In March 2009 the Board published an exposure draft (ED) to replace the derecognition requirements in IAS 39 Financial Instruments: Recognition and Measurement and to improve the disclosure requirements in IFRS 7 Financial Instruments: Disclosures relating to the transfer of financial assets and liabilities. At this meeting the Board began redeliberation of the comments received on the ED. The Board discussed:
- whether the derecognition model should include a test of bankruptcy remoteness ('legal isolation')
- whether sale and repurchase agreements ('repos') and similar transactions should be treated as sales or lending transactions
- how a transferor should treat (i) an interest that it retains in a previously recognised financial asset or (ii) an investment that it acquires in a transfereevehicle
The Board also discussed two possible approaches to replacing the current derecognition requirements for financial assets in IAS 39. One approach was a modified version of the current requirements in IAS 39, with the other being the alternative approach in the ED.
The Board tentively decided that a bankruptcy remoteness test should not form part of the derecognition model.
The Board was not convinced that all repos are sales. The Board therefore directed the staff to ascertain whether some repos (on the basis of the terms of those arrangements) are in substance lending arrangements.
The Board tentatively decided to pursue the alternative approach and directed the staff to further develop that approach to account for a retained interest as follows:
- If the retained interest is a disproportionate interest in the asset previously recognised, the transferor should treat it as a new asset and measure it initially at fair value but subsequently using the classification and measurement requirements in IAS 39. The transferor would recognise any gain or loss resulting from the transfer in profit or loss.
- If the retained interest is a proportionate interest in the asset previously recognised, the transferor should treat it as part of that asset. Therefore, the transferor would recognise a gain or loss only on the part transferred. The transferor would continue to measure the retained interest using the measurement basis that it applied to the asset recognised before the transfer.
The Board will continue the redeliberation of other aspects of the ED at future meetings