IFRS users could have a new financial instruments classification
and measurement standard to use when preparing their 2009 financial
The International Accounting Standards Board (IASB) is currently
conducting a comprehensive review of IAS 39 Financial Instruments:
Recognition and Measurement. An exposure draft is due in October
and a final IFRS in the first half of next year.
But the board decided this month to publish an exposure draft on
classification and measurement in July. If feedback on the draft is
positive, a final standard covering that section will be effective
for 2009 financial statements. Essentially this means the
comprehensive review of IAS 39 would continue but be broken into
The move follows ramped up pressure from European politicians for
the IASB to provide a clear timeline for their revision of IAS
Speaking at an EC conference on financial reporting earlier this
month, European Commissioner for Internal Market and Services
Charlie McCreevy said the IASB should accelerate work on crisis
related issues and come forward with technical solutions in time
for the preparation of the 2009 annual accounts.
He noted a “growing concern” among European finance ministers at
the time it has taken the IASB to respond to the systemic
“Many ministers have complained about what they see as an
over-academic approach to standard-setting, which many see as out
of touch with today’s reality. The IASB needs to show they
understand these concerns and can take the steps necessary to
address them quickly. Otherwise, the progress towards global
accounting standards is going to be called into question,” McCreevy
At the same conference, IASB member John Smith said the standard
setter was “acutely aware” of the attention it was under and would
work in an “urgent manner” with the US Financial Accounting
Standards Board to release an exposure draft within six
He pointed out that, although there was a sense of urgency on IAS
39, due process had to be respected because the revised version
would probably be used for the next 10 years, as its predecessor
A representative from the French Ministry of Finance said he wanted
a clearer picture of when the revision would be done and what could
be done quickly to address any issues.
Deutsche Bank head of accounting policy Charlotte Jones said if an
exposure draft was not released for six months this realistically
meant no changes until 2010.
European Financial Reporting Advisory Group technical group
chairman Stig Enevoldsen said he wanted due process and a viable
long term solution but was also “a bit worried” about only
receiving an exposure draft late this year.
Smith ruled out providing an effective date for its release and
implementation as the IASB had found previously that comments
received from exposure drafts could cause drafts to be re-thought
and in some cases re-issued.
Nicholas Moody and Carolyn Canham
Fixing IAS 39
International Accounting Standards Board member John Smith outlined
what the IASB is doing to fix IAS 39 at an EC financial reporting
conference this month:
• Reduce measurement alternatives. There are currently 12 different
measurement methods for financial instruments, including three for
impairment. There are also at least 22 ways of reaching one of the
measurement methods. The end goal is to get to two measurement
options. Ideally, there will be single impairment method.
• Decide whether it is the characteristics of an instrument, its
activity in the marketplace or management’s intentions that is of
• Address the issue of transfers out of fair value.
• Evaluate how to reduce complexity and increase the transparency
of hedge accounting activities.
Source: EC financial reporting conference