® International Accounting Standards Board IASB UPDATE Tatsumi Yamada Board Member, IASB

® Disclaimer Expressions of individual views by members of the IASB and its staff are encouraged. The views expressed in this presentation are those of the speaker. Official positions of the IASB on accounting matters are determined only after extensive due process and deliberation.

® Outline IASCF Structure IASCF Structure Convergence project with USA Convergence project with USA Convergence project with China Convergence project with China Convergence effort in Korea Convergence effort in Korea Convergence project with Japan Convergence project with Japan IASB agenda IASB agenda

® Working Groups Standards Advisory Council IASC Foundation (22 Trustees) IASCF Structure International Accounting Standards Board Staff IFRIC (Interpretations) The standard setting operation

® IASC Foundation—Oversight 22 trustees: 22 trustees:  6 from North America  6 from Europe  6 from Asia/Oceania  4 Any area Appoint IASB members, SAC and IFRIC Appoint IASB members, SAC and IFRIC Monitor IASB’s effectiveness, raise funds, approve budget, responsible for constitution Monitor IASB’s effectiveness, raise funds, approve budget, responsible for constitution

® Standards Advisory Council (SAC) 40 members—worldwide 40 members—worldwide Meets at least 3 times a year Meets at least 3 times a year Consultative forum, including Consultative forum, including  Input on IASB agenda and project timetable  Advise IASB on projects  Support the promotion and adoption of IFRSs

® Board Members 12 full-time and 2 part-time members 12 full-time and 2 part-time members Sole responsibility for setting agenda and standards Sole responsibility for setting agenda and standards Presently from 9 countries and 5 continents Presently from 9 countries and 5 continents

® Convergence with USA FASB – Norwalk Agreement A focus is convergence with US FASB A focus is convergence with US FASB Norwalk Agreement aims to achieve convergence in short and long term (October 2002) Norwalk Agreement aims to achieve convergence in short and long term (October 2002) MOU related to Roadmap is second step of Norwalk Agreement (February 2006) MOU related to Roadmap is second step of Norwalk Agreement (February 2006)

® Convergence with USA FASB– ‘Roadmap’ Agreement Agreement  SEC ‘road map’ – removal of reconciliation to US GAAP by 2009 at the latest  April 2005 – SEC/EC agreed on ‘roadmap’  Progress of convergence by 2008 Target Target  Not necessary to achieve full convergence on all standards  Working jointly and making progress on major projects by 2008 (MOU)

® Convergence with USA FASB– ‘MOU – Short term’ FASB examination IASB examination Fair value option Borrowing costs Impairment (with IASB) Impairment (with FASB) Income tax (with IASB) Income tax (with FASB) Investment properties Government grants Research and development Joint ventures Subsequent events Segment reporting

® Convergence with USA FASB– ‘MOU – Other projects’ Projects Progress to be achieved by 2008 Business Combinations To have issued converged standards (projected for 2007) Consolidations To implement work aimed at the completed development of converged standards as a matter of high priority Fair Value Measurement To have issued converged guidance

® Convergence with USA FASB– ‘MOU – Other projects’ Projects Progress to be achieved by 2008 Liabilities/equi ty distinctions To have issued one or more due process documents PerformanceReporting To have issued one or more due process documents on the full range of topics Post- retirement benefits (inc. pensions) To have issued one or more due process documents

® Convergence with USA FASB– ‘MOU – Other projects’ Projects Progress to be achieved by 2008 Revenue Recognition To have issued one or more due process documents Derecognition To have issued a due process document relating to the results of staff research efforts FI (replacement of existing standards) To have issued one or more due process documents relating to the accounting for financial instruments

® Convergence with USA FASB– ‘MOU – Other projects’ Projects Progress to be achieved by 2008 Intangible assets To have considered the results of the IASB’s research project and made a decision about the scope and timing of a potential agenda project Leases To have considered and made a decision about the scope and timing of a potential agenda project

® Convergence Project with China June 2005 – China agrees to make up an action plan to achieve high-quality accounting standards June 2005 – China agrees to make up an action plan to achieve high-quality accounting standards October 2005 – IASB staff was in China to discuss Chinese EDs for convergence October 2005 – IASB staff was in China to discuss Chinese EDs for convergence November 2005 – the 1 st convergence meeting including IASB Board members November 2005 – the 1 st convergence meeting including IASB Board members February 2006 – issuance of new standards substantially converged with IFRS in main principles (effective from January 2007 for listed companies) February 2006 – issuance of new standards substantially converged with IFRS in main principles (effective from January 2007 for listed companies)

® Convergence Effort in Korea February 2006 – establishment of ‘IFRS convergence task force’ to discuss the three step strategy – replacement of KAS by Korean IFRS February 2006 – establishment of ‘IFRS convergence task force’ to discuss the three step strategy – replacement of KAS by Korean IFRS Phase I – Optional application of KIFRS or KAS for all entities (starts by 2009) Phase I – Optional application of KIFRS or KAS for all entities (starts by 2009) Phase II – Application of KIFRS to listed global entities Phase II – Application of KIFRS to listed global entities Phase III – Application of KIFRS to all listed entities Phase III – Application of KIFRS to all listed entities Timing of Phase II and III is not decided Timing of Phase II and III is not decided

® Convergence Project with Japan October 2004 –inauguration of the Joint Convergence project October 2004 –inauguration of the Joint Convergence project March 2005 –items to be dealt with in the 1 st phase were announced (1 st meeting ) March 2005 –items to be dealt with in the 1 st phase were announced (1 st meeting ) September 2005 – progress has been reported (2 nd meeting) September 2005 – progress has been reported (2 nd meeting) March 2006 – a new (whole picture) approach agreed and three new items added (Asset removal obligation etc) (3 rd meeting) March 2006 – a new (whole picture) approach agreed and three new items added (Asset removal obligation etc) (3 rd meeting) 4 th meeting will be held in London in September th meeting will be held in London in September 2006

® The IASB agenda Short-term convergence Next step / current status Timing estimate Income taxes ED Q SegmentsED Q Borrowing costs ED Q Joint ventures Start deliberations Early 2006

® The IASB agenda Other short term Next step / current status Timing estimate Puttable instruments ED Early 2006 Emission rights EDdeferred Government Grants EDdeferred

® The IASB agenda Joint Projects with FASB Next step / current status Timing estimate Business combinations II Redeliberations IFRS early 2007 Fair value measurement ED, based on FASB work Mid 2006 Non-financial liabilities Redeliberations IFRS end 2006 Non-controlling interests Redeliberations IFRS early 2007

® Fair Value Measurement How to measure fair value if another standard requires a FV measurement How to measure fair value if another standard requires a FV measurement Not when to measure fair value Not when to measure fair value Definition of fair value Definition of fair value  The price that would be received for an asset or paid to transfer a liability in a current transaction between marketplace participants in the reference market for the asset or liability.

® FVM Application Transaction price presumed to be FV on initial recognition Transaction price presumed to be FV on initial recognition Reference market Reference market  Market entity would transact in Valuation premise Valuation premise  “In exchange” or “in use” Market observable prices or inputs preferred to entity inputs Market observable prices or inputs preferred to entity inputs

® Non-financial Liabilities Scope is all non-financial liabilities not covered by another standard Scope is all non-financial liabilities not covered by another standard Analyse whether obligation is conditional or unconditional Analyse whether obligation is conditional or unconditional Purely conditional obligations are not liabilities Purely conditional obligations are not liabilities  No present obligation from past event

® Non-financial Liabilities Unconditional ”stand ready” obligations are liabilities Unconditional ”stand ready” obligations are liabilities  Result in outflow of resources in all cases  Service provided by assuming risk Uncertainties about amount and timing of future events affect measurement Uncertainties about amount and timing of future events affect measurement  Not a recognition threshold

® The IASB agenda Joint Projects with FASB Next step / current status Timing estimate Performance reporting -- Segment A -- Segment B -- Segment B ED EDDP Q Q End 2006 Conceptual Framework Series of DPs From mid 2006 Revenue recognition DP End 2006?

® Performance Reporting Fresh look at presentation of financial statement package Fresh look at presentation of financial statement package Segment A – segregate income and expenses from equity transactions Segment A – segregate income and expenses from equity transactions Segment B – complete redesign Segment B – complete redesign

® Performance Reporting Segment A Decisions Required financial statements agreed Required financial statements agreed Required comparative information agreed Required comparative information agreed Will be exposed for comment as ED in Q (IASB only) Will be exposed for comment as ED in Q (IASB only)  No changes to information already required to be presented  Statement of recognised income and expense can be presented as a single statement or two statements

® Statement of Recognised Income and Expense Sales xxxxx Cost of sales(xxxxx) Gross profit xxxxx Expenses(xxxxx) Profit or loss before taxes xxxx Incomes taxes (xxxx) Profit or loss xxxx Changes in AFS securities (xxxx) Change in FX translation xxxx Change in cash flow hedges (xxxx) Recognised income and expense xxxx

® Performance Reporting Full Set of Financial Statements -- 1 Year Beginning and end of period statements of financial position Beginning and end of period statements of financial position Statement of recognised income and expense Statement of recognised income and expense Statement of changes in equity Statement of changes in equity Statement of cash flows Statement of cash flows

® Performance Reporting Segment B Activities Consider whether there is value in the notion of recycling between subtotals of net income and other comprehensive income Consider whether there is value in the notion of recycling between subtotals of net income and other comprehensive income If so, determine the basis for the types of transactions and events that should be recycled and when should recycling occur If so, determine the basis for the types of transactions and events that should be recycled and when should recycling occur Develop consistent disaggregation principles Develop consistent disaggregation principles Develop consistent definitions of totals and subtotals including financing category Develop consistent definitions of totals and subtotals including financing category Develop a reporting model applicable to all for-profit entities other than financial institutions Develop a reporting model applicable to all for-profit entities other than financial institutions

® Conceptual Framework Long-term project Long-term project Conceptual base for all standards Conceptual base for all standards Approved Needs an overhaul Approved Needs an overhaul  Refine, update, complete, converge Will not stop “ normal” development Will not stop “ normal” development

® Revenue and Related Liabilities Biggest source of restatements in US Biggest source of restatements in US Need a clearer definition of revenue Need a clearer definition of revenue When do we recognise revenue? When do we recognise revenue?  At contract signing or only at delivery?  Triggering events?  Bundled offerings?

® The IASB agenda Next step / current status Timing estimate Standards for SMEs ED2006 Consolidation - control ED? / DP? 2006 Insurance contracts DP2006 Liabilities & Equity Monitoring FASB

® Insurance Contracts IFRS 4 is an interim standard IFRS 4 is an interim standard Insurance Working Group advising on Phase II – a clean slate Insurance Working Group advising on Phase II – a clean slate Modified joint project with FASB (ie from Discussion Paper stage) Modified joint project with FASB (ie from Discussion Paper stage)

® Research project DPs issued These are not yet active agenda items Leader Management commentary New Zealand Measurement objective – at initial recognition – at initial recognitionCanada

® Other topics becoming ‘hot’ These are not yet active agenda items Timing estimate Pensions May become part of convergence effort UK ASB considering a project Asset impairment Canada working on this as part of ‘measurement’

® International Accounting Standards Board IASB Update