The Board tentatively decided to exclude the following IFRSs from the scope of an IFRS on fair value measurement:
- IFRS 2 Share-based Payment. In some situations, IFRS 2 requires that vesting conditions, other than market conditions, and reload features are not be taken into account when measuring the value of share-based payment transactions. This means that fair value in some contexts in IFRS 2 is actually 'fair value based'. To amend IFRS 2 to distinguish between measures that are fair value and those that are fair-value-based, new measurement guidance would need to be created for the fair-value-based measures. Such measurement guidance might result in an unintended change in practice with regard to measuring the value of share-based payment transactions.
- IAS 17 Leases. Applying the proposed fair value measurement guidance might significantly change classifications of leases and the timing of recognising gains or losses for sale and leaseback transactions. The IASB, jointly with the FASB, is currently reviewing the accounting for lease agreements. Both boards plan to replace IAS 17 within the first half of 2011. If the IASB includes IAS 17 in the scope of an IFRS on fair value measurement, this might require entities to make significant changes to their accounting systems, first for the IFRS on fair value measurements and secondly for the IFRS on lease accounting.
The Board also tentatively decided:
- in IFRS 3 Business Combinations, to retain the term 'fair value' when referring to the measurement of reacquired rights.
- in IAS 39 Financial Instruments: Recognition and Measurement, to retain the term 'fair value' for measuring financial liabilities with a demand feature.
- in IAS 19 Employee Benefits, not to describe the measurement of the reimbursement rights as the present value of the related obligation as a practical expedient for determining fair value.
- not to exclude the measurement of award credits in IFRIC 13 Customer Loyalty Programmes from the scope of an IFRS on fair value measurement
The Board tentatively decided that each of the IFRSs that are excluded from the scope of an IFRS on fair value measurement will state the reasons for that decision and why the term 'fair value' was nevertheless retained in that standard.
Recognition of day 1 gains or losses of financial instruments
In January 2010, the IASB tentatively decided to address the recognition of day 1 gains or losses separately from the fair value measurement project. Although the issue will not be addressed in the fair value measurement project, that project team will prepare an analysis on the basis of which the IASB will consider amending IAS 39 Financial Instruments: Recognition and Measurement. The project team plans to bring this issue to the IASB at a future meeting. No decisions were made on this issue.
Disclosures about fair value measurements
The Board deliberated disclosures about fair value measurements jointly with the FASB.
The boards tentatively decided:
- to define 'class' on the basis of the following principles: ◦an entity should determine the appropriate classes of assets and liabilities based on the nature, characteristics and risks of the assets and liabilities, and their classification in the fair value hierarchy
- a class of assets and liabilities will often require greater disaggregation than the entity's line items in the statement of financial position
- judgment is needed to determine the appropriate classes of assets and liabilities.
- not to require an entity to disclose information about the change in the nonperformance risk of a non-financial liabilit
- to require an entity to disclose its policy for determining when transfers between levels of the fair value hierarchy are recognised
- to require an entity to disclose information about fair value measurements only after initial recognition
- for assets and liabilities that are recognised at fair value at each reporting period, to require an entity to disclose a reconciliation of activity within Level 3 of the fair value hierarchy and information about transfers between Levels 1 and 2. For assets and liabilities reameasured at fair value only in specific circumstances, an entity does not need to disclose this information.
- to require an entity to disclose fair value information by level in the fair value hierarchy for items that are not measured at fair alue in the statement of financial position
- not to include guidance for assessing the significance of an input or of significant changes in fair value.
The boards also tentatively decided to require a sensitivity analysis disclosure for all Level 3 fair value measurements unless another standard does not require such a disclosure. The objective of the sensitivity analysis disclosure is to provide users of financial statements with information about measurement uncertainty for Level 3 fair value measurements. That is, the disclosure does not represent a worst-case scenario and is not forward looking. In addition, the boards tentatively decided that the sensitivity analysis disclosure should consider the effect of the correlation between inputs when relevant.
The IASB tentatively decided to require entities to disclose information about fair value measurements for financial instruments in an entity's interim financial statements.