Summary of Board decisions are provided for the information and convenience of constituents who want to follow the Board´s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions are included in an Exposure Draft for formal comment only after a formal written ballot. Decisions in an Exposure Draft may be (and often are) changed in redeliberations based on information provided to the Board in comment letters, at public roundtable discussions, and through other communication channels. Decisions become final only after a formal written ballot to issue an Accounting Standards Update.

April 17, 2012 FASB/IASB Joint Board Meeting

Investment companies.The IASB and the FASB discussed summaries of the feedback received on the IASB exposure draft, Investment Entities, and the FASB Proposed Accounting Standards Update, Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The meeting was educational in nature, and the Boards were not asked to make any decisions.

Accounting for financial instruments: classification and measurement. The IASB and the FASB discussed the business model assessment for classifying financial assets at amortized cost and bifurcation of financial assets and financial liabilities.

Business Model Assessment for Amortized Cost Classification for Financial Assets

The Boards tentatively decided that financial assets would qualify for amortized cost if the assets are held within a business model whose objective is to hold the assets in order to collect contractual cash flows. The Boards tentatively decided to clarify the primary objective of hold to collect by providing additional implementation guidance on the types of business activities and the frequency and nature of sales that would prohibit financial assets from qualifying for amortized cost measurement.

Bifurcation of Financial Assets and Financial Liabilities

The Boards tentatively decided that financial assets that contain cash flows that are not solely principal and interest would not be eligible for bifurcation. Rather, they would be classified and measured in their entirety at fair value through net income. The Boards tentatively decided that financial liabilities would be bifurcated using the existing bifurcation requirements in IFRS 9, Financial Instruments, and U.S. GAAP. The IASB also affirmed that the "own credit" guidance in IFRS 9 would be retained. The FASB will discuss "own credit" presentation requirements at a future FASB-only meeting.

April 18, 2012 FASB/IASB Joint Board Meeting

Accounting for financial instruments: impairment. The IASB and the FASB clarified the attributes of an expected credit loss estimate to address concerns raised about the use of the term expected value.

The Boards clarified that an estimate of expected credit losses should reflect the following:
  1. All reasonable and supportable information considered relevant in making the forward-looking estimate
  2. A range of possible outcomes and the likelihood and reasonableness of those outcomes (that is, it is not merely an estimate of the "most likely outcome")
  3. The time value of money.
The Boards clarified that an entity should consider information that is reasonably available without undue cost and effort in estimating expected credit losses.

The Boards clarified that the Bucket 1 measurement approach would be explained as "expected losses for those financial assets on which a loss event is expected in the next 12 months."

In further explaining the Bucket 1 approach, the Boards also indicated that:
  1. Expected losses are all cash shortfalls expected over the lifetime (that is, the full loss content) that are associated with the likelihood of a loss event in the next 12 months; that is, the losses being measured are not only the cash shortfalls over the next 12 months.
  2. Estimating lifetime losses should not require a detailed estimate for periods far in the future, but the degree of detail necessary in forecasting estimated losses decreases as the forecast period increases.
  3. Various approaches can be used to estimate the expected losses, including approaches that do not include an explicit "12-month probability of a loss event" as an input.
Trade Receivables

In February 2012 and at this meeting, the Boards discussed whether an expected credit loss model should be applied to trade receivables without a significant financing component, as defined in Proposed Accounting Standards Update, Revenue Recognition (Topic 605): Revenue from Contracts with Customers. In February, subject to deciding whether an expected loss model should be applied to these trade receivables, the Boards had tentatively decided how an expected loss approach would be applied. In February, they also requested that the staff evaluate whether an expected loss model would be operational for those trade receivables, which was the basis for the discussions at this meeting. On the basis of both discussions, the Boards tentatively agreed that an expected loss model should be applied to trade receivables without a significant financing component, including a practical expedient that a provision matrix can be used.

Next Steps

The Boards asked the staff for an update on the project, including what topics still needed to be addressed jointly. The staff noted that, with the decisions reached at this meeting, the general framework of the model was now complete. However, the staff will prepare joint papers for discussions related to off-balance-sheet items, disclosures, transition, and any follow-on issues resulting from future decisions in the classification and measurement project. Each Board may have separate issues to individually consider in order to address their respective constituents´ needs.

Insurance contracts. [This summary will be posted as soon as it becomes available.]

April 19, 2012 FASB/IASB Joint Board Meeting

Insurance contracts. [This summary will be posted as soon as it becomes available.]