IASB April 2007

The Board began its redeliberation of the discussion paper Preliminary Views on an Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information. The Board discussed issues related to the qualitative characteristics and tentatively decided:

• to retain faithful representation as a necessary qualitative characteristic.

• to separate verifiability from faithful representation and describe it as an enhancing qualitative characteristic, rather than a component of a necessary qualitative characteristic.

• to clarify the description of faithful representation to make clear that faithful representation requires the economic substance of the underlying phenomenon to be portrayed regardless of its form and that neutrality and completeness are necessary but not sufficient to achieve faithful representation.

• to clarify the distinction between necessary and enhancing qualitative characteristics.

• to clarify the discussion of understandability to link it more clearly to the primary user group identified in chapter 1 of the discussion paper.

• to affirm its decision that conservatism is incompatible with neutrality and therefore is not a component of faithful representation.

The Board asked the staff to consider whether timeliness should be removed as a component of relevance and be classified as either an enhancing qualitative characteristic or as a constraint of financial reporting.

The Board also discussed issues related to the conceptual framework in general. It affirmed its decision to consider the applicability of the framework to not-for-profit organisations in a separate and later part of the project. It also directed the staff that, in drafting due process documents, they should, when feasible, continue to use terms that are compatible with the range of entities that compose the IASB and FASB constituencies and to which the converged framework would apply.