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March 30, 2010

Tweedie admits financial instruments challenge

International Accounting Standards Board (IASB) chair David Tweedie has acknowledged the IASB is least likely to achieve convergence with the US Financial Accounting Standards Board (FASB) in its memorandum of understanding (MoU) project on financial instruments.

The convergence MoU, first signed in 2006, covers a series of major projects including:

  • Financial Instruments;
  • Consolidations;
  • Derecognition;
  • Fair value measurement;
  • Revenue recognition; and
  • Leases.

The aim is to achieve converged standards by mid-2011. This has been backed by the G20.

The IASB and FASB reaffirmed their commitment to the goal in November last year, saying they would meet monthly to achieve the deadline.

Unofficial notes taken by Deloitte staff at a meeting of the trustees of the International Accounting Standards Committee (IASC) Foundation this week say Tweedie has conceded financial instruments is the project on which convergence will ‘most likely’ not be achieved.

The IASB’s financial instruments standard, IFRS 9, uses a mixed measurement model, with fair value measurement and amortised cost used in different situations.

The FASB seems set on a full fair value measurement model, which would not be accepted by Europe.

However, Deloitte’s notes, published on the IAS Plus website, quote one US trustee as saying it is far from clear the FASB’s ‘full fair value on the balance sheet’ approach would be accepted.

He noted that for debt instruments in particular, the amortised cost approach was seen as the better, more useful measure.

 

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