
more-likely-than-not threshold is met.
The IASB also considered
requests for guidance on applying
the existence criteria for legal
proceedings. The IASB decided
tentatively that an entity defending
legal proceedings has a liability if,
based on the available evidence, it is
more likely than not that the case will
be either:
●● ruled against the entity by the
courts if the case progresses
through the courts; or
●● settled out of court.
The IASB considered objections to
its proposal to omit from the IFRS
the recognition criterion requiring
a probable outflow, which prevents
entities from recognising some material
liabilities. No decision was made.
A staff paper on these issues will be
posted on the IASB’s website and the
IASB is expected to discuss these
issues later in 2011 after feedback from
interested parties has been analysed.
Post-employment benefits
project
The IASB discussed the proposals
on presentation, disclosure and
classification of the exposure draft on
defined benefit plans.
Presentation
The IASB decided tentatively:
●● to confirm the proposals to present
the service cost and finance cost in
profit or loss;
●● to not to specify how the service
cost and finance cost should be
presented in profit or loss;
●● to make it an option to present
the remeasurements component
either in profit or loss or in other
comprehensive income; this is
different from the proposals;
●● to confirm the proposal to prohibit
recycling of the remeasurements
component from other
comprehensive income to profit or
loss;
●● to allow transfer of the cumulative
amount of other comprehensive
income within equity; and
●● to confirm the proposals to
recognise all cost (i.e. the
service cost, finance cost and
remeasurements component) in
the statement of comprehensive
income, unless other standards
require capitalisation of such cost.
Disclosure
The IASB decided tentatively to make
the following amendments to the
proposals:
●● to focus the narrative description of
the risks on those that are specific
to the entity or unusual;
●● to remove some of the proposals to
provide certain disclosures related
to actuarial assumptions and future
contributions;
●● to add requirements to disclose:
– a narrative description of
funding arrangements and
funding policy;
– the amount of expected
contributions in the next year;
and
– the maturity profile of the
benefit obligation;
●● to remove the proposals to
specify the minimum categories
of plan assets and instead provide
examples of categories that could
be disclosed to meet the principle
of the disclosure; and
●● to remove the proposals to
disclose the defined benefit
obligations without the effect of
the expected salary growth and
instead disaggregate the defined
benefit obligation; the basis for
disaggregation will be explored
further in future meetings.
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Classification
The IASB decided tentatively:
●● to retain the classification of
post-employment and other
long-term employee benefits;
the recognition, presentation and
disclosure requirements for long-
term employee benefits will remain
the same as in IAS 19 Employee
Benefits;
●● to clarify that employee benefits are
classified as short-term only when
the whole amount resulting from
that type of benefits is expected
to be settled within the short-term;
and
●● to clarify that the classification of
a short-term employee benefit
should be reassessed if the benefit
no longer meets the definition of a
short-term employee benefit.
Other projects with no technical
decisions made
The discussion of the following projects
focussed more on timing and project
planning; no technical decisions made.
●● Conceptual framework project. The
Boards decided that the Reporting
Entity chapter of the conceptual
framework will not be finalised
during the first quarter of 2011 as
planned originally. The Boards are
expected to discuss the relevance of
some fundamental concepts to the
project at future meetings.
●● Revenue recognition project.
The Boards received a summary
of the feedback received on the
exposure draft on revenue from
contracts with customers, including
the feedback from the outreach
activities, roundtable discussions and
comment letters. The details of the
feedback received are expected to be
discussed in the December meeting.
Interpretations Committee
update
The IASB received an update on
the Interpretations Committee
kpmg.com/ifrs

meeting that took place on 4 and completion date for these priority The IASB has published an update of
5 November 2010. The IASB supported projects remains June 2011 or earlier. its work plan on 29 November 2010.
specifically the recommendation of the
Interpretation Committee to collaborate Consequently, the Boards have
with the financial instruments with decided to defer until after June 2011
characteristics of equity project team substantive deliberations on certain
when it considers potential alternative projects including:
accounting models for a financial
liability for a put option that is written ●● broad financial statement
over shares of a non-controlling interest presentation project
shareholder. ●● financial instruments with If you would like further information
characteristics of equity project on any of the matters discussed in this
Technical plan ●● emissions trading project issue of Briefing Sheet, please talk to
The Boards have given priority to ●● reporting entity phase of the your usual local KPMG contact or call
the MoU3 projects and the target conceptual framework project. any of KPMG firms’ offices.

Abbreviations
1 IASB: International Accounting Standards Board
2 FASB: US Financial Accounting Standards Board
3 MoU: Memorandum of Understanding

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Publication name: Briefing Sheet
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