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  • IASB publishes Exposure Draft of a new Conceptual Framework
    statement of changes in equity go unmentioned The chapter also discusses the definition of a reporting entity and the boundary of a reporting entity It also states the IASB s conviction that generally consolidated financial statements are more likely to provide useful information to users of financial statements than unconsolidated financial statements Chapter 4 The elements of financial statements The main focus of this chapter is on the definitions of assets liabilities and equity as well as income and expenses The definitions are quoted below Asset An asset is a present economic resource controlled by the entity as a result of past events An economic resource is a right that has the potential to produce economic benefits Liability A liability is a present obligation of the entity to transfer an economic resource as a result of past events Equity Equity is the residual interest in the assets of the entity after deducting all its liabilities Income Income is increases in assets or decreases in liabilities that result in increases in equity other than those relating to contributions from holders of equity claims Expenses Expenses are decreases in assets or increases in liabilities that result in decreases in equity other than those relating to distributions to holders of equity claims Note that other than in the DP the IASB has backed away from changes in the definitions liabilities and equity that would address the problems that arise in classifying instruments with characteristics of both liabilities and equity Exploring those problems has been transferred to the IASB s research project on financial instruments with the characteristics of equity Chapter 5 Recognition and derecognition The ED states that only items that meet the definition of an asset a liability or equity are recognised in the statement of financial position and only items that meet the definition of income or expenses are to be recognised in the statement s of financial performance However their recognition depends on three criteria their recognition provides users of financial statements with 1 relevant information about the asset or the liability and about any income expenses or changes in equity 2 a faithful representation of the asset or the liability and of any income expenses or changes in equity and 3 information that results in benefits exceeding the cost of providing that information Nevertheless the ED also maintains that whether the information provided is useful to users depends on the item and the specific facts and circumstances and requires judgement and possibly varying recognition requirements between standards Derecognition requirements as presented in the ED are driven by two aims the assets and liabilities retained after the transaction or other event that led to derecognition must be presented faithfully and the change in the entity s assets and liabilities as a result of that transaction or other event must also be presented faithfully The ED also describes alternatives when it is not possible to achieve both aims Chapter 6 Measurement This chapter is dedicated to the description of different measurement

    Original URL path: http://www.iasplus.com/en/news/2015/05/cf-ed (2016-02-10)
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  • IASB decides to extend the comment period for the Conceptual Framework ED
    2005 2004 2003 2002 2001 2000 Info IASB decides to extend the comment period for the Conceptual Framework ED 22 Sep 2015 At its meeting today the IASB discussed an agenda paper recommending to extend the comment period for the Conceptual Framework ED The IASB followed the staff s recommendation and decided to extend the comment period for the Conceptual Framework ED from 150 to 180 days ending on 25 November 2015 Please see the IASB Update for further information Related Topics Resources IASB exposure drafts International Accounting Standards Board IASB Projects Conceptual Framework Comprehensive IASB project Standards Conceptual Framework for Financial Reporting 2010 Related news Pre meeting summaries for the February IASB meeting 09 Feb 2016 2016 IFRS Red Book coming in March 09 Feb 2016 Reactions to the proposed amendments intended to address concerns about the different effective dates of IFRS 9 and the forthcoming new insurance contracts standard 08 Feb 2016 We comment on the IASB s proposed amendments to IFRS 4 08 Feb 2016 FEE briefing paper on the endorsement of IFRS 9 08 Feb 2016 February 2016 IASB meeting agenda posted 05 Feb 2016 All Related Related Publications Deloitte comment letter on proposed amendments to IFRS 4 08 Feb 2016 IFRS in Focus IASB issues amendments to IAS 7 Statement of Cash Flows requiring disclosure of changes in liabilities arising from financing activities 01 Feb 2016 Deloitte comment letter on the IASB s annual improvements to IFRSs 2014 2016 cycle ED 27 Jan 2016 IFRS industry insights Telecommunications sector Implications of the new leasing standard 21 Jan 2016 All Related Related Discussions Conceptual framework joint with FASB education session 23 Sep 2015 Conceptual framework IASB only 22 Sep 2015 Insurance contracts 20 May 2015 Conceptual framework 19 Mar 2015 All Related Related Dates February 2016

    Original URL path: http://www.iasplus.com/en/news/2015/09/cf-ed-comment-period (2016-02-10)
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  • Conceptual framework
    from the Framework would mean having to go through all Standards removing OCI as well The Vice Chairman called a vote on the staff recommendation to change the term statement of comprehensive income to the term statement s of financial performance Nine of the fourteen Board members were in favour On removing the term OCI from the Framework only three Board members agreed The Senior Technical Manager introduced the next issue which concerned dual measurement i e the selection of a current measurement basis for an asset or a liability in the statement of financial position and the selection of a different measurement basis for related income and expense Excluding those income and expenses permanently i e no recycling from the statement of profit or loss might enhance the relevance of the information in that statement This had led to confusion amongst the reviewers of the pre ballot draft The staff therefore recommended extending the discussion on dual measurement and inserting an illustrative example The example explained that the income or expense would be disaggregated with the amortised cost part recognised in profit or loss and the fair value part recognised in OCI One Board member said that the example was confusing and that the disaggregation was not similar to recycling in her view The Chairman agreed and said that the example was too extensive Another Board member also proposed not to include the example as this was an exception to the benchmark treatment of dual measurement i e no recycling A fellow Board member agreed and said that the introduction of disaggregation was not a sweep issue as it would change the entire concept of recycling The Research Director replied that there was a lot of confusion about recycling and that communication was required One Board member agreed but said that this should be done through the performance reporting project He said that the example was not conceptual and therefore not fit for the Conceptual Framework The Vice Chairman called a vote on including the example in the Exposure Draft None of the Board members voted in favour One Board member said that this should not mean that the Exposure Draft should avoid the term disaggregation The Technical Principal said that the draft also mentioned disaggregation in the presentation section and that this should not be removed The Technical Principal then went on to the issue on reporting entities Constituents had expressed concerns that the definition of a reporting entity was too broad as entities could also report on an incomplete set of activities The staff therefore recommended prescribing that the financial statements of a reporting entity should provide information that was useful to the users of financial statements in making decisions about providing resources to the entity Also economic activities of the reporting entity should be a complete set of economic activities One Board member agreed and said that constituents should be reminded that there was an overall objective of financial statements Another Board member said that statements

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/march/conceptual-framework (2016-02-10)
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  • Conceptual Framework - Sweep issues
    in the staff draft that the lack of a past event could prohibit recognition He said that the Board had decided before that the past event did not play a role in recognition The Chairman asked who supported the staff recommendation 12 of the 14 Board members were in favour The next issue concerned the definition of an economic resource The Technical Principal said that both the asset and the liability definitions in the Exposure Draft included the term economic resource Economic resource was in turned defined as a right that was capable of producing economic benefits The term capable did not mean a minimum probability threshold but meant that at least in some circumstances the economic resource would generate economic benefits When drafting this section the staff realised that the term capable was already used in the discussion of relevance in the existing Conceptual Framework As the ambiguous use of capable could potentially raise confusion the staff suggested replacing is capable of in the discussion of economic resources with has the potential to A Board member agreed with the change He said that capable implied a probability threshold especially when translated to Portuguese The Chairman agreed and said that translation to other languages also might be problematic He concluded that everyone agreed to change the draft The Technical Principal introduced the next issue which was the objective of profit or loss She reminded the Board that they voted in favour of bringing forward the dual objective of profit or loss from the Discussion Paper The staff however realised in the drafting process that the objective of profit or loss was redundant as it had already been covered by the overall objective of financial reporting In addition to that other components of financial statements did not have a separate objective either The Technical Principal therefore suggested deleting the objective One Board member agreed but said that the Board had missed an opportunity to define objectives for all components of financial statements A fellow Board member agreed as well but also saw the objective as an additional signpost in the difficult question of what went into profit or loss and what went into OCI A fellow Board member did not see a redundancy as the general objective of financial statements stated depicting the return an entity had made on its economic resources whilst the objective for profit or loss added during the period to this objective In his view this expressed a key element in the distinction between profit or loss and OCI The Chairman and Vice Chairman agreed with that One Board member said that the Board was struggling with defining objectives for other components and he welcomed the fact that this objective would be deleted as well He also asked why OCI would not be part of the objective if it were to be left in the draft The Technical Principal shared this concern as the objective as drafted might indicate that nothing would ever be recognised outside of

    Original URL path: http://www.iasplus.com/en/meeting-notes/iasb/2015/january/conceptual-framework (2016-02-10)
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  • Conceptual Framework
    Board member said that he was more concerned about the question of why a framework for public entities like the IPSASB s would contain elements of ownership whilst a framework for private entities like the IASB s would not The Research Director said that income and expenses were proposed to be defined as changes in assets or liabilities other than distributions or contributions He said that the Board had decided that distributions and contributions should not be elements as this would most likely cause drafting issues and it had not caused issues in the past Agenda Paper 10D Measurement Transaction costs The Technical Principal reminded the Board that the Discussion Paper was silent on transaction costs However this was an issue that was often discussed when drafting a new standard Staff had therefore decided to propose adding transaction costs to the discussion of measurement bases in the Conceptual Framework The Technical Principal said that the agenda paper distinguished two types of transactions costs The first category was the cost of acquiring an asset or incurring a liability and would therefore increase the carrying amount of an asset or decrease the carrying amount of a liability The second category was transaction costs that were incurred when realising an asset or settling a liability These costs decreased the carrying amount of assets and increased the carrying amount of liabilities The discussion in the agenda paper on the first category of transaction costs began with assets and liabilities that were measured at current value The costs of acquiring an asset or incurring a liability were a feature of the transaction rather than a feature of the current value The staff therefore recommended that transaction costs were not a part of the current value One Board member asked whether this was consistent with IFRS 13 Fair Value Measurement The Technical Principal confirmed that A Board member added that it was also consistent with IFRS 9 Financial Instruments A fellow Board member asked if there were any examples for transaction costs that occurred on fulfilment of a liability The Technical Principal said that costs of employment of a third party to fulfil the liability on the entity s behalf would be an example The Board member replied that to him those were costs of execution not transaction costs A Board member said that transaction costs could be separate assets and liabilities and he was therefore concerned stating that they were part of an asset or a liability He agreed that costs incurred on acquisition of an asset should be included in the asset but he was concerned about the way this was presented in the agenda paper The Technical Principal replied that in most cases transaction costs would not meet the asset criteria and that the paper focused on those The Research Director added that costs by themselves would never meet the definition of an asset An asset could only be a right so the question was whether it was a separate right or an

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  • Conceptual framework
    disclosed to provide the best estimate of cash flows One Board member said that there were many variables in measuring a liability for example entity specific vs market view own credit risk adjustment profit margin etc This led to many possible compositions of liabilities He said fulfilment value should therefore be defined like value in use The Technical Principal agreed that it would be helpful to have a definition however she believed that this would be a long discussion and was concerned that on a standards level the discussion would arise again when discussing whether the fulfilment value should be adjusted in particular circumstances The Research Director said that the definition of value in use would not provide all answers either and that the answers needed to be given on a standards level i e IAS 36 He said that nonetheless staff could try defining fulfilment value The Chairman proposed doing that and asked what that meant for the process The Technical Principal said that they could bring back a new staff draft for the November IASB meeting The Chairman agreed A Board member expressed concern that the Framework would then have different levels of detail as cash flow based measures would not be defined In response to that the Chairman advised the staff to keep the definition of fulfilment value on a high level The Research Director replied that the paper already contained a high level definition of fulfilment value being the present value of cash flows estimated to arise in fulfilling the liability He said that this was the same level as value in use in IAS 36 The Technical Principal was concerned that refining this definition would lead to an overly detailed definition The Chairman acknowledged that but suggested including the spirit of the discussion in the next staff draft nonetheless The Technical Principal agreed and said that this would be a sweep issue The Chairman refrained from calling a vote given the general acceptance of the paper in the discussion Summary of potential inconsistencies between the existing standards and the Conceptual Framework Exposure Draft The Technical Associate said that the agenda paper showed the implications of the revised Conceptual Framework for existing standards She said that the Board had already discussed some of those implications Staff recommended highlighting the potential implications in the Basis for Conclusions on the Exposure Draft It should be made clear that the Framework did not override existing standards and that any standard changes needed to follow due process She also said that preparers who used the Framework to develop an accounting policy due to lack of standard guidance IAS 8 would be immediately affected by changes to the Framework She continued saying that staff had identified standards with inconsistencies to the revised Framework These were reclassification requirements in IAS 32 and recognition requirements in IFRIC 21 Minor inconsistencies included standards that quoted asset and liability definitions but the staff did not see any application issues for those standards They also included standards that did not state a disclosure objective or included a requirement of using forward looking information unrelated to assets or liabilities at the end of the period She said that changes to the Framework could have an impact on current projects e g emission trading or rate regulated activities On the other hand she said that some existing inconsistencies would disappear with the new Framework The Vice Chairman said he agreed with this summary but strongly disagreed with some of the proposals suggested in the subsequent papers He said that currently the Board was only deliberating an Exposure Draft and therefore it seemed premature to him to think about changing the term reliable in the standards as redeliberations on the Exposure Draft might bring the term back A Board member shared the concerns and said that she agreed with adding the summary to the BC on the Exposure Draft but would not agree with adding it to the final BC on the Framework Another Board member disagreed with the Vice Chairman s view and said that the Exposure Draft should be the Board s firm belief of a Conceptual Framework and therefore the Board needed to inform constituents about consequences for the standards if the Exposure Draft would be finalised as drafted The Vice Chairman pointed out that he agreed with the staff recommendation as regards highlighting issues in the BC and only had problems with the detailed amendments proposed to the standards The Chairman assumed that everyone agreed with the staff recommendation Nobody objected Proposed amendments Updating references to the Framework The Technical Associate explained that several standards still referred to the old title of the Framework i e Framework for the Preparation and Presentation of Financial Statements These references had not been updated when the title had been changed to Conceptual Framework for Financial Reporting Staff recommended updating those references with the publication of the new Framework The Technical Associate summarised the detailed proposals as laid out in the appendix to the agenda paper The staff also recommended allowing a transition period of at least 18 months One Board member said that the Board had stated previously that they would not change any standard as a result of the transitioning to the new Framework Being under this impression he was confused as to why staff did now recommend making changes to standards He understood that references needed to be updated but found it difficult where to draw the line A Board member disagreed and said that some changes were necessary in his view The Chairman supported that and said it was merely a technical issue to update references One Board member said he disagreed with the staff s view that updating the references had no significant effect For example updating the reference in IFRS 3 led to a different definition of assets and liabilities which in turn could lead to a different recognition of assets and liabilities in a business combination The Research Director said that whilst

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  • Conceptual framework
    continued to support a mixed measurement model She pointed out that this had been the proposed model in the Discussion Paper and that it had received broad support from respondents One Board member said that whilst he did not support a single measurement model in general there might be circumstances in which it was appropriate e g on liquidation The Technical Principal replied that the paper encompassed such situations Another Board member said that it was not necessary in his view to make an explicit reference to such situations A Board member referred to the part of the agenda paper where it said that the IASB needed to consider the assessment of investors how an asset or a liability would contribute to future cash flows when selecting a measurement basis She was concerned that this could imply that management s assessment on this might be irrelevant The Chairman shared this concern The Technical Principal said that this was part of question 2 and opened the discussion on that question She said that respondents to the Discussion Paper had showed broad support for selecting a measurement basis that was based on an assessment how an asset or a liability would contribute to future cash flows She therefore suggested carrying forward this reference to the Exposure Draft together with the reference that this was only one of the factors to consider when selecting a measurement basis and that the importance of each of the factors depended on the facts and circumstances She asked the Board members whether they agreed The Chairman agreed and suggested the reference be made more objective by removing the reference to investors creditors and other lenders from the proposed wording The Technical Principal summarised that the Board was content with the staff recommendation if the reference to investors creditors and other lenders was deleted She moved on to question 3 where staff asked the Board whether they agreed with the Exposure Draft stating that the way in which an entity conducted its business activities should be considered when deciding how an asset or a liability contributed to future cash flows She also asked whether they agreed that the Conceptual Framework should not refer explicitly to any specific business activity although this had been proposed by respondents to the Discussion Paper She said that respondents also thought that referring to the business activity could help improve the relevance of the financial statements She conceded that some respondents had expressed concerns with regard to management intent One Board member asked whether staff intended addressing accounting mismatches as the business model played a role in those as well The Technical Principal replied that this had been included in one of the decisions made in July A Board member disagreed with the staff s recommendation and said that business activities were a pseudonym for business model which in his view led to the management intent problem He conceded that IFRS 9 used the business model with regard to measurement but hoped that would stay an exception A fellow Board member disagreed and said that financial reporting was also about the reporting of business activities He then referred to the reference in the agenda paper where staff had stated that as an example non financial institutions would normally repay their financial liabilities in accordance with their contractual terms rather than seek to transfer them to a third party He asked whether the intention was only to cover normal scenarios in the standards or if abnormal scenarios should also be discussed The Technical Principal said that this was generally the case but she could think of situations where also abnormal outcomes would be covered One Board member asked the Technical Principal to confirm that not the fact that an entity was a lender influenced the measurement but the fact how the lender managed its financial assets The Technical Principal confirmed that A fellow Board member agreed with the staff s recommendation He made reference to the FRC s comment about management intent The FRC had said that an asset should not be written down simply because management intended to use it in a sub optimal manner He believed that if management used an asset in a sub optimal way this should be reflected in the financial statements as the asset produced less cash flows One Board member expressed concern about the wording in the agenda paper that a business activity was entity specific He was concerned that the Framework might conflict with standards Standards described a certain measurement but if an entity conducted its business differently it could be derived from those words that the measurement was different The Technical Principal replied that the guidance was directed at the Board when selecting a measurement basis The Board member then suggested deleting the reference to the entity and merely say business activities should be considered Supported by the Chairman the Technical Principal agreed A Board member suggested merging questions 2 and 3 by saying that how an asset or a liability was used in the business activity should be considered when selecting a measurement basis Everyone agreed The Technical Principal said that question 4 regarded the interaction of the selection of a measurement basis and the use of other comprehensive income She reminded the Board that they had taken several decisions on OCI and that it should be restricted to items of income and or expense or components of income and or expense that were derived from a change in current measurement of an asset or liability The IASB had decided that the use of OCI enhanced the relevance of financial statements OCI could be used when the IASB decided that one measurement basis was appropriate for the statement of financial position and a different measurement basis was appropriate for the statement of profit or loss The agenda paper discussed when such dual measurement could be appropriate She asked the Board whether they agreed to state in the Exposure draft that it would be appropriate when a the IASB concluded that a current measurement basis provided relevant information in the statement of financial position but that including a component of the change in the current measurement in OCI allowed the entity to provide better information about an aspect of the entity s business activities and b there was more than one way in which an asset or a liability was likely to contribute to future cash flows The Vice Chairman agreed with a As regards b he said he did not understand that if for example an entity had an asset that was held for two reasons i e appreciation and cash inflows why not both parts were recognised in profit or loss The Technical Principal said that there were several ways in practice to present the different kinds of income A Board member supported the Vice Chairman and said that this should be linked to the OCI decision as there were other ways to disaggregate The Technical Principal confirmed that this was the case A Board member said he did not agree with a and b as they were too specific considering that there were three conceptual bases to use OCI He said that OCI could only be used if it provided more relevant information However this information could be provided by a different disaggregation The Chairman said that the use of OCI could only be defended by stating that it provided more relevant information One Board member suggested reducing the discussion and agreed with b as one example when dual measurement was appropriate She said that a was basically a recapitulation of the Board s discussions and therefore did not serve a great purpose in her view though she did not disagree with it The Technical Principal agreed A fellow Board member said that there was a lot of overlap between a and b and that they were incomplete in her view Agreeing with that a Board member suggested deleting the reference to the business activities in a and making b the reasoning for a i e because there is more than one way The Technical Principal said that she needed to think about drafting and that her impression was that the measurement section did not need an extensive discussion on that as it was already portrayed in the OCI section She said she would include that occasionally there was more than one measurement basis and would then discuss how best to present this fact i e disclosure or OCI The Board agreed Question 5 concerned the nature of an asset or a liability and if it was one of the factors that should be considered when selecting a measurement basis Many respondents to the Discussion Paper had agreed with that however some had thought that this was more a standards level issue Staff partly agreed with that but suggested an underpinning conceptual basis One Board member said that nature should be replaced with characteristics Another Board member asked whether high variability demanded current value The Technical Principal said that this would be the Board s decision He replied that for example crude oil inventory or intangible assets also had a high variability but cost as a measurement basis The Technical Principal said that they deliberately did not demand fair value for high variability to avoid confusion The Board member was concerned that this was not enough guidance for future standard setting The Vice Chairman believed that it was not so much the nature of an asset or a liability than the business model that determined the measurement for examples regards liabilities he would find the fulfilment value more relevant than the fair value A Board member replied that users had demanded fair value to be able to see changes in credit risk early One Board member agreed with the staff recommendation and said that nature was but one factor other factors also needed to be considered No further comments were made Measurement initial measurement The Technical Principal said that this paper addressed two minor issues She said that one of the issues was to align the terminology with the description of measurement bases and to delete much of the standard level detail that was in the Discussion Paper Also some points on the exchanges of value should be clarified The other issue was changing the requirement that initial and subsequent measurement should be the same One Board member said with financial instruments the initial measurement was fair value and then if the standard required that amortised cost was applied from that initial fair value She asked how this would fit in the context of the paper The Technical Principal replied that fair value was deemed cost which would be one of the cases were a change of measurement basis would be permitted No further comments were made Implications of long term investment for the Conceptual Framework The Research Director introduced the agenda paper The paper addressed the information that could be provided on long term investments of the entity and what information about the entity a long term investor could need He pointed out that these were two separate questions He said that government bodies had promoted long term investment and had considered issues relating to it He conceded that there was no definition of long term investment He asked the IASB whether they agreed that they had sufficient tools in the proposed Framework to make decisions about long term investments and that no other part of the Framework needed any reference to long term investments One Board member said that when assessing business activities the relationship between assets and liabilities i e how an entity financed its activities played an important role Another Board member said that the fair value was different from the fundamental long term value as it included margins from a small number of people trading He asked the Research Director how the Framework would be dealing with that He replied that he would see the discussion in the section of the Framework where market vs entity specific values were discussed A Board member said he agreed with the staff s recommendation However he did not believe that there was a call for changing the accounting for investments in subsidiaries joint ventures or debt instruments He thought the main concern would be equity investments He asked whether this would affect the Framework The Research Director replied that this would be a standards level decision and would therefore not affect the Framework One Board member said that it would be especially important to see whether there was a mismatch in durations of assets and their funding liabilities She agreed however that the Board had sufficient tools in the Conceptual Framework to address these issues Upon calling a vote all fourteen Board members agreed with the staff s recommendation The Research Director went on to long term investments in the reporting entity He said that there were concerns amongst constituents that the Board might focus too much on short term investors and potential investors rather than existing investors Another concern was the excessive use of current measurements and the implied focus on short term investors The Research Director said that staff did not understand the link between current measurements and short term investors In their view the long term investors were even more interested in current measurements Also staff believed it was correct to also focus on potential investors Next in the paper was the objective of financial reporting where he said that it should not be an objective to encourage or discourage a certain type of behaviour in investors He continued with stewardship and prudence which were also topics that had come up regularly in the discussion of long term investment Also he said that there was a concern that current measures could lead to volatile and sometimes excessive dividends and bonuses He asked the Board whether they agreed that the Framework including the tentative decisions made to date contained sufficient and appropriate discussion of the aforementioned topics A Board member said that bonuses dividends and tax payments were always topics at outreaches to constituents He said that the Framework was clear on these issues however he felt that it should be further clarified that this was not an accounting problem A fellow Board member welcomed the agenda paper and suggested to include parts of it in the Basis for Conclusions Several Board members supported that One Board member said that the changes in claims to the entity were of particular interest for long term investors Also she said the Board had made tentative decisions with regards to going concern that would provide useful information to long term investors A fellow Board member said that stewardship was more important for long term than for short term investors and therefore long term investors required more information The Chairman summarised that the Board took this issue seriously and suggested to include the topic in the Basis for conclusions Upon calling a vote all Board members agreed with the staff recommendation Equity This session was devoted to concluding the IASB s discussions for the equity section of the Conceptual Framework Exposure Draft The Technical Manager introduced the session and noted that five papers had been prepared for the meeting He noted that the staff wanted to focus discussion on agenda papers 10H and 10K which were the papers that discussed the consequences for the Conceptual Framework He noted that agenda papers 10I and 10J were provided for information purposes and that the IASB had already seen a version of agenda paper 10I and that agenda paper 10J supplemented agenda paper 10I based on comments received from the IASB when the topic was previously discussed Consequences of approaches explored In the corresponding agenda paper the staff explored whether and the extent to which the definitions of liability and equity needed to change in order to implement the approaches in agenda paper 10I The Technical Manager introduced the paper and asked the IASB members whether they agreed with the staff recommendation that The definitions of a liability and of equity should not be amended at this time and if not how the definitions should be amended and why the staff explore a more complete implementation of the combined settlement and value approach in the Research Project One IASB member noted that she believed that the IASB needed to propose an amendment to the liability definition In particular she noted that the definition needed to be amended to address the variable share settlement issue as the current literature IAS 32 and IFRS 2 provided conflicting answers The Conceptual Framework project provided the IASB with a good opportunity to address the issue She noted that the staff had identified in paragraph 42 of the paper that one of the disadvantages of amending the definition of a liability was that it would be a fundamental change however she questioned how significant this change would be given most of the proposed definition aligned with IAS 32 She further noted that she was concerned at the suggestion that this issue should be addressed in the Research Project rather than the Conceptual Framework project as a the scope of the Research Project has yet to be determined b without more answers from the Conceptual Framework project trying to come up with answers to known problems in IAS 32 could be difficult and c the Conceptual Framework should provide the foundation to resolve standards level problems rather than being completed as a result of standards level decisions Another IASB member noted that she supported the staff recommendation not to amend the existing definitions at this time particularly from a process perspective She acknowledged the conflicts between IAS 32 IFRS 2 and the existing Conceptual Framework definitions She noted that in theory the Conceptual Framework should provide the foundation for resolving standards level issues but cautioned the IASB about tying its hands before performing an in depth exploration of the issues and

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  • Conceptual Framework – Transition requirements for the revised Conceptual Frameworks
    the paper that the Committee should start applying the revised Conceptual Framework immediately after its publication was really the only logical option as once published this became the new Conceptual Framework under IFRS He noted that the Standards clearly trumped the Conceptual Framework and that in situations where there were substantial issues with the new Conceptual Framework conflicting with existing literature the Committee would refer such issues to the IASB in accordance with the procedures set out in the due process handbook However he noted that he believed such situations would be rare Another Committee member noted that he believed that transitional provisions for those entities that had selected accounting policies on the basis of using the hierarchy in IAS 8 were necessary He noted that he also agreed that the IASB and Committee should start using the revised Conceptual Framework immediately after its publication He further noted that he believed it was important for the Committee to think about the process that would be followed in situations where conflicts arose between existing Standards and Interpretations and the new Conceptual Framework He added that such situations could also arise with respect to agenda rejections and notices where the Committee had provided some level of guidance based on the existing Conceptual Framework and Standards He noted that these sources of guidance could be made inconsistent by the issuance of the new Conceptual Framework and the Committee could be asked to clarify whether such guidance was still appropriate One of the IASB members present cautioned the Committee about making the issue unnecessarily complicated She noted that the issuance of the new Conceptual Framework would not result in the need for the IASB to go back and question the legitimacy of all existing Standards Accordingly she noted that to the extent that the Committee had interpreted those Standards unless there were gaps where the Committee had to specifically go to the Conceptual Framework she would not expect there to be any more questions about the legitimacy of those Interpretations because of the new Conceptual Framework than there would be about the Standards themselves which were not being questioned One of the Committee members responded and noted that while the IASB did not have to add to its agenda a project to look at a Standard the Committee had to accept submissions that came in and decide whether to add them to its agenda He noted that some of those submissions could relate to existing Interpretations and specifically whether they remained valid He also noted that the Committee could receive questions that would need to be answered in the context of a Conceptual Framework that would conflict with a Standard He acknowledged that such situations would be rare but that the Committee should do some work on what its process would be if such situations arose The Chairman highlighted the point that as for Standards any Interpretations that had been issued took precedence over the Conceptual Framework He noted that there could be situations

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