PwC IFRS blog

Delays and more delays – will 2012 be any different?

Will we remember 2011 as a year of delays? Will the theme continue into 2012? We started 2011 with high hopes that the year would see the completion of the convergence agenda and that we would end it with a decision by the US as to whether they would adopt IFRS. Here is a look back at this year’s developments and a look forward at what we can expect in 2012.

Use of IFRS in the US

The SEC had promised us an announcement before the end of 2011 to confirm the position on companies using IFRS, but in December they told us they needed more time to complete their work plan.  Given the parallel delays in the IASB work plan, this was not surprising, but we hope it doesn’t lead to further delays in other countries’ implementation plans.  But the SEC did complete a key part of its work plan when it published two staff papers in November.

The first paper summarises differences between US GAAP and IFRS frameworks, commenting that US GAAP’s detailed industry and transaction-specific standards promote consistency within an industry, whereas IFRS’ broad principles promote consistency across industries. The second paper analyses IFRS as applied in practice and identifies diversity in applying IFRS across various territories. Both are factual and add new perspectives to the debate. The second paper in particular is well worth a read – the SEC highlights poor clarity of disclosure, particularly around accounting policy implementation, as perhaps the biggest issue identified in its review. This is something well within the grasp of all of us to fix.  

At the American Institute of Certified Public Accountants’ annual conference on SEC and PCAOB developments, Jim Kroeker, the SEC’s Chief Accountant, explained that it would be sensible not to race to a decision; the SEC needs to take time to find the best answer. Given the US domestic concerns about IFRS adoption voiced at the SEC roundtables in July , it makes sense for the SEC to be as thorough in its analysis as possible. I think therefore we need to be patient. But it is an election year in the US and it would be very unfortunate if the decision gets sidelined by politics.

Activity at the IASB

For the IASB, much of 2012 looks set to be taken up with Memorandum of Understanding projects. Key accounting standards are taking much longer to develop than we expected, and the complexities of international standard development are becoming very obvious.

Following the high-level of concern raised by the many respondents to the first revenue exposure draft issued in June 2010, we now have a revised revenue exposure draft. We expect two more revised exposure drafts in early 2012, on leasing and financial assets impairment, with macro hedging to follow. We wait to see how people respond to the revised exposure drafts. Currently, standards on revenue and leasing are expected later in 2012. No date has yet been set for an impairment standard.

The IASB has also announced a ‘limited’ review of IFRS 9. Given the topics to be comprise operational issues identified so far − possible changes to help resolve the impact of market volatility on assets held to back insurance contracts and whether further changes could be made to achieve a converged standard with the FASB − I think the IASB has found an entirely new meaning of the word ‘limited’!  However, if this does lead to a converged financial instruments classification and measurement model and a breakthrough in the insurance project, I for one would be happy to see ‘limited’ change.  Let’s see how much gets resolved this year – hopefully we will be able to start 2013 with the new agenda that should emerge from 2011’s agenda consultation, but there’s a lot to be done this year first.  I’ll leave you though with my good wishes for a successful new year!  Lets hope it won’t be entirely dominated by the Eurozone crisis!

Revenue recognition – are we there yet?

The IASB and FASB have finally released the much awaited new exposure draft on revenue. The boards have been generally responsive to feedback from the first exposure draft. Many of the changes will be welcomed by industry groups, users and preparers, especially the simplification of the proposals for collectability, warranties, licences and contract separation. But the question is: in solving one problem have they opened up others?

A number of significant changes respond directly to industry feedback − for example, more contracts will be accounted for as a single unit; more revenue will be recognised over time; and the recognition of revenue will be restricted when the consideration is variable. But as we have seen before, a good answer for one industry may be a concern for another. This is always a potential pitfall of a principles-based standard. 

What do I think? A principles-based approach remains the best way to achieve consistency across industries and capital markets. Industry-specific guidance and rules should be limited. The boards will no doubt continue working to retain the core model principles under pressure from those various industries that did not get what they wanted in the re-deliberations. 

The boards have asked for specific feedback on the more significant changes from the original exposure draft:

• Collectability – All amounts related to credit risk are now to be recorded in a line item adjacent to revenue. This is closer to current practice, although it affects gross margin.  
• Services – There is no separate recognition model for services; instead, the proposals include criteria for determining when control transfers over time. The criteria could capture activities beyond those we would normally consider a service. 
• Contingent consideration – Variable consideration is recognised as revenue only when management has enough predictive experience to make an estimate. This is likely to be an area of judgement for industries where contingent consideration arrangements are common and industry practices could emerge.
• Onerous performance obligations – This is now limited to performance obligations satisfied ‘over time’ and over more than one year. This is a step closer to current practice but remains controversial.

Will people limit their comments to these issues? The boards received nearly 1,000 letters on the last exposure draft, and we expect the same level of response this time around. And most will not be able to stop themselves commenting on everything – so we might be in for another long period of deliberation. There are already suggestions that the final standard might slip into 2013.

Remember that revenue falls at the bottom of the standards ‘waterfall’. The proposals scope out financial instruments, leases and insurance contracts.  The revenue proposals and timing could be significantly affected by the changes in the leasing project. And when the standard is finished, the boards also have implementation issues to look forward to. Will the EITF and IC work through the issues together? There have been no significant problems from the joint business combination project so far, but revenue is more pervasive. Preparers should, wherever possible, test the proposals against real transactions to flush out implementation issues now.

I said that the ‘masses have spoken’ when describing the response rate during the last comment period. The question is ‘Will they speak again?’ I suspect so.

Leasing – what is happening now? And what is the next big project likely to be?

What can I say about the leases project? Back in March, I thought the pace of decision-making meant that the proposals would be finalised by June. How wrong I was.

At the time, you will remember that the Boards had moved in a direction that seemed to provide a more workable model for preparers while still providing useful information for users. My blog prompted a number of you to raise comments – principally along the lines of why has it taken this long to come to a sensible answer?

Then in May, many of those tentative decisions were reversed, and the proposed standard seemed to be moving back in the direction of the exposure draft. For example, concerns from preparers and users about front-loading expenses have returned – there will no longer be a distinction between financing and ‘other than finance’ leases. I understand that the changes were hard to reconcile to the conceptual framework, but there is an argument that the Boards are concentrating on conceptual purity rather than practical expediency. If a lease is manifestly not financing, then will the proposed accounting provide useful information? What do you think?

Despite the reversals, there are still significant changes since the original proposals – not least the Boards’ eventual agreement on a single lessor proposal. For that reason the Boards have decided to do a limited re-exposure of the leasing project. This is due before the end of 2011. We wait to see what limited re-exposure means in practice.

So what have the Boards agreed on lessor accounting? All lessors will account for leases using a ‘receivable and residual’ approach (previously known as the ‘derecognition approach’). But there will be scope exemptions for investment property valued at fair value and simplified accounting for leases with a maximum term of 12 months or less.

This is good news and is certainly an incentive for investment property companies to use the fair value option in IAS 40; otherwise, the accounting by lessors for multi-tenant properties could become very complex under the new leasing standard.

Re-exposures such as those planned for revenue and leasing will not speed up the Board’s standard-setting process. But we broadly support the plan to re-expose these standards, as a formal process is more likely to result in a standard that meets investors’ information needs and preparers’ operational needs, while avoiding unintentional consequences.

Despite the delays to the current batch of standards, that hasn’t stopped the IASB thinking about what happens next. In July they issued a request for views (the ‘Agenda Consultation 2011’), seeking input from stakeholders on the strategic direction of the IASB’s future work plan. The new Chairman, Han Hoogervorst, urged all those that are directly or indirectly affected by financial reporting to get involved.

They are particularly interested in understanding the needs of users of financial statements. It goes without that saying that PwC and many of the other accountancy firms will respond to the consultation, but I would mirror Hans’ request and urge investors and preparers to respond as well. Your views are important to the IASB, and if you have an urgent issue you want addressing, or you want no change at all for the next 10 years, then tell the Board by 30 November 2011). Because if you don’t, no-one else will.

John

Moving to IFRS: delays and more delays

There have been some interesting recent developments in countries that are considering transition to IFRS: the SEC is still due to decide later this year whether/when and how to incorporate IFRS into the US financial reporting system. In June the staff issued a potential slow burn proposal for consideration. Japan’s Financial Services Minister implied that Japan  might defer its move to IFRS from 2014 until 2016 although this is not an official view; and India are eerily silent over their plans despite having passed their original  proposed transition date.

The SEC’s staff paper issued in May put forward a transition plan for converging IFRS with US GAAP over a five to seven year period that is essentially an endorsement approach. The US would aim to avoid differences between ‘full IFRS’ and ‘US-endorsed IFRS’, but the FASB could modify or supplement IFRS in rare instances. The paper stresses that the SEC has not yet decided to follow this approach but requests constituents’ views on this and other approaches by 31 July 2011. If you have a view please do respond.

The staff paper has provoked very different responses. Some recognise the difficulty in persuading US firms of the benefit of moving to IFRS. A ‘softly softly’ approach over a period of years may gradually win those companies over. Others want to avoid further ‘endorsement’ processes – or think that if the US has a rigorous endorsement process, Europe or other regions should toughen their own approval process.

I am not in favour of multiple layers of endorsement and exceptions, as this can slow the process even further; but I understand that accepting it in the US may be the only way to reach the ultimate goal of a single set of global IFRS standards. It would be helpful, though, if those US companies that would like to move to IFRS in one go were allowed to early-adopt on a voluntary basis.

If the US adopts this approach, what impact is this likely to have on other IFRS adopters? I have previously mentioned that several territories are unlikely to commit to full adoption of IFRS until the US announces its decision. Japan, India and China are cases in point where the US timetable may be influencing the completeness or speed of adoption.

India made a commitment to the G-20 in 2008 that it would converge with IFRS by April 2011. But the standards are still not included in the legal framework; so, although there has been no formal announcement of delay, lobbying by Indian companies seems to have had the desired effect for them. The converged Indian Accounting Standards published so far also have numerous carve-outs and carve-ins – so maybe a further delay will allow time for these  exceptions to be eliminated.

In June, various statements from the Chairman of the Accounting Standards Board of Japan and Japan’s Financial Services Minister suggested that Japan were considering a delay in adoption of IFRS.  Japan’s business community have been asking for an extension while they try to deal with the aftermath of the Great East Japan Earthquake.

At the moment we understand that no such decision has been made and that the FSA will make a decision about transition in 2012 as originally proposed. So a short transition may still be a possibility but, I am sure, the suggestion of a lengthy transition period in the US and requests for delays from big businesses must be having an effect on Japanese thinking.

I hope the SEC makes a decision this year as promised so that other transitioning territories can get some more clarity. Of course, they may want to wait until final leasing, financial instruments and revenue standards are issued. If that is the case we still have a long way to go.

Let me know what you think on these latest developments.

John

Final standards at last – but is it convergence?

The IASB and FASB are still deliberating on some fundamental standards, but they have finally concluded (or agreed to differ) on a number of other topics. So, last week we got a flurry of new standards – five on consolidation and joint arrangements; one on fair value measurement.

IFRS 10, ‘Consolidated financial statements’, provides extensive guidance to help entities decide who controls who. Although the new definition of control and additional guidance are not expected to result in widespread change, there will be some.

SIC 12, ‘Consolidation – Special purpose entities’, was notoriously difficult to interpret, but the new standard (which supersedes SIC 12) is also complex and will still require judgement in many situations. I am sure that as auditors we will be having interesting discussions with our clients about what the changes mean for them.

The objectives of the project include requiring an entity that controls another entity to prepare consolidated financial statements, and requiring disclosure of the risks and financial impact of having an interest in another entity. Has the IASB has achieved these objectives, particularly in respect of structured entities.

The layman might assume that special purpose entities are controlled by, and are the responsibility of, one of the parties to the transaction. The four indicators of control in SIC 12 tended to lead to that conclusion but have now been replaced by IFRS 10. It remains to be seen whether IFRS 10 results in more consolidation of structured entities, but early indicators suggest it may not.

The new definition of control requires the investor to have power, exposure to variable returns and the ability to use its power to affect its return. I can foresee circumstances where one of those criteria is not met by a party to the transaction, and therefore the special purpose entity will not be consolidated.

IFRS 12 will require useful additional disclosure about this interest in an unconsolidated structured entity, but will users read the disclosures or focus on the numbers in primary statements? What do you think?

It is also unfortunate that the FASB has decided not to issue the equivalent of IFRS 10 in US GAAP. The FASB did not believe it was right to consolidate an entity if holding less than 50.1% of the voting rights. So their proposed amendments to US GAAP consolidation guidance will not address ‘de facto’ control and potential rights.

There is movement but, once again, not full convergence. Some may argue that the failure to achieve convergence negates the purpose of the new standard given the levels of judgement still required. What’s your view?

On the other hand, IFRS 13, ‘Fair value measurement’, and ASU 2011-04, ‘Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs’ do provide a consistent definition of fair value and common guidance on how to measure fair value.

However, the standards only seek to achieve consistency in the measurement of fair value; they do not tackle the issue of when fair value should be used. Existing differences between IFRS and US GAAP are therefore not addressed.

Do let me have your thoughts.

John

Extended timetable for key projects – is it a surprise?

Shock news! The IASB and the FASB have announced that the major convergence projects (revenue, leasing and financial instruments) will no longer be completed by June 2011. I’m not sure that is a big surprise to anyone. The Boards have been working incredibly hard over the last few months to address the comments received on the exposure drafts. But it has been increasingly obvious that they still had some way to go and indeed some regulators have been urging them to take an extra six months.

I think making a formal announcement of the extended timetable was a very good idea. There is an English phrase ‘It is better to under-promise and over-deliver’, and I am hoping that the Boards will now be able to do this. They are aiming to complete the priority projects in the second half of 2011 – and this looks feasible for revenue and leasing at least.

The period of grace until later in 2011 should give the Boards time to consult further with preparers and users, fully assess the consequences of recent tentative decisions and undertake a proper fatal flaw review, resulting in high-quality standards. Sir David Tweedie and Leslie Seidman, chairmen of the IASB and the FASB respectively, said in their interview on 14 April that they are committed to carrying out robust due process; as Global Chief Accountant of a global network of accountancy firms, I can only support that ambition and the extension to the timetable.

But reaching agreement on financial instruments is another matter. The Boards still face a significant challenge to reconcile their different views on accounting for financial instruments. They have already noted in the report issued on 21 April that the FASB may need more time to finalise its hedging proposals, but they should not underestimate the scale of the task ahead. The IASB issued the classification and measurement phase of IFRS 9 last year, but it is not yet effective in all IFRS territories. The FASB are expected to issue their exposure draft in June and July, with three categories of financial instrument rather than two. This is likely to increase pressure from  some preparer groups who would like to reopen the debate and take on board some of the FASB’s proposals. The impairment proposals are also a compromise and received a very mixed response from those who commented on them, although they may be the only way to achieve convergence in this area. A fully converged financial instruments standard is still a considerable way off.

Insurance, although not part of the MoU programme, is a further priority where the IASB is hoping to complete a new standard by the end of 2011; the FASB intends to issue an exposure draft at the same time. Both boards still have to reach decisions on some major issues for this to become a reality. I hope the Boards do meet their revised target, as a further period of uncertainty would be unhelpful for the many countries transitioning to IFRS at the moment and may impact the US adoption of IFRS. The upcoming future agenda consultation is also likely to be more fruitful if not overhung by the need to finish the current one.

I would be interested as always in any comments you may have.

Leasing: better late than never?

With only four months left until the new leasing standard is due to be published, the boards still appear to have a huge amount of debate and decision-making left to do. Should the boards really be deliberating what the definition of a lease is at this stage in the process? The answer is clearly no, but as the saying goes ‘better late than never’. Perhaps this should be the strap line for the project as a whole at the moment.

It is no surprise that the leasing exposure draft attracted a large number of comment letters (over 780 to date). It is an area that affects nearly every entity to some degree, and the original proposals would be complex and costly for many preparers to implement without necessarily providing the intended benefits to users.

Indeed, the original proposal managed to attract opposition from both users and preparers – quite an achievement. The IASB and FASB have undertaken extensive consultation since the exposure draft was published and have heard the strength of feeling from constituents. In hindsight, perhaps more thorough consultation earlier in the process could have prevented a fundamental change in direction so close to the publication date.

It does make you wonder what the boards were doing in the period leading up to the exposure draft, particularly given this debate has spanned over a decade. Maybe in attempting to remove the perceived bright lines between operating and finance leases and minimising structuring opportunities, the boards lost sight of the overarching aim of the project: to bring all leases on-balance-sheet.

Some people, including at least one board member, have commented that if the boards had focused on achieving this aim, the project would have not run into so much opposition. Indeed looking at the direction of the boards’ redeliberations since the start of the year, the change in direction appears to be taking us back closer to an IAS 17 model with two categories of leases, but requiring all leases to be on-balance sheet.

The boards started 2011 with a clear path towards the final standard. This includes the re-deliberation of five key areas: lease term, variable lease payments, lessor accounting, profit and loss recognition and determining the definition of a lease.

A more sensible tentative decision has already been taken on lease term, and the boards have given a clear direction to the staff to undertake targeted consultation on the other four key areas. So the boards are now moving in a direction that responds to constituents’ concerns and, if adopted, would result in a more workable model for both lessees and lessors while providing meaningful information to users.

Certainly, if the boards continue at the same pace as we have seen since the January board meeting, there is every possibility that all key decisions, if not the final standard, could still meet the June 2011 deadline. The question of whether due process will require re-exposure still looms in the background.

This will no doubt be dictated by how different the final standard looks from the exposure draft once all key decisions have been made. One thing is clear: as Sir David Tweedie flies off into his retirement, he can do so in the knowledge that his plane will one day be on someone’s balance sheet.

Did I get it right? Please let me know your thoughts and opinions.

Proposals on impairment of financial assets – a promise of greater consistency or the door to diversity?

The IASB and FASB’s ‘supplementary document’ on impairment of financial assets represents a major step towards convergence. The boards’ original exposure drafts could not have been further apart. The IASB started off with an income statement model that built up an expected loss reserve over time, reflecting the way loans are priced; while the FASB  exposure draft took a balance sheet approach and  proposed that the entire expected credit loss should be booked immediately.

The expected loss approach was welcomed by constituents, but there was a plea for convergence. Preparers said they couldn’t run two impairment calculations; users wanted a consistent answer. There was also a concern about the ‘operationality’ of the IASB model, especially in the context of open portfolios where loans move in and out and only forward-looking credit loss estimates are available.

So the boards needed to find a way to get to a converged, operational solution. They managed to narrow a possible 12 models down to the three proposed in the supplementary document. A compromise approach is presented as the common proposal, and the two alternatives reflect IASB and FASB preferred approaches. Needless to say, the alternatives represent enhanced variations of the respective boards’ original proposals.

The supplementary document focuses on open portfolios, as this is where the key operational issues arise; it proposes a dual model driven by credit characteristics of financial assets. On a ‘bad book’, the entire remaining lifetime expected credit loss is recognised immediately. On a ‘good book’, the proposal combines a simpler version of the time-based IASB approach with a minimum floor of the full amount of loss expected to occur in the ‘foreseeable’ future.

So what are the implications of the joint proposals? Do they mean consistency in reporting impairment of financial assets or diversity in practice?

The first question that comes to mind is the scope. The supplementary document focuses on open portfolios, scopes out short-term receivables and invites views as to whether the common proposal can be applied to closed portfolios, single instruments and off-balance sheet exposures. Does this mean we may end up with multiple impairment models depending on the type of the instrument?

Once you drill down, you next wonder about the application of the ‘good book’ and the ‘bad book’ approach. The distinction is based off the degree of uncertainty about the collectability of financial asset and internal risk management objective. Credit risk management practices differ between entities, so does it seem inconceivable that where one entity recognises a full expected loss, another continues to spread it?

Within the ‘good book’, there is a further potential for diverse application. More sophisticated entities may be able to come up with detailed forecasts for the next two to three years; less sophisticated entities may end up with a 12-month minimum foreseeable future. This will mean a different ‘floor’ for similar items across preparers.

I would be interested to hear your thoughts and opinions about the proposals. Do you favour the common proposal over the alternatives? What is the right scope? Do you feel a single impairment model should apply in all circumstances or multiple models are justified? Do you support the focus on internal risk management and the flexibility or would you rather limit the available choices? Whatever the outcome of the debate, the  boards are to be commended for their willingness to listen and their commitment to work together.

IASB and FASB issue proposals to address single largest balance sheet difference

The IASB and FASB have issued proposals that would eliminate the single largest balance sheet difference between the two accounting frameworks today.

IFRS preparers’ ability to ‘net’ or offset certain financial assets and liabilities can create trillion dollar differences on the balance sheet compared with entities reporting under US GAAP.

So, although there would be little change for entities reporting under IFRS, it would have a major impact on US GAAP preparers, particularly financial institutions. 

Under current US GAAP, an entity can elect gross or net presentation for derivatives and collateral subject to master netting agreements. The ability to elect net presentation under US GAAP is an ‘exception’ to the existing offsetting criteria. The proposals would eliminate this exception, as they require offset only when net cash flows, rather than gross, are exchanged between a financial asset and liability. This is not the case for derivatives, where cash flows actually are exchanged gross.  This is because the master netting agreement only allows net cash flows in the event of default of one of the counterparties rather than in the normal course of business.

There is no consensus among users on the usefulness of presenting gross or net information about financial assets and liabilities on the face of the balance sheet.  Whichever basis is used on the balance sheet however, most users say they would like the data on the other basis in the notes. So what do you think should be presented on the face of the balance sheet? Does it matter if the information on both bases is available?

The International Swaps and Derivatives Association (ISDA) believes the proposal to report derivatives on a gross basis rather than net on the balance sheet is ‘counterintuitive, may lead to complexity in practice and can obscure the real position of the entity’.  It goes on to say that it is likely to be ‘misleading when presenting the leverage, credit risk and liquidity risk position of an institution. Misperceptions regarding the risk exposure of derivatives users may impede the ability of corporations, government entities and financial institutions to effectively manage the business and financial risks to which they are exposed.’

The boards say that the presentation of gross amounts of assets and liabilities generally provides more relevant information than a net presentation. In particular, they believe the gross amounts of derivative assets and liabilities are more relevant to users of financial statements than net amounts for assessing the liquidity or solvency of an entity. A derivative can generally be settled or sold at any time for an amount equal to its fair value.  So the boards believe that gross amounts generally provide better information about the entity’s derivatives portfolio and its exposure to risk.

There is likely to be a fierce debate on this topic. While the boards’ arguments appear sensible for non-financial companies, the ISDA has a point that gross numbers may give a misleading picture of the amount of leverage in a financial institution. Whose view do you support? 

Regardless of views on this issue, all entities that have derivatives subject to master netting agreements will be required to provide gross and net information in the notes to meet the user request for, t both gross and net information..  So even though this ED does not propose a change for the balance sheet under IFRS, entities will still need to obtain the information to be disclosed in the notes.

I’d be interested as ever to hear your thoughts.

John

FASB change of view – a positive sign for convergence or still no meeting of minds?

Some of the comments coming out of the US at the end of 2010 implied that convergence of IFRS and US GAAP was still a long way off. But on 25 January, the FASB tentatively decided to allow certain financial instruments to be measured at amortised cost. Following the decision in December to go for a common approach to impairment (more on that in a future blog), this looks like  progress.

However, the tentative decision certainly doesn’t lead to full convergence on financial instruments– for one thing, the FASB has suggested three business strategies, while IFRS 9 uses a ‘mixed measurement’ model with only two categories of financial assets. This difference is a fundamental one;  so, although on the face of it it looks like a step towards convergence, in reality there is still no meeting of minds between the two boards. It does, however, show that standard setters do listen. Leslie Seidman said that the FASB received ‘overwhelming feedback’ that preparers, auditors and others prefer loans held for collection to be carried at amortised cost.

Personally I like to think that the PwC survey of investors and analysts issued last summer What investment professionals say about financial instrument reporting also had some bearing on the decision.

Following the tentative decision, US GAAP companies will be permitted to use amortised cost for assets that are managed with the intention of collecting the contractual cashflows. This will have most impact in the banking industry for bank loans issued to individuals and entities in the ordinary course of business. Unsurprisingly, the American Bankers’ Association welcomed the move, describing it as a ‘turn in the right direction’, although there was still more work to be done.

Other financial assets held as part of the entity’s investing or trading activity would still be held at fair value, with movements either through other comprehensive income or in net income. For more details on the tentative decision, see the recently issued Straight away 'FASB changes course on financial asset classification and measurement'.

In my previous post on the response to the revenue recognition standard, I commented on how many letters had been received by the IASB on that publication. This FASB decision shows that it is worth making your view heard. You can shape the future of financial reporting.

On the matter of financial asset classification and measurement, I am pleased to see a mixed-measurement approach being suggested, as I think this is more practical for many entities, but it remains disappointing that fundamental differences in approach remain between the boards.

I would be interested in your thoughts. Is this good news? Should we still be concentrating on convergence? Do you think the US will ever move to IFRS and, if not, what impact might that have on other transitioning territories?

John