Derecognition
IAS 39 Financial Instruments: Recognition and Measurement sets out requirements for derecognising financial assets .
These requirements are fundamentally different to the requirements for derecognising financial instruments in US GAAP SFAS 140 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities .
Furthermore, many find the derecognition requirements in IAS 39, which the Board inherited from its predecessor body, the International Accounting Standards Committee (IASC), to be complex.
In April 2005, the IASB and the U.S. Accounting Standards Board (FASB) directed the staff to begin a research project to develop a new approach to derecognition with an initial focus on financial assets that would be an improvement to both, IAS 39 and SFAS 140.
The boards also directed the staff to consider as a part of that research project the feasibility of developing a broader derecognition standard that would apply to all types of assets.
In July 2008, the IASB moved this project from its research agenda to its active agenda.
Where are we in the project?
The initial results of the staff research work were discussed by the IASB and FASB in October 2007.
The draft staff paper sets out a possible approach to derecognition based on the existence or otherwise of the legal rights to a financial asset by the reporting entity.
That approach requires further analysis to assess its feasibility in regard to securitized assets and the treatment of servicing contracts.
The staff is also considering other possible approaches to derecognition of financial assets to assess whether they would represent a significant improvement to existing requirements.
Is this project part of the Memorandum of Understanding?
Yes, this project forms part of the Memorandum of Understanding which sets out a Roadmap of Convergence between IFRSs and US GAAP 2006 - 2008.
Next due process step
The staff will be presenting an update of their work to the Boards at their joint meeting in October 2008.
Related projects
In addition to this project, there are two other long-term projects on financial instruments:
There are other projects that are also related to this project:
This project might generate useful inputs for the related projects and the conclusions reached in other projects might affect the Board’s work in relation to this project.
Further information
- Download the full report [PDF], including a summary of the tentative decisions the Board has reached.