Financial Instruments: A Replacement of IAS 39 Financial Instruments: Recognition and Measurement
Where are we in the project?
On 19 March 2008 the IASB published a discussion paper Reducing Complexity in Reporting Financial Instruments.
The discussion paper is open for comment until 19 September 2008.
Background
IAS 39 was originally issued by the Board’s predecessor body, the International Accounting Standards Committee (IASC). IAS 39 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. Many find IAS 39 complex and have asked the Board to simplify and improve it.
For some time the Board has acknowledged the need to improve the reporting of financial instruments and to reduce the complexity of that reporting. IAS 39 has been amended several times for various reasons, but the Board has not previously reconsidered the fundamental requirements of IAS 39.
At their joint meetings held in April and October 2005, the Board and the FASB discussed the future of financial reporting for financial instruments. Three explicit long-term objectives were established to improve and simplify the reporting for financial instruments:
- to require all financial instruments to be measured at fair value with realised and unrealised gains and losses recognised in the period in which they occur;
- to simplify or eliminate the need for special hedge accounting requirements; and
- to develop a new standard for the derecognition of financial instruments.
The ultimate goal of this project is to issue an IFRS that would significantly improve and simplify financial instrument reporting.
Is this project part of the Memorandum of Understanding?
Yes, this project forms part of the Memorandum of Understanding between the Board and the FASB which sets out a Roadmap of Convergence between IFRSs and US GAAP 2006 – 2008.
Next due process step
The project has been undertaken as the result of a research effort not officially as part of the IASB’s active agenda. However, as mentioned above, it forms part of the MoU with the FASB.
The IASB will consider a project proposal to add this project to its active agenda.
In 2004 the IASB set up a Financial Instruments Working Group (FIWG) that includes users, preparers and auditors of financial statements of both financial institutions and other types of entities.
In addition, other interested parties participate, such as regulators of financial institutions. The purpose of the FIWG is to advise the IASB in the development of a new standard on financial instruments.
Related projects
In addition to this project, there are two other long-term projects on financial instruments:
There are other projects that are related to this project, including: