IASB October 2007

Interaction between new framework and existing Framework

The Board considered issues arising from the interaction between Chapters 1 and 2 of the new framework and the existing Framework until the entire new framework is completed. The Board tentatively decided:

(a) to withdraw the relevant paragraphs on the objective and qualitative characteristics of financial reporting in the existing Framework and replace them with Chapters 1 and 2 when they are finalised.

(b) not to change the rest of the existing Framework as a consequence of publishing the new chapters, except for essential changes. The Board will determine at a later meeting which changes are essential.

(c) that amendments as a consequence of the new framework should not result in changes to IFRSs. The Board also asked the staff to consider if additional guidance is necessary because the previously existing guidance in the Framework had been changed.

(d) to apply the new chapters when they are finalised.

(e) to specify a separate effective date for constituents to apply each chapter, of at least one year after it is finalised. This is because IAS 8 requires management to consider applying the Framework when there is no applicable IFRS available.

Objective of financial reporting

The Board also reconsidered the objective of financial reporting. At its previous meeting the Board considered a proposed objective of financial reporting:

The objective of general purpose external financial reporting is to provide financial information about the reporting entity that is useful to current and potential investors and creditors and others in making decisions in their capacity as capital providers.

At this meeting the Board observed that the proposed objective did not explicitly acknowledge that users other than capital providers might use financial reports. The Board asked the staff to consider whether the objective should explicitly refer to other users and, if so, how.

Phase B: Elements and Recognition—definition of an asset

The Board continued its discussions of a working definition of an asset, and tentatively decided:

• to focus the definition of an asset on a present economic resource, rather than on future economic benefits.
• to remove the assessment of likelihood from the definition of an asset.
• to focus the definition on the present, rather than on past transactions or other events.
• to ask the staff to clarify the notion of other access that links the entity to the economic resource, preferably without using the word control.

The FASB reached similar decisions at its meeting on 17 October 2007.

The IASB and the FASB will continue to discuss wording of the definition at their joint meeting on 22 and 23 October 2007 (see below).