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The new standard on classification and measurement responds directly to the call of the G20 Leaders to ‘reduce the complexity of accounting standards for financial instruments’. IASB is working closely with the European Commission and the European Financial Reporting Advisory Group (EFRAG) to facilitate a smooth endorsement.
Sir David Tweedie structured his presentation on the following areas:
· Enhanced stakeholder dialogue to respond appropriately
IASB carried out an enhanced global consultation to ensure the input of all stakeholders was taken into account. In that regard, the one clear message which IASB has received from the Council and others on this issue is the need for broad stakeholder engagement in the standard-setting process to ensure a high-quality and broadly-respected outcome.
· Addressing the issues raised by stakeholders
At the heart of the IASB’s proposal is defining when fair value and cost-based accounting should be applied to financial instruments. Members of the Council and many commentators have expressed concern about any increased use of fair value. Sir David confirmed that extending the use of fair value has not been our motive or intent in developing a new standard.
The IASB knows that the new standard will apply not just to banks, but to all companies with financial instruments. Insurance companies have expressed some concerns regarding the immediate impact of the standard. Insurance companies would not be required to adopt the new standard until 2013 or 2014 at the earliest.
· Towards a high-quality, globally-accepted standard
The G20 has emphasised the need for convergence towards a single set of high-quality, global, independent accounting standards. To this end, the IASB has been, and is committed to, working with the US Financial Accounting Standards Board (FASB) to reach a common approach on financial instruments and on the other areas outlined in the Memorandum of Understanding between the two organisations.