IASB and FASB seek to reduce differences in classification and measurement models for financial instruments

LONDON & NORWALK, Conn.--(BUSINESS WIRE)--The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) today agreed to work together to seek to reduce differences in their respective classification and measurement models for financial instruments.

“At the same time, this limited-scope review now presents an ideal opportunity to align IFRS and US GAAP more closely, in this important area of financial reporting.”

The discussions will form part of the FASB’s ongoing redeliberation of a proposed Accounting Standards Update on financial instruments, which was originally issued in May 2010. The IASB will consider these discussions as part of its project to undertake limited-scope changes to IFRS 9, Financial Instruments, issued in November 2009 and amended in October 2010, resulting from its ongoing work to develop a new IFRS on insurance contracts and the feedback received on application of IFRS 9 to particular instruments.

The boards will work together with the objective of more closely aligning key aspects of their classification and measurement models.

The boards will explore these key aspects jointly, and then decide whether to issue proposed amendments to IFRS 9 and U.S. Generally Accepted Accounting Principles (U.S. GAAP), respectively.

IASB Chairman Hans Hoogervorst said:

“When IFRS 9 was introduced in 2009 we said that further amendments might be required once the direction of travel on insurance contracts became clear. We are now at that point.

“At the same time, this limited-scope review now presents an ideal opportunity to align IFRS and US GAAP more closely, in this important area of financial reporting.

“We will proceed with caution, recognising the investment that many jurisdictions have made in preparing for the introduction of IFRS 9 in 2015.”

FASB Chairman Leslie F. Seidman said:

“The boards have been urged to converge their standards on financial instruments. Today's decision to work together on key differences—which represent the most significant remaining differences between the decisions reached to date—is responsive to stakeholders in the US and abroad.

“The boards will share the feedback they have received on their respective decisions and strive to develop a more closely converged approach that addresses those concerns.

“The boards will continue to develop a common approach on impairment of financial assets, which is being handled as a separate work stream. As part of their project on financial instruments, the FASB is proposing enhanced disclosures about interest rate risk and liquidity, which under IFRS are covered by IFRS 7, Financial Instruments: Disclosures.”

Notes to editors

About the IASB

The IASB was established in 2001 and is the standard-setting body of the IFRS Foundation, an independent, private sector, not-for-profit organisation. The IASB is committed to developing, in the public interest, a single set of high quality global accounting standards that provide high quality transparent and comparable information in general purpose financial statements. In pursuit of this objective the IASB conducts extensive public consultations and seeks the co-operation of international and national bodies around the world. The IASB has 15 full-time members drawn from 11 countries and a variety of professional backgrounds. By 2012 the Board will be expanded to 16 members. Board members are appointed by and accountable to the Trustees of the IFRS Foundation, who are required to select the best available combination of technical expertise and diversity of international business and market experience. In their work the Trustees are accountable to a Monitoring Board of public authorities. For more information visit www.ifrs.org

About the Financial Accounting Standards Board

Since 1973, the US Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors and others rely on credible, transparent and comparable financial information. For more information about the FASB, visit its Website at www.fasb.org.