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IASB meeting summaries and observer notes


 IASB November 2013


 

The IASB met on 21 November 2013 to continue its redeliberations on the clarifications and enhancements to the proposals in the Exposure Draft Financial Instruments: Expected Credit Losses (the Exposure Draft). Whether the IASB will proceed to finalise the Exposure Draft will be decided at a future meeting.


At this meeting, the IASB considered the following specific aspects of the proposals in the Exposure Draft: 

    a.     loan commitment and financial guarantee contracts;
    b.     financial assets measured at fair value through other comprehensive income (FVOCI);
    c.     calculation and presentation of interest revenue for financial instruments with objective evidence of impairment;
    d.     purchased of originated credit-impaired financial assets;
    e.     the simplified approach for trade receivables and lease receivables; and
    f.     the mandatory effective date of IFRS 9 Financial Instruments.

Agenda Paper 5A: Loan commitments and financial guarantee contracts


The IASB discussed whether expected credit losses for revolving credit facilities should consider the contractual ability to cancel the undrawn commitment or whether that contractual ability does not necessarily limit an entity’s exposure to credit losses to the contractual notice period. The IASB tentatively decided that for revolving credit facilities:

    a.     expected credit losses, including expected credit losses on the undrawn facility, should be estimated for the period over which an entity is exposed to credit risk and over which future drawdowns cannot be avoided.


        Thirteen IASB members agreed with this decision. One IASB member was not present.

    b.     expected credit losses on the undrawn facility should be discounted using the same effective interest rate, or an approximation thereof, used to discount the expected credit losses on the drawn facility.


        Fifteen IASB members agreed with this decision. One IASB member was not present.

    c.     the provision for the expected credit losses on the undrawn facility should be presented together with the loss allowance for expected credit losses on the drawn facility if an entity cannot separately identify the expected credit losses associated with the undrawn facility.

        Thirteen IASB members agreed with this decision. One IASB member was not present.

On the basis of this tentative decision, expected credit losses on other loan commitments and financial guarantee contracts will still be based on considering the contractual obligation to extend credit as proposed in the Exposure Draft. However, the IASB requested the staff to perform further analysis to determine whether these tentative decisions should apply to a wider scope of loan commitments and financial guarantee contracts.


Agenda Paper 5B: Financial assets measured at FVOCI


The IASB tentatively confirmed the proposals in the Exposure Draft for the treatment of expected credit losses for financial assets measured at FVOCI and not to introduce any relief from recognising 12-month expected credit losses.


Furthermore, the IASB agreed to clarify in drafting that expected credit losses reflect management’s expectations of credit losses. However, when considering the ‘best available information’ in estimating expected credit losses, management should consider observable market information about credit risk.


Fourteen IASB members agreed with this decision. One IASB member was not present.


Agenda Paper 5C: Interest revenue: Calculation and presentation


The IASB tentatively confirmed the proposals in the Exposure Draft for the calculation and presentation of interest revenue.


Fifteen IASB members agreed with this decision. One IASB member was not present.


Agenda Paper 5D: Purchased or originated credit-impaired financial assets


The IASB tentatively confirmed the proposals in the Exposure Draft for the treatment of purchased or originated credit-impaired financial assets. In addition, the IASB agreed to provide more guidance on originated credit-impaired financial assets.


Fourteen IASB members agreed with this decision. One IASB member was not present.


Agenda Paper 5E: Simplified approach for trade receivables and lease receivables


The IASB tentatively confirmed the proposals in the Exposure Draft for the simplified approach for trade receivables and lease receivables. The IASB also noted that the applicability of accounting policy choice for lease receivables to different populations of those receivables would be further considered when the Leases project is finalised.


Thirteen IASB members agreed with this decision. One IASB member was not present.


Agenda Paper 5F: Mandatory effective date of IFRS 9


The IASB noted that it will only be able to determine the mandatory effective date after redeliberations on the impairment and classification and measurement requirements have been completed and the issue date of the final version of IFRS 9 is known.


However, to assist entities in their planning, the IASB tentatively decided that the mandatory effective date of IFRS 9 will be no earlier than annual periods beginning on or after 1 January 2017.


Fourteen IASB members agreed with this decision. One IASB member was not present.

 

Date: 11/20/2013


Agenda Papers