The G4+1 group of standard setters met in Dublin, by cqb96228


									                                 G4+1 COMMUNIQUÉ
                                      Number 5, September 1999

The G4+1 Group of standard setters met in Dublin, Ireland from 14 – 16 September 1999 at the
offices of the Institute of Chartered Accountants in Ireland. The G4+1 comprises members of
national standard setting bodies from Australia, Canada, New Zealand, the United Kingdom and
the United States of America. Representatives of the International Accounting Standards
Committee (IASC) attend as observers. The views noted in this Communiqué are those of the
representatives of the member standard setting bodies and not necessarily of the bodies

                                        Open Meetings

The Group agreed that beginning with meetings in the year 2000, the discussions of technical
issues in future meetings of the G4+1 generally should be open to public observation to the
extent such arrangements are possible and appropriate meeting facilities are available in the host
country. The host country would make meeting details and the current meeting agenda available
to the public.


The Group continued its discussions of a number of technical issues that emerge from the
proposed new approach to lease accounting set out in the 1996 G4+1 Discussion Paper,
“Accounting for Leases: A New Approach,” which proposes a single approach to accounting for
all lease contracts.
The discussion at the meeting focused on the following issues:
• The distinction between executory or service contracts and leases in which the leased asset is
   not made available to the lessee on a continuous, uninterrupted basis, for example, in the
   lease of a time-share.
• The impact of contingent rentals, price changes, cancellation and renewal options, and
   residual value guarantees on the measurement of the lessee’s assets and liabilities under the
• Subsequent measurement of lessee guarantees to the lessor. The Group discussed whether
   changes in the fair value of residual value guarantees should be expensed or reflected in the
   carrying amount of the lessee’s asset.
• The assets that should be separately identified in the lessor’s balance sheet, including assets
   arising from future lease payments, residual values, and residual value guarantees. The
   Group also considered the extent to which contingent rentals, price changes, and cancellation
   and renewal options should be included in the lessor’s assets arising from the lease contract
   and three possible methods of accounting for the lessor’s residual interest in the asset at the
   end of the lease.
• Leases of land or buildings in circumstances in which the land or building is reported at fair
   value under existing accounting practice.
• Methods for recognition of gain or loss on sale-leaseback transactions.
                            G4+1 COMMUNIQUÉ (CONTINUED)

The Group agreed that a paper containing a discussion of the technical issues related to the
approach and the conclusions reached by the G4+1 to date should be published as an Invitation
to Comment in each of the G4+1 jurisdictions.

                                 Equity Method of Accounting

The Group continued its review of a discussion paper on the use of the equity method of
accounting in financial reporting. The Group decided to focus the discussion paper on issues
related to use of the equity method in circumstances in which an investor has neither control nor
joint control but only significant influence. The Group previously discussed whether the equity
method is appropriate in those circumstances and whether investments over which the investor
has significant influence should be measured at fair value. The discussion paper will (a) set out
the background to the use of the equity method in accounting for investments over which an
investor has significant influence and (b) present arguments in support of a movement to a fair
value basis of measurement.
The Group decided that issues related to the use of the equity method in circumstances involving
control or joint control might be considered at a future date in conjunction with discussions on
consolidations and joint ventures. Consideration of implementation issues that remain unresolved
in current practice would also be part of those discussions.

                                   New Basis Measurement

The Group was presented with a series of cases for which new basis measurement in the
separately issued financial statements of consolidated subsidiaries may be appropriate. The
Group agreed to continue discussions at the next meeting and to first focus on one possible
condition for new basis measurement, that is, circumstances that involve a purchase of a majority
interest in an entity’s stock.

                                     Financial Instruments

The Group received a report from the Chair of the Financial Instruments Joint Working Group
(JWG) on progress with the development of a comprehensive accounting standard on the
recognition and measurement of financial instruments using fair value as the basis of
The Group reviewed the progress of the project. Significant progress toward drafting a standard
and the related basis for conclusions has been made in some of the major topic areas identified
by the JWG. Work is still needed to complete research in areas such as the appropriate methods
of determining fair value and the presentation of gains and losses arising from changes in fair
value. The Group noted the JWG’s completion and release of a paper intended to provide a basis
for discussion of the special issues related to applying fair value accounting to banks. The Group
continues to be satisfied that the JWG would produce an Exposure Draft in the first half of 2000
for release by each Group member in a manner appropriate to each jurisdiction.
                                    G4+1 COMMUNIQUÉ (CONTINUED)

                                              Constructive Obligations

The Group discussed some of the issues related to constructive obligations identified in a paper
that resulted from work by FASB staff and Board members on the topic. The Group agreed to
continue its discussion of that topic at the next meeting.

                                                     Project Updates

The Group discussed the status of the Canadian and the U.S. projects on business combinations.
Both jurisdictions have recently issued Exposure Drafts on the subject.
The Group also discussed the Exposure Draft presently under development by the FASB on
accounting for financial instruments with characteristics of liabilities, equity, or both. Further
study of the possible implications for the definition of residual interest (equity) by the G4+1 has
been deferred until the release of that Exposure Draft.
The FASB provided an update on the status of its project on present-value-based measurements.

                                             Forthcoming Publications

Papers developed by the Group on the following topics are expected to be published in each
Group member’s jurisdiction in the near future:
• Accounting for Interests in Joint Ventures
• Accounting by Recipients for Non-reciprocal Transfers, Other than Contributions by Owners.

                                                Future Agenda Topics

The Group identified the following as potential agenda topics for future discussion:
• Accounting for intangible assets
• Definition of residual interest (equity)
• Accounting for environmental liabilities
• Accounting for postretirement benefits
• Investor and investee accounting for interests in joint ventures.

                                                       Next Meeting

The Group meets next in Montreal, Canada on 30 November − 2 December 1999. The following
topics will be discussed:
• Constructive obligations
• New basis measurement issues
• Equity accounting
• Financial instruments
• Stock-based compensation.

                        This G4+1 Communiqué is published with the concurrence of members of the G4+1.
            Contact information for the ASB, the accounting standard setter for the UK and Ireland, is at

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