SWOT Analysis of Ultra Tech Cement Industry

SWOT Analysis of Ultra Tech Cement Industry The SWOT analysis about Ultra Tech cement and its position in the market. The company is one of the best in the cement industry, analysing it through the different framework of analysis in order to judge the actual situational and industrial position of the company in order to find out how actually is the company doing. The company is facing a lot of problem regarding its promotion and marketing techniques due to which it faces a short of awareness in the market due to which people are not aware of the product but instead of all the problems it is quite stable and maintain its position in the market. After performing Swot analysis of the company by reviewing porters 5 forces and pestel analysis companys strategic standing and positioning have been analysed. Currently the company is having a better standing as threat of entry is very low due to high initial funds required to establish the factory setup. Contents INTRODUCTION: Ultra Tech is Indias biggest exporter of cement clinker. The companys production plants have increase across eleven integrated area, one white cement plant, twelve grinding units and five terminals four in India and one in Sri Lanka. Most of the plants have ISO 9001, ISO 14001 and OHSAS 18001 certification. In addition, two plants have outcome ISO 27001 certification and four have received SA 8000 certification. The process of certification is at present started for the left over plants. The company exports over 2.5 million tons per annum, which is about 30 per cent of the countrys total exports. The export market comprises of countries around the Indian Ocean, Africa, Europe and the Middle East.ÂÂ  Export is a pressure area in the companys strategy for growth. Worlds top 10 cement companies comprises of Ultra Tech Cement Limited. The company has an annual capacity of 48.8 million tones, and manufactures and markets ordinary There is blast furnace slag cement and There is Pozzol ana cement. The companys subsidiaries are Dakshin Cements Limited, Harish Cements Limited; there is Ceylinco (P) Limited and Ultra Tech Cement Middle East Investments Limited. (Kalesh, 2009) SWOT ANALYSIS: STRENGTHS: Cement demand has grown in tandem with strong economic growth derived from: Growth in housing sector (over 30%) key demand driver. Infrastructure projects like ports, airports, power projects, dam irrigation Projects. National Highway Development Programme. Bharat Nirman Yojana for rural infrastructure and rise in industrial projects. Production The companys production facilities are spread across 11 integrated plants, one white cement plant, 12 grinding units and 5 terminals, 4 in India and one in Sri Lanka. High quality cement production is increasing annually.ÂÂ  Annual production capacity is 23.10 million tones. Use of high-end equipment such as the Gamma Metrics Machine and the X-ray Analyser ensures that each product passing out of company. There is manufacturing facility adheres to global standards of quality andÂÂ  performance. Logistics: Ultra Tech Can directly deal with the limestone tenders and thus the middle man do not affect its cost. Company use the local transporters which provide the efficient transportation cost. Thereby reducing the extra expense and making cement more economical for the local man to afford. Plantation: Ultra techs manufacturing plant uses ultra-modern technology and imported machinery. Companys Unit at Koala is the only Unit in this sector in India to have a desalination plant. It is used for meeting the water needs of the plant and the colony. The waste gases from the cooler are used in the desalination plant. that makes the product recyclable and environmental friendly thereby contributing to the environment. The Ultra Tech cement manufacturing the greenbelt at companys Units is simply awesome and is surrounded by trees all around. At some points, company is advancing to achieve the skyline. Only the leaves and the flowers and hear the cacophony of the birds.ÂÂ   Companys CSR (corporate social responsibility) activities extend to 127 villages, in proximity to its plants, across the country. (William B. Werther, David B. Chandler, 2010) Brand Positioning: In the world, Aditya Birla Group is the eighth largest cement player. Ultra Techs products include Ordinary Portland cement, Portland Pozzolana cement and Portland blast furnace slag cement. The company exports over 2.5 million tons per annum, which is about 30 per cent to the countrys total exports. Ordinary There is cement is the most commonly used cement for a wide range of process. Applications cover dry-lean mixes, general-purpose ready-mixes, and even high strengthÂÂ  pre-cast and pre-stressed concrete. OPC(ordinary Portland cement) is used for applications, such as commercial buildings, industrial constructions, Multi storied complexes, cement concrete roads and heavy duty floors. PPC ( Portland Pozzolana cement )cement is used forÂÂ  big construction like dam and thermal powerÂÂ  plant. Distribution Channels: Ultra Techs distribution network is very widely spread out in the country with over 5,500 dealers and 30,000 retailers with its strong distribution channels currently Ultratech is starting to acquire a strong positioning in the market giving head on competition to its rivals. Quality: All the plants of Ultra tech are ISO 14001 Environment Management Systems certified sustain toÂÂ  OHSAS 18001 standards. Clean technologies and processes that combine economic progress and sustainable environment are adopted by the company for better performance. There is plants at Awarpur and Ratnagiri in Maharashtra; There is Jafrabad and Magdalla in Gujarat; Hirmi in Chhattisgarh; Arakkonam in Tamil Nadu; Tadipatri in Andhra Pradesh; Jharsuguda in Orissa and DurgapurÂÂ  in West Bengal.ÂÂ  They have won the Capexil Certificate of Export Recognition Top Exporter -Cement, Clinker, Asbestos and Cement Products for the years 2000, 2002 and2003. Bhartiya Udyog Ratan Award presented to Sh. KYP Kulkarni By Indian Economic Development Research Association (IEDRA) for good quality of cement to customer, New Delhi in 2004. (Narayanan, 2007) WEAKNESSESS: Cement Industry is highly fragmented and it is also highly regionalized and Low value commodity makes transportation over long distances uneconomical. Not available in all the places: Ultra tech is not available at all the places as it is not manufactured at all places and all plants are not available everywhere due to which people cannot find it everywhere hence the profit margins are affected to a greater extend. Human Resource: Due to openness in the Ultra techs work culture which is very informal that does not suit forÂÂ  better management in corporate . The environment being very informal affects the management a lot as being the management they have to maintain a distance and discipline but due to the openness there is no such thing and they face a lot difficulty to control. And Ultra tech has insufficient man power due to its easy recruiting and selection method. Marketing: Lack of awareness program for consumers due to low promotion mix: the company faces the problem of proper promotion due to which the customers doesnt know much about the product resulting into less sales of the product instead of being a good product. Lack of marketing mix: ÂÂ  the company suffers with the problem of proper marketing mix which in return results into the whole confusion state and the product does not reach to the customers properly and in fact a lot of them dont know about it also. Delay in supply: the company being situated in the outer parts of the city and its plant not being located in every city causes delay in the supply of the product. (Porter, 1988) Health: Highly dusty environment at the time of dumping the cement is hazardous forÂÂ  health. It affects humans respiratory system adversely. Ultra tech is therefore not contributing to society as its corporate social responsibility remains unfulfilled due to many hazards. Others: Cement industry is highly fragmented and regionalized as Low value commodity makes. As transportation over long distances is uneconomical for value sector, so cost of transporting cement is high and this keeps cement from being profitable over long distances. In other talks, shipping cement costs more than the profit from selling it. PESTEL ANALYSIS: Analysing the above through pestel framework Ultratech was highly affected by the environmental factors. As cement plants are very harmful for the environment causing a lot of pollution and is harmful for the health of human being hence proving that the environmentally it is not good and hence its plants all are made to be situated outside the city where the population rate is low or no population. So Ultratech is bearing great difficulty in managing the environment along with the health issues. OPPORTUNITIES: With the low per capita consumption of cement in India 102 kg compared to the global average of 260 kg and the emphasis on infrastructure development, Ultra tech has ample opportunity to ride the growth curve. Ultratech can develop new marketing area. It can sign MOUs (memorandum of understanding) withÂÂ  government regarding supply of cement forÂÂ  government work. Ultratech can also maintain the position of competition in the market. Institutional market like corporate and offices, school society complexes are growing in large scale, which will increase the requirement. People are opting for more stable structures and good future, so large use of cement is taking place, so government isÂÂ  spending heavily on infrastructure project as Indian industry base is growing rapidly Thus, this is the right time to fully invest in these market. There is regular demand of cement which in turn will increase foreign investment in this sector. As roadsÂÂ  transformation proce ss is going on throughÂÂ  which the traditional method of road building will be convert by modern concrete roads. Substantially lower per capita cement consumption as compared to developing countries (1/3 rd of world average) Per capita cement consumption in India is 82 kgs against a global average of 255 kgs and Asian average of 200 kgs. For green field capacity 20 million tons per annum will be required to match the demand in pipeline for other two years leading to favourable demand supply scenario. (verma, 2008) THREATS:ÂÂ   As huge cement industry emerge there is more competition for ACC (Associated Cement Companies) to carefully enhanced its price , product and at the same time satisfy its dealers and customers. Cheap priced brand are capturing like a mushroom to lower income customerÂÂ  base. Players such as Jaypee Cement, Prism Cement, and Birla cement. ACC cement are eating up considerable market share. Due to India satisfy growth many new international cement companies are expected in coming years which will bring enormous change and can start price war. Government intervention to adjust cement prices Transportation cost is upgrading. Due toÂÂ  loading restriction there is overloading industrialist shows increase in costs due to the shortage in coal industry. Many retailers are influence by better profit margin, andÂÂ  other Benefits because of small industries increase competition among them, which in turn give heavy discount to customer and start malpractices. Timber is also being considered as one of the substitutes of cement, which is cheap and long lasting. Due to continuous attack of earthquake, many countries like Japan, Indonesia, Singapore etc are now using timber in construction since those areas are high earthquake affected. (Kalesh, 2009) PORTERS 5-FORCE MODEL(THREAT) ANALYSIS: Analysing the above through the five forces framework: Threat of New Entrants: TheÂÂ  high costs are major entry barrier for the entry of new players. The high shipment costs make it difficult to import cement. Cement being a high volume low value commodity results in high goods costs, which makes cement imports economically unlikely. Domestic Cement industry is highly integrated from global cement markets. Making cement duty free, as cement is being imported from neighbouring countries. However, due to logistics issues and lack of port, handling capabilities, imports of cement will remain negligible and do not pose a threat to domestic industry of Ultratech. Competitive rivalry between existing players: Previously the rivalry was strong among the players, as the industry was not consolidated. During the last few years the industry has become more consolidated with the Top 3 players Ultratech is having a combined market share of 49 percent in 2005-06 as compared to 32 Percent in 1999-2000. (Porter, 1988) Its competitive analysis is as follows: Domestic players competing Ultratech are: Associated Cement Companies Ltd (ACCL) Associated Cement Companies Ltd manufactures ordinary Portland cement, composite cement and special cement and has begun offering its marketing expertise and distribution facilities to other producers in cement and related areas. The company plans capital expenditure through expansion of existing units and/or through acquisitions. Birla Corp Birla Corps product portfolio includes acetylene gas, auto trim parts, casting, cement, jute goods, yarn, calcium carbide etc. The cement division has an installed capacity of 4.78 million metric tones and produced 4.77 million metric tones of cement in 2003-04. The company has two plants in Madhya Pradesh and Rajasthan and one each in West Bengal and Uttar Pradesh and holds a market share of 4.1 per cent. Going forward, the company is setting up its captive Power plant to remain cost competitive. Madras Cements Madras Cements Ltd is one of the oldest cement companies in the southern region and is a part of the Armco group. The company is engaged in cement, clinker, dolomite, dry mortar mix, limestone; ready mix cements (RMC) and units generated from windmills. Lafarge India Lafarge India Pvt Ltd, a subsidiary of the Lafarge Group, has a total cement capacity of 5 million tonne and a clinker capacity of 3 million tonne in the country. Lafarge commenced operations in 1999 and currently has a market share of 3.4 per cent. It exports clinker and cement to Bangladesh and Nepal. It produces Portland slag cement, ordinary Portland cement and Portland Pozzolana cement. Grasim-Ultra Tech Cemco Grasims product profile includes viscose staple fiber (VSF), grey cement, white cement, sponge iron, chemicals andÂÂ  textiles. With the acquisition ofÂÂ  Ultra Tech, L Ts cement division inÂÂ  early 2004, Grasim hasÂÂ  now become the worlds seventh largest cement producer with aÂÂ  combined capacity of 31million tones. Grasim (with Ultra Tech) held a marketÂÂ  share of around 21 perÂÂ  cent in 2005-06. Gujarat Ambuja Cements Ltd (GACL) Gujarat Ambuja wasÂÂ  set up inÂÂ  1986 with the commencement ofÂÂ  commercial production at its 2 million tonneÂÂ  plant in Chandrapur, Maharashtra. The group has clinker manufacturing facilities at Himachal Pradesh, Gujarat, Maharashtra, Chattisgarh, Punjab and Rajasthan. The company has a market share of around 10 per cent, with aÂÂ  strong foothold in the northern and western markets. ItsÂÂ  total sales aggregated US$ 526ÂÂ  millionwith a capacity ofÂÂ  12.6 million tonne in 2003-04. Gujarat Ambuja is one ofÂÂ  Indias largest cement exporter and one ofÂÂ  the most cost efficient firms. It hasÂÂ  also earmarked around US$ 195-220 million for acquisitions Cements Ltd. CONCLUSION: As India is the second largest producer of cement in the worlds many big player presents in the market after that Ultratech cement increases his market share due to the high growth rate of real estate. Because of continuously growth of ultra tech cement after little yearÂÂ  company may occur top cement manufacturer in India. After swot analysis of Ultra Tech I found that company has many strength, but few weakness also present, there are various opportunities for companyÂÂ  in IndiaÂÂ  and other Asian countries because the infrastructure is continuously developing. Company has won the best Employer award in 2007, so young generation have various career opportunities in it. Overall performance of company is increasing continuouslyÂÂ  in each sectorÂÂ  like as Production, HR, Marketing it is good for company it is soon about to establish a strong brand name in the industry due to its good quality and reputed image that is making it exclusive from its competitor s.

Fv Project Summary of Fasb and Iasb

Project Summary Background The objective of this project is to provide guidance to entities on how they should measure the fair value of assets and liabilities when required by other Standards. This project will not change when fair value measurement is required by IFRSs. Discussion at the September 2005 IASB Meeting At the September 2005 meeting, the IASB added the Fair Value Measurements topic to its agenda. The aim of the project is to provide guidance to entities on how they should measure the fair value of assets and liabilities when required by other Standards.This project will not change when fair value measurement is required by IFRSs. Discussion at the November 2005 IASB Meeting The staff conducted an education session on the FASB's working draft of a final Statement on Fair Value Measurements. In addition, the staff reviewed the scope of FASB's Fair Value Measurements project as it relates to IFRSs and the issues and questions to be addressed in preparing an IASB Exposure D raft and related Invitation to Comment. No decisions were made.At a previous meeting, the Board decided to issue the FASB's final Statement on Fair Value Measurements as an IASB Exposure Draft with an Invitation to Comment. The appendices in the FASB document dealing with consequential amendments and references to US GAAP pronouncements will be replaced with proposed consequential amendments and references to IFRSs. The Board further decided that there should be limited changes to the FASB's document. Instead, the Invitation to Comment should discuss any areas where the Board disagrees with the FASB's conclusions along with the basis for the disagreement.The staff expects these areas to be identified during Board deliberations during the December 2005 and January 2006 meetings whilst aiming toward issuance of the IASB Exposure Draft by April 2006. Discussion at the December 2005 IASB Meeting Definition of fair value The staff presented a paper identifying and comparing the differenc es between the definitions of fair value in the FASB's draft Fair Value Measurements (FVM) standard to the definition in IFRS.This comparison was meant to assist the Board in concluding whether or not to replace the current IFRS definition of fair value with the FVM standard definition. The staff's overall recommendation was to replace the current IFRS definition of fair value with the definition of fair value in the FVM standard. However, the staff made it clear that it was not stating that this definition be applied to all instances where fair value is currently used in IFRS. This scoping issue is the subject for a separate discussion that would span several Board meetings.The Board discussed in detail, the various components of the current and proposed definition of fair value in the context of the staff's analysis. Although the Board was in overall agreement to proceed with the proposed definition in the FVM standard, the following points were noted: †¢ Certain Board member s wanted to see the various issues discussed pulled together and presented in some logical manner that would clarify how fair value is approached. As noted below, the Board was concerned that the proposed definition would cause confusion where this was not the intention. Some Board members were concerned about changing ‘amount' to ‘price' as this would change the meaning of fair value. This concern seemed to emanate around the treatment of transaction costs. †¢ The explicit discussion of ‘exit values' in the draft guidance was seen by some as problematic. Illustrations were provided indicating that at the time of the transaction; the agreed price constitutes both an ‘entry' and ‘exit' value for that specific asset or liability. Others indicated that it was their belief that the current fair value definition already encompasses an exit value notion. Following on from this issue, the notion of ‘marketplace participants' is believed by some Boar d members to be a less superior phrase to the widely accepted ‘knowledgeable, willing parties' notion which is more readily understood to apply to a transaction between two parties without the necessity of the existence of a ‘market'. The FASB's rationale for introducing the ‘marketplace participants' notion as a means of excluding to the greatest extent possible, any entity specific factors when determining fair value, was noted.The Board will be asked to debate the meaning of the ‘reference market' notion at subsequent meetings. Scope of the Fair Value Measurements Project The Board considered a paper setting out on a Standard by Standard basis, which individual standards should be scoped in or out of this project. That paper was organised into three sections: †¢ Standards that require fair value measurement †¢ Standards that require fair value measurement by reference to another standard †¢ Standards that do not require fair value measuremen t Within each of these sections, the staff made various proposals for the Board's consideration.Overall, the staff recommended not modifying as part of this project existing reliability clauses and practicability exceptions. The staff concluded that such modifications could result in significant changes to current practice and that any changes should be considered on a standard-by-standard basis separately from this project. Standards that require fair value measurement The following standards were noted as requiring assets or liabilities to be measured at fair value in certain circumstances: †¢ (a) IAS 11 – Construction Contracts †¢ (b) IAS 16 – Property, Plant and Equipment (c) IAS 17 – Leases †¢ (d) IAS 18 – Revenue †¢ (e) IAS 19 – Employee Benefits †¢ (f) IAS 20 – Accounting for Government Grants and Disclosure of Government Assistance †¢ (g) IAS 26 – Accounting and Reporting by Retirement Benefit Pla ns †¢ (h) IAS 33 – Earnings per Share †¢ (i) IAS 36 – Impairment of Assets †¢ (j) IAS 38 – Intangible Assets †¢ (k) IAS 39 – Financial Instruments: Recognition and Measurement †¢ (l) IAS 40 – Investment Property †¢ (m) IAS 41 – Agriculture †¢ (n) IFRS 1 – First-time Adoption of International Financial Reporting Standards †¢ (o) IFRS 2 – Share-based Payment (p) IFRS 3 – Business Combinations and the June 2005 Exposure Draft †¢ (q) IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations The Board agreed with the staff recommendations (as set out in the observer notes) for each standard except in the following instances: †¢ IAS 18 – the staff concluded that in the instances where an entity received services for dissimilar goods or services, the measurement objective is not consistent with the draft FVM standard and therefore IAS 18 should be exclu ded from the scope.The Board noted this issue but indicated a preference to include IAS 18 within the scope of the FVM Standard as this is a minor part of the fair value requirements in IAS 18. The confusion caused in the market if the Board were to exclude IAS 18 from the project would be undesirable. †¢ IFRS 2 – due to the grant date model, the Board noted the issue that may arise where an entity measures a share-based payment transaction by reference to the equity instruments granted, not the goods or services received.However, the Board decided to include IFRS 2 within the scope of the FVM Standard on the same basis as for IAS 18. Standards that require fair value measurement by reference to another standard †¢ (a) IAS 2 – Inventory †¢ (b) IAS 21 – The Effects of Changes in Foreign Exchange Rates †¢ (c) IAS 27 – Consolidated and Separate Financial Statements †¢ (d) IAS 28 – Investment in Associates †¢ (e) IAS 31 â €“ Interests in Joint Ventures (f) IAS 32 – Financial Instruments: Presentation and Disclosure †¢ (g) IFRS 4 – Insurance Contracts †¢ (h) IFRS 7 – Financial Instruments The Board agreed with the staff recommendation that discussion of the above is not necessary as these standards do not contain any additional requirements to measure assets or liabilities at fair value. Standards that do not require fair value measurement †¢ (a) IAS 1 – Presentation of Financial Statements †¢ (b) IAS 7 – Cash Flow Statements (c) IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors †¢ (d) IAS 10 – Events After the Balance Sheet Date †¢ (e) IAS 12 – Income Taxes †¢ (f) IAS 14 – Segment Reporting †¢ (g) IAS 23 – Borrowing Costs †¢ (h) IAS 24 – Related Party Disclosures †¢ (i) IAS 29 – Financial Reporting in Hyperinflationary Economies †¢ (j) IA S 30 – Disclosures in the Financial Statements of Banks and Similar Financial Institutions †¢ (k) IAS 34 – Interim Financial Reporting (l) IAS 37 – Provisions, Contingent Liabilities and Contingent Assets †¢ (m) IFRS 6 – Exploration for and Evaluations of Mineral Reserves With regard to IAS 37, the Board concurred with the staff that the measurement principles therein are consistent with fair value principles in many respects and went further to state that when the amendments to IAS 37 are finalised, it would add explicit reference to fair value to clarify this issue. Discussion at the February 2006 IASB MeetingThis was a brief session to inform the Board about recent tentative decisions of the FASB on its fair value measurement standard. No observer notes were provided for this session. The FASB discussed the fair value hierarchy at its last meeting. FASB's exposure draft had proposed a five-level fair value hierarchy. The FASB has come to the conclusion that it is difficult to distinguish levels two to four in the hierarchy. They have therefore reduced the hierarchy to three levels. The FASB has not made other changes to its proposed fair value guidance.The staff said that discussion will continue in March. Discussion at the May 2006 IASB Meeting Principles of the fair value measurement project The following principles were put to the Board as those forming the foundation of the fair value measurement project: †¢ The objective of a fair value measurement is to determine the price that would be received for an asset or paid to transfer a liability in a transaction between market participants at the measurement date. †¢ The definition of fair value and its measurement objective should be consistent for all fair value measurements required by IFRS. A fair value measurement should reflect market views of the attributes of the asset or liability being measured and should not include views of the reporting entity tha t differ from market expectations. †¢ A fair value measurement should consider the utility of the asset or liability being measured. As such, the fair value measurement should consider the location and the condition of the asset or liability at its measurement date. The Board concurred with the staff that the above principles form the foundation of the fair value measurement project.Revised definition of fair value In the staff's view, the FASB's revised definition of fair value is substantively similar to the one tentatively approved by the IASB in December 2005. Based on that, the IASB agreed that the revised definition is consistent with the measurement objective. However, some Board members expressed concern about the change to a ‘price' rather than ‘amount'. In addition, the revised definition is based on an exit price notion that does not consider prices that exist other than the exit price.As a consequence, other Board members noted that the current definitio n will require measurement based on a hypothetical market that, for some types of assets and liabilities, cannot be calibrated with reality and in most cases will result in day 1 gains or losses, which constituents are uncomfortable with. Revised fair value hierarchy The draft fair value measurement statement indicates that valuation techniques used to measure fair value shall maximise the use of observable inputs and minimize the use of unobservable inputs.The hierarchy prioritises the inputs to valuation techniques used to measure fair value based on their observable or unobservable nature. The revised three-level hierarchy is summarised as follows: †¢ Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets the reporting entity has the ability to access at the measurement date. †¢ Level 2 inputs are observable inputs other than quoted prices for identical assets or liabilities in active markets at the measurem ent date. Level 3 inputs are unobservable inputs, for example, inputs derived through extrapolation or interpolation that cannot be corroborated by observable data. However, the fair value measurement objective remains the same. Therefore, unobservable inputs should be adjusted for entity information that is inconsistent with market expectations. Unobservable inputs should also consider the risk premium a market participant (buyer) would demand to assume the inherent uncertainty in the unobservable input.IFRSs currently does not have a single hierarchy that applies to all fair value measures. Instead individual standards indicate preferences for certain inputs and measures of fair value over others, but this guidance is not consistent among all IFRSs. The Board agreed with the staff's conclusion that the revised hierarchy in the draft fair value measurement statement is consistent with the principles discussed above and that the hierarchy in the draft fair value measurement statemen t represents an improvement over the disparate and inconsistent guidance currently in IFRSs.Unit of account and fair value measurements The Board agreed that it is not appropriate or practical to provide detailed guidance on the unit of account within the fair value measurement project. Determining the appropriate unit of account is a critical element of accounting and is not always consistent from one asset or liability to another or from one type of transaction to another. Determination of which market The Board agreed with the FASB's conclusion to adopt the ‘principal market' view.While this will result in a change from the ‘most advantageous' view currently in IFRS, the ‘principal market' view more accurately reflects the fair value measurement objective and provides a more representative measure of fair value by giving preference to highly liquid markets over less liquid markets. Transaction price presumption At the December 2005 meeting, the IASB tentatively agreed the fair value measurement objective was an exit price.The December discussion highlighted the conceptual difference between transaction price (what an entity would pay to buy an asset or receive to assume a liability) and an exit price objective (what an entity would receive to sell an asset or pay to transfer a liability). The staff concluded that an entity cannot presume an entry price to be equal to an exit price without considering factors specific to the transaction and the asset or liability. As a consequence, the staff plans to bring a separate discussion of day 1 gains or losses to the Board at a future meeting.The Board shared the concerns of the staff that if a transaction price were presumed to be fair value on initial measurement, entities might not sufficiently consider the differences between an entry transaction price and an exit fair value. As such, IFRSs should require an entity to consider factors specific to the transaction and the asset or liability in as sessing if the transaction price represents fair value. Fair value within the bid-ask spread Entities often transact somewhere between the bid and ask pricing points, particularly if the entity is a market maker or an influential investor.However, application of the rule in IAS 39 results in consistency across entities without consideration of entity specific factors that may influence where within the bid-ask spread the entity is likely to transact. Further, the rule creates a bright-line in quoted markets, thus limiting the use of judgement and subjectivity in the fair value measurement. The Board agreed to add a discussion to the invitation to comment that communicates agreement with the principle in the draft fair value measurement statement.The discussion would state that it is not appropriate to use a consistently applied pricing convention as a practical expedient to fair value. This recommendation would result in both a change to existing IFRSs as well as a departure from th e FASB's draft fair value measurement statement. Transaction and transportation costs in measuring fair value The definitions of transaction type costs vary in IFRSs, though such costs are consistently excluded from fair value measurements.Currently, IFRSs are not clear (with the exception of IAS 41) whether transportation costs are an attribute of the asset or liability, and as such should be included in the fair value measurement. The draft fair value measurement statement defines transaction costs as the incremental direct costs to transact in the principal or most advantageous market. Incremental direct costs are costs that result directly from, and are essential to, a transaction involving an asset (or liability).Incremental direct costs are costs that would not be incurred by the entity if the decision to sell or dispose of the asset (or transfer the liability) was not made. In the draft fair value measurement statement, the FASB concluded the fair value measurement of the ass et or liability shall include only those costs that are an attribute of the asset or liability. The FASB concluded transaction costs are an attribute of the transaction, not an attribute of the asset or liability.Therefore the fair value measurement of the asset or liability shall not include transaction costs. The staff agreed with the conclusions in the draft FVM statement regarding transportation and transaction costs. However, the staff concluded that the discussion of what types of costs are attributes of the asset or liability could be more robust as it is difficult to decipher justification for different treatment of transaction costs and transportation costs in the current discussion in the draft FVM statement.As such, the staff recommended, and the Board agreed that the invitation to comment should include a question on the sufficiency of the discussion of costs that are attributes of an asset or liability, such as transportation costs. Discussion at the June 2006 IASB Meet ing The Board continued its discussion of Fair Value Measurements (FVM), and reviewed the current project plan and due process steps. In addition, the Board had a preliminary discussion on accounting for ‘day-one gains'. Project Plan and Due ProcessThe Board was briefly updated on the developments from the last FASB meeting at which the Fair Value Measurements project was discussed. The Fair Value Measurement project was added to the IASB's agenda in September 2005. At that time, the Board decided that they would expose the FASB's final FVM standard as an IASB exposure draft, not modifying it other than change US GAAP references to the appropriate IFRS references. Since then, the staff has become aware of concerns raised by IASB constituents.These include: †¢ As the FVM project could change how fair value is measured, some think that proceeding directly to an IASB exposure draft based on the final FASB document could potentially short-cut the IASB's due process requiremen ts. †¢ As the FASB document applies a different concept of fair value from that of older IFRSs, constituents have problems with the conceptual reasons for changing to an ‘exit price objective' of fair value, particularly when an entity have no intention to sell an asset. As fair value is being increasingly used, fundamental questions regarding relevance and reliability need to be debated prior to completion of the project. Due to these concerns, the staff presented the Board with two alternative solutions: †¢ The first alternative was a modified plan which still would include issuing the FASB document as an exposure draft, in addition to conducting field visits and round-table discussions to get input from constituents. †¢ The second alternative was to issue the FASB document as a discussion paper, deliberate this, and then issue an exposure draft.This would allow the Board more time and more flexibility to address the concerns raised by constituents and hopeful ly a better standard, even if this route will be a longer one. The Board expressed sympathy for the concerns raised by the constituents, and the majority of Board members agreed that this would require a shift from the current project plan to alternative two which is to issue the FASB document as a discussion paper. However some Board members thought that the second alternative should be avoided as this would delay the issuing of a final standard too long.Alternative two will result in a final IFRS in late 2008 or early 2009. Some Board members thought that it would be crucial to communicate with constituents that this move away from the current project plan and towards the discussion paper route would take more time, but that it would be done to ensure the interest of constituents. The Board voted in favour of alternative two, resulting in a discussion paper being issued based on the FASB document. The Board noted that a final plan could not be put together before the final FASB do cument is issued. As long as the FASB have not issued their final document including, e. . their application guidance, the IASB will not have a public document accessible for issuing as the IASB's discussion paper. Day-one Gains and Losses Fair value, as defined in the FASB's document is an exit price. As a result of the Board's tentative approval of the exit price definition of fair value, in circumstances where an asset or a liability is required to be measured at fair value on initial recognition, a day-one gain or loss may be recorded. The staff believes the existing guidance in IAS 39 is inconsistent with the exit price notion as tentatively approved by the Board, and therefore needs amendment.The Board was asked whether they would consider: †¢ To make only consequential amendments to conform IAS 39 with the guidance in the Fair Value Measurement statement and to leave the current guidance on recognition of day-one gains and losses in IAS 39. †¢ Making consequential a mendments and change the existing guidance in IAS 39. The Board decided that they would not make any amendments right now, but rather put a question in the discussion paper whether this should be dealt with in a separate project or as a part of the Fair Value Measurement project.September 2006: FASB issues fair value measurement standard On 15 September 2006, the US Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157 Fair Value Measurements. FAS 157 provides enhanced guidance for using fair value to measure assets and liabilities. It applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. FAS 157 does not expand the use of fair value in any new circumstances. Click for: †¢ FASB News Release (PDF 19k) Special issue of the Heads Up Newsletter Summarising FAS 157 (PDF 218k) Some points about FAS 157: †¢ Fair value is the price that would be received to sell an asset or paid to transfe r a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. †¢ Fair value should be based on the assumptions market participants would use when pricing the asset or liability. †¢ FAS 157 establishes a fair value hierarchy that prioritises the information used to develop those assumptions.The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entity's own data. †¢ Fair value measurements would be separately disclosed by level within the fair value hierarchy. †¢ FAS 157 is effective for financial statements issued for fiscal years beginning after 15 November 2007, and interim periods within those fiscal years. Early adoption is permitted. †¢ FAS 157 may be downloaded from FASB's Website without charge. The IASB has on its agenda a project on fair value measurement.It is one of the convergence pr ojects with the FASB. This means that the IASB and the FASB plan to have similar, if not identical, definitions and guidance relating to fair value measurements. The IASB plans to issue a discussion paper in the fourth quarter of 2006 that will: †¢ indicate the IASB's preliminary views on the provisions of FAS 157; †¢ identify differences between FAS 157 and fair value measurement guidance in existing IFRSs; and †¢ invite comments on the provisions of FAS 157 and on the IASB's preliminary views about those provisions.Discussion at the September 2006 IASB Meeting The staff noted that FAS 157 Fair Value Measurements was issued on 15 September 2006 (see IAS Plus News Story of 19 September 2006). The IASB staff can now complete the preparation of an IASB Discussion Paper on Fair Value Measurements, which will comprise: †¢ FAS 157; †¢ excerpts of existing FVM guidance in IFRSs; and †¢ an Invitation to Comment that expresses the Board's preliminary views and requests constituent input on certain matters Non-performance riskThe Board noted that IFRSs currently do not discuss non-performance risk in relation to the fair value of liabilities. IAS 39 requires the fair value of a financial liability to reflect the credit quality of the instrument. Reflecting credit quality in the fair value measurement of a financial liability effectively causes the fair value measurement to reflect the risk that the obligation will not be fulfilled. FAS 157 extends this principle to the fair value measurement of both financial and non-financial liabilities.It was noted that non-financial liabilities include both credit risk (which related to the financial component) and non-performance risk (which related to the activity). After some discussion, the Board agreed to include a preliminary view in the invitation to comment agreeing with the concept that the fair value of a liability should reflect the non-performance risk relating to that liability (in additio n to credit risk). Issues in the Invitation to Comment Entry and exit pricesThe Board agreed that the Invitation to Comment should discuss the concepts of entry and exit prices without stating a preliminary view. The Discussion Paper will address two views without stating a preference. The discussion note that the notion of a price established between ‘a willing buyer and a willing seller' matters only when one is shifting markets. In many IASB standards, ‘fair value' is used to mean an exit price; in a few (such as IFRS 3, IAS 39, and IAS 41), the phrase is used to mean an entry price.Board members found using the same phrase to communicate two different measurement objectives confusing. Board members noted that they might need to reassess the measurement objective in IFRS 3, IAS 39, and IAS 41 should they adopt the approach in FAS 157 paragraph 17(d), which allows the use of a price other than the transaction price to represent fair value if the transaction occurred in a market other than the principal or most advantageous market. The staff proposed wording ‘on the fly', which they will bring back to the Board. Principal or most advantageous marketIAS 39 requires an entity to use the most advantageous active market in measuring the fair value of a financial asset or liability when multiple markets exist, whereas IAS 41 Agriculture requires an entity to use the most relevant market. By comparison, the FAS 157 requires an entity use the principal market for the asset or liability. In the absence of a principal market for the asset or liability, the entity uses the most advantageous market. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity for the asset or liability.The most advantageous market is the market in which the reporting entity would sell the asset or transfer the liability with the price that maximizes the amount that would b e received for the asset or minimizes the amount that would be paid to transfer the liability, considering transaction costs in the respective market(s). In either case, the principal (or most advantageous) market (and thus, market participants) should be considered from the perspective of the reporting entity, thereby allowing for differences between and among entities with different activities.The Board reconfirmed their view taken in May 2006, namely: When multiple markets exist for an asset or liability, the fair value measure should be based on the principal market for that asset or liability. If there is no principal market, the most advantageous market should be used. In both instances, the principal or most advantageous market should be determined from the perspective of the reporting entity. A question will be asked on this topic in the Invitation to Comment. Calling ‘level 3' measurements ‘fair value'The Board noted that FAS 157 establishes a three level hierar chy for categorising and prioritising inputs for fair value measurements. Level 3 of the hierarchy is ‘unobservable inputs' for the asset or liability (that is, they are not observable in a market). Unobservable inputs are used to measure fair value only to the extent that observable inputs are not available. These inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).When Level 3 measures are used, FAS 157 prescribes additional disclosures. The Board agreed that the disclosure requirements in FAS 157 highlight sufficiently the nature of the fair value measurement so that users of financial statements can develop a view of the potential uncertainty of that measurement. Therefore, it would not be necessary to include in the Discussion Paper a discussion of whether measurements comprised of significant Level 3 inputs should be labelled something other tha n fair value. Block premiums and discountsThe Board agreed to address the issue of whether block premiums and discounts should be discussed in the Discussion Paper. Such premiums or discounts may arise when a larger-than-normal quantity of an asset or liability is being sold in a market. Board members noted that the requirement to use the ‘Price x Quantity' formula is limited to Level 1 measures, and that this opens the treatment of block purchases and sales to abuse, since it could be argued that these should be measured using Level 2 or 3 inputs.Board members also agreed that there is a need to distinguish illiquidity caused by the size of the block from that caused by the thinness of the market. The staff will draft a question on this issue for inclusion in the Invitation to Comment. Day 1 gains and losses The Board noted that an exit price measurement objective could have significant implications on certain fair value measurements in IFRSs, particularly in IAS 39 on initia l recognition. They reasoned that it is important to highlight situations where the guidance in FAS 157 differs significantly from current IFRSs.Further, convergence on the day-one gain matter is a high-profile issue to many large financial institutions and is an area where the staff expects many comments. The Invitation to Comment will contain a discussion and question on the transaction price presumption. US GAAP-specific material contained in FAS 157 The Board agreed that, in the interests of timely publication, they would not alter FAS 157 in any way for the purposes of the Discussion Paper and Invitation to Comment, and that it would therefore have US GAAP-specific material. The Invitation to Comment would note that any Exposure Draft would be IFRS-specific.Next steps On a poll, 12 Board members voted to issue the Invitation to Comment and Preliminary Views, and one Board member abstained, pending resolution of the discussion of entry and exit prices. The Discussion Paper is sc heduled for publication in late 2006. November 2006: Discussion Paper Issued On 30 November 2006, the IASB published for public comment a Discussion Paper on Fair Value Measurements. The Discussion Paper sets out the IASB's preliminary views on how to measure fair values when fair value measurement is already prescribed under existing IFRSs.It does not propose any extensions of the use of fair values. The DP is built around FASB's recently issued SFAS 157 Fair Value Measurements. SFAS 157 establishes a single definition of fair value together with a framework for measuring fair value for financial reports prepared in accordance with US GAAP. Click for IASB Press Release (PDF 53k). The Discussion Paper will be available without charge on the IASB's website starting 11 December 2006. Comment deadline is 2 April 2007 [extended to] 4 May 2007. The IASB plans to publish an Exposure Draft in 2008.Discussion at the January 2007 IASB Meeting Extension of the comment deadline on the Discussi on Paper The staff reported that several constituents had asked the Board to extend the deadline for comments on the Board's Discussion Paper Fair Value Measurements. The constituents highlighted that the comment period coincided with the financial reporting season for those with calendar year ends and asked for more time so that an important and complex document could receive the attention it deserved. The Board agreed unanimously to extend the deadline for comments to Friday 4 May 2007.Discussion at the September 2007 IASB Meeting The staff informed the Board that the FASB had formed a Valuation Resource Group (VRG). The purpose of the VRG is to provide the FASB with input for clarifying the guidance related to the application of the principles in SFAS 157 Fair Value Measurement when fair value is required or permitted under US GAAP. The VRG is drawn from accounting firms, valuation advisers, preparers, users, regulators and standard setters. The first meeting of the VRG is planne d for 1 October 2007. Issues raised at that meeting will be brought to the October FASB meeting.The IASB staff noted that any decisions made by the FASB are likely to have implications for valuations performed under IFRSs because constituents may apply the US guidance in the absence of IFRS guidance. The staff will keep the Board informed of the project. No decisions were made. Discussion at the October 2007 IASB Meeting The staff presented their analysis of comments received on the IASB's discussion paper on fair value measurement. The discussion paper was issued as a ‘wrap around' of FASB Statement of Financial Accounting Standards No. 157.The complete analysis is available in the Observer Notes section on the IASB's website (Agenda Paper 2C). The staff asked the Board to do the following: †¢ consider the main points raised in the comment letters (136 received); †¢ affirm the project objectives; and †¢ approve the staff's preliminary project plan. The main poi nts raised in the comment letter by constituents included (please refer to Agenda Paper 2C for a detailed analysis): †¢ General agreement to that the fair value measurement project is needed; †¢ Concerns about how to provide guidance on determining fair value when it is not clear in hich circumstances; †¢ The interaction between the fair value measurement project and the conceptual framework project (in particular, phase C which covers measurement); †¢ The view that in many situations an entry price notion is superior to an exit price notion; †¢ Fair value is more akin to a heading for a ‘family' of measurement bases and accordingly terms should be used which are more descriptive (that is, more clearly articulate what the Board's intended measurement basis in that situation is); and †¢ With regard to measuring liabilities at fair value, the respondents raised concerns about the application of a transfer notion instead of a settlement notion and as ked for guidance as to the meaning of non-performance risk. Regarding the interaction between this project and the Conceptual Framework project, some Board members noted that the outcome of this project is only one of a number of possible measurement bases that will be in the revised Framework. Consequently, the impact on the Framework project is only minor. The staff confirmed that it consults with staff of the Framework project on a regular basis. Some Board members observed that the notion ‘entry price' should be as well defined as ‘exit price'. Staff noted that this is part of the proposed project plan. No decisions were made.The Board was also asked to agree on the following project objectives: †¢ Development of principles and measurement guidance for an exit price measurement basis; and †¢ Completion of a standard-by-standard review of fair value measurements permitted or required in IFRSs to asses whether each standard's measurement basis is an exit pric e. If the Board does not agree, will it agree to decide on a case-by-case basis whether or not to develop measurement guidance for those other measurement bases. The Board agreed to both objectives. On the second bullet point, it was clarified that this analysis will not lead to the development of additional guidance for those measurement bases that will be identified as not fitting in the definition of fair value for the purpose of the fair value measurement project. However, the Board noted that a working definition for fair value must first be agreed on before the analysis can be done. Additional Discussion at the October 2007 IASB MeetingThis was an education session and accordingly no decisions were made. The session was led by representatives of the valuation profession to illustrate practical valuation concepts and issues (the complete presentation [Agenda Paper 11A] can be obtained from the Observer Notes section on the IASB Website). The focus was on the valuation methodolo gies used in the measurement of tangible and intangible non-financial assets. The background of the session was the Discussion Paper on Fair Value Measurements that was issued by the IASB in November 2006. The main topics of the presentation were: †¢ Value concepts in IFRSs †¢ The purchase price allocation process Overview of valuation methodologies (that is cost approach, market approach, income approach) The presenters' main focus was the valuation requirements resulting from a business combination and what are the factors valuation professionals consider in such transactions. Although this was an education session only the Board showed particular interest in certain topics of the presentation: †¢ If and how appraisers exclude entity-specific factors from their valuation models †¢ Customer-related intangible assets (separation and assumptions used in valuation) †¢ Consideration of tax in the valuation process †¢ Separation and valuation of contingent liabilitiesOn the last point, the representatives of the valuation profession admitted that they have difficulties identifying all contingent liabilities and how to value them based on a transfer notion (that is what would an entity have to pay to pass on the risk – in contrast to a settlement notion). Discussion at the November 2007 IASB Meeting The staff began the morning session by informing the Board about the latest developments in relation to the implementation of SFAS 157 Fair Value Measurements which is the basis for the Discussion Paper published by the IASB. The developments included the deferral of the effective date of SFAS 157 for non-recurring measurements (for example in business combinations).It was noted that these developments would have no impact on the IASB project on fair value measurements. The staff presented its preliminary definitions of ‘current exit price' and ‘current entry price' for assets and liabilities that will be used in the stan dard-by-standard review. The Board and the staff reiterated that they do not want to change the measurement within the standards. The goal of the analysis carried out by the staff would be to find out which measurement attribute the Board and its predecessor (the IASC) had in mind when using the term ‘fair value'. The preliminary working definitions of the staff are as follows: †¢ Assets: Current entry price: The price that would be paid to buy an asset in an orderly transaction between market participants at the measurement date. o Current exit price: The price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. †¢ Liabilities: o Current entry price: The price that would be received to incur a liability in an orderly transaction between market participants at the measurement date. o Current exit price I (transfer notion): The price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. o Current exit price II (settlement notion): The price that would be paid to settle a liability in an orderly transaction at the measurement date.At the request of a Board member staff confirmed that possible components of fair value will be addressed in later stages of the project. The staff also confirmed that it will involve practitioners to gain insight into current valuation practice in the specific circumstances. The Board had a short discussion on certain aspects of fair value measurement and was informed by staff that some of the issues will be discussed at the December Board meeting. The Board agreed on the preliminary definitions of current entry price and current exit price for assets and liabilities and that staff should not consider other measurement bases for the purpose of the standard-by-standard review.Discussion at the December 2007 IASB Meeting The purpose of this session was to continue the deliberations on the issues in the Fair Value Measurements Discussion Paper and to present an analysis of the ‘market participants view' under SFAS 157 compared to the ‘knowledgeable, willing parties in an arm's length transaction' in IFRSs. After staff review of the two approaches, the Board was asked if it agrees with the staff analysis on the market participants view. Some Board members raised concerns about the possible differences of the notion ‘market participants view' in comparison to a ‘knowledgeable, willing party'. The staff noted that they see no differences in content.One Board member asked why a change in terminology would then be necessary as constituents are familiar with the notion of a ‘knowledgeable, willing party'. Other Board members said that the document must make clear that the terms are interchangeable. After this the Board discussed what a market is and whether, for certain transactions, one can assume a market exists if, for example, actually onl y two parties are acting. As no definition of ‘market' was provided, the Board asked the staff to develop an analysis. As all further discussions depend on the outcome of that analysis the Board agreed to postpone discussion of the other items in the agenda paper to a later Board meeting. No further decisions were made. Discussion at the March 2008 IASB MeetingWhether the fair value measurement project should have a working group or other type of specialist advisory group The Board has on its agenda a project on fair value measurement that aims to provide guidance on how to determine fair value if a standard requires or allows fair value measurement. The staff informed the Board that it worked under the assumption that a working group would not be required as there is an overlap with existing working groups that could be involved as required. On further reflection, the staff has concluded that this approach does not work as it proved difficult to involve the other working grou ps without a clear mandate.The staff also believes that it would not be necessary to set up a formal working group but instead to establish a ‘technical advisory group' (TAG) that could work on a informal, as-needed basis. Information exchange could be done in person or via electronic communication. However, the IASB Due Process Handbook requires the Board's consent for not establishing a working group for a major project. One Board member raised the question whether the Valuation Resource Group of the FASB could be involved. The staff answered that this group would interpret and implement SFAS 157, the US standard providing fair value measurement guidance. The Board agreed not to establish a working group, but to form a technical advisory group instead. Discussion at the April 2008 IASB MeetingRepresentatives of the International Valuation Standards Committee (IVSC) presented an education session to the Board on four valuation issues. No decisions were made at this education session. The four issues presented by the IVSC delegation were: †¢ What is the difference between ‘price' and ‘value'? †¢ Is there a valuation difference between an entry and an exit price? †¢ Highest and best use †¢ What makes the market? What is the difference between ‘price' and ‘value'? The representatives made clear that in their view ‘price' is the amount agreed on in a transaction while ‘value' is the outcome of a valuation. In practice, most valuations assume a transaction but, depending on the purpose of the valuation exercise, a value could also be entity-specific.It was made clear that in many cases price and value would result in (nearly) the same number. It was also noted that the IVSC standards use three types of valuation with two of them taking a market view and one of them being an entity-specific approach – which could possibly result in different amounts for the same valuation object. Some Board member s were confused by the terminology used by the presenters and it was agreed that this could be the cause for much confusion within the constituency and that any communication by the Board must clearly articulate what they mean. One Board member noted that ‘value' must always be accompanied by an adjective as people understand different things in different situations.Other Board members were confused about where the difference in amounts results from. The IVSC representatives explained that there are many reasons (for example, synergies). Is there a valuation difference between an entry and an exit price? The delegation moved then on to the second question. The representatives explained that the profession holds the view that for non-entity-specific values entry and exit price for the same market should be the same. Often a perceived difference results because entry price is determined on a different market than the exist price. The Board had a lengthy discussion on that issue with a view on the guidance in US GAAP.Highest and best use The highest and best use is terminology from the US GAAP standard SFAS 157 Fair Value Measurements that assumes an entity would also use its asset the best way it can. It was highlighted that the SFAS 157 definition is very similar to the IVSC one. It was noted that this is not a different type or basis of value and that it is inherent in any basis that requires the estimate of an open market transaction. Some Board members expressed their doubt that this always could be assumed for liabilities. What makes the market? The representatives explained that there is an opinion that fair values could only be made where active markets exist.They made it clear that in their view this is not the case. The valuation profession assumes as long as there is enough evidence to establish a valuation it is assumed that a market exist even if the degree of reliability is lower than that for a market with frequent transactions. They would no t necessarily link value and liquidity. The Board showed interest in the valuation for some of the instruments where markets have contracted recently and had some debate on that point with the representatives. The Chairman closed the session by asking the IVSC representatives if they have experts on valuing liabilities that could participate in the planned IASB technical experts group.The representatives confirmed that such experts would be available to participate in the group. Discussion at the May 2008 IASB Meeting Discussion of the Meeting of the IASB Expert Advisory Panel on Valuing Financial Instruments in Illiquid Markets The issue was added to the agenda with short notice and no observer notes were available. The staff informed the Board that the Financial Stability Forum has established an expert advisory panel to assist the IASB in enhancing its guidance on valuing financial instruments when markets are no longer active. In addition the staff noted the following: †¢ T he first meeting will take place on 13 June 2008. †¢ At the first meeting the panel will decide on the form of guidance issued, e. g. est practice guidance or input for amendment of standards. †¢ The duration of the panel is expected to be two or three months. June 2008: IASB Forms an Expert Advisory Panel on Valuing Financial Instruments in Inactive Markets On 5 June 2008, the IASB formed an expert advisory panel on valuation of financial instruments in inactive markets, in response to Recommendations made by the Financial Stability Forum (FSF). The new panel will assist the IASB in: †¢ reviewing best practices in the area of valuation techniques, and †¢ formulating any necessary additional practice guidance on valuation methods for financial instruments and related disclosures when markets are no longer active.Organisations participating in the panel include AIG (American International Group); Basel Committee on Banking Supervision; BNP Paribas; Capital Interna tional Research Inc. ; Citigroup; Deloitte; Deutsche Bank; Ernst & Young; Financial Stability Forum; Fitch Ratings; Goldman Sachs; HSBC; International Association of Insurance Supervisors; International Organization of Securities Commissions (IOSCO); KPMG; Pioneer Investments; PricewaterhouseCoopers; Swiss Re; and UBS. FASB will have a staff observer. The first meeting of the panel will take place on 13 June 2008 in private session. A summary of the meeting will be presented to the IASB at its June 2008 meeting and will be published on its website. More Information on IASB's website. Related resources are available on our Credit Crunch Page.Discussion at the June 2008 IASB Meeting [pic]Fair Value Measurements – Expert Advisory Panel on Valuing Financial Instruments in Inactive Markets: Meeting update The staff presented a summary of the first meeting held on 13 June 2008 of the Expert Advisory Panel. The staff noted that the purpose of that meeting was to identify the issues arising on valuing financial instruments when markets are no longer active and that possible solutions will be discussed at future meetings. In addition the staff noted the following: †¢ No decision was made regarding the form of guidance the panel will provide, e. g. best practice guidance or input for amendment of standards. Subsets of the issues identified will be discussed by a subgroup of panel members at the next meetings in July (measurement issues) and August (disclosure issues). Meeting dates have not yet been confirmed. The meetings will be held in private sessions with public updates being provided at the July and September Board meetings. †¢ The last meeting is expected to be in September 2008. Updates on the activities of the panel are also available on the IASB's website. Discussion of the Fair Value Measurements Project Following the joint IASB-FASB meeting in April 2008 the Board discussed the way forward in this project. At the joint meeting the IASB decid ed not to re-debate all aspects of the Fair Value Measurement discussion paper (the DP), i. e. ot to fully re-debate FAS 157 Fair Value Measurements on which the DP is based. Instead the Board agreed to redeliberate certain areas of confusion or areas in which FAS 157 had proved difficult to apply. The staff presented an analysis of issues raised in the DP and provided recommendations on whether a particular issue should be redeliberated or not. Technical aspects of fair value measurement were not discussed at this meeting. The Board agreed to discuss further the topics listed below. These topics will be redeliberated mainly because the Board did not express a preliminary view in the DP and/or comments received on the DP indicated a need for further discussion: The exit price measurement objectiveThe Board agreed to consider both entry and exit notions of fair value measurement based on the standard-by-standard review currently performed by the staff. The market participant view In general the Board reaffirmed its preliminary view in the DP. However, the staff was asked to improve the wording in order to address concerns raised by constituents. In particular, it should be clarified how to apply the market participant view in cases where no market exists (for example, liabilities that cannot be transferred). Transfer vs. settlement of a liability The Board agreed to a staff analysis that this is an important cross-cutting issue for other Board projects, particularly, amendments to IAS 37.Transaction price and fair value at initial: Day one gains and losses This issue is considered to be interrelated with the entry vs. exit price issue. The principal (or most advantageous) market The Board reaffirmed the preliminary view in principal but noted that questions about the practical application needs to be resolved. Valuation of liabilities: Non-performance risk There seemed to be a broad consensus to reaffirm the preliminary view that non-performance risks needs to be considered when measuring the fair value. However, the majority of Board noted that this is an important cross-cutting and that there are unresolved issues with regard to presentation (of the counter-entry) and disaggregation. Highest and best useThe staff intends to address comprehensively all issues relating to ‘different markets'. Bid-ask spreads: Applicability of mid-market pricing to all levels of the hierarchy? The staff noted that the Board still needs to reach a preliminary and that the question of which transaction costs are to be included will be addressed in this context. Issues not discussed †¢ Disclosures: Redeliberation in light of current market environment †¢ Application guidance: Redeliberation in light of current market environment Topics not to be redeliberated The Board decided not to redeliberate the following five topics: 1. Attributes (characteristics) specific to an asset or liability 2.Whether transaction costs are separate from fair value The staff intends to discuss any outstanding issues in connection with bid-ask spreads. (this sentence relates to bullet 2) 3. Three-level fair value hierarchy Accepted as described in the Discussion Paper without any further deliberations 4. The prohibition of blockage factor adjustments at all levels of the hierarchy The Board had a thorough debate on this issue. One Board member emphasised that the majority of constituents disagreed with the preliminary view expressed in the DP. Finally, there seemed to be a consensus not to redeliberate the issue but to deal with the concerns in the feedback statement.The staff was asked to review the comments received to ensure that the Board ‘has not missed anything' in reaching the preliminary view. 5. The unit of account for financial assets and liabilities The staff noted that the topics not to be discussed by the Board are broadly consistent with the principles in IFRSs and that they can therefore be addressed in the exposure draft in a way that considers the concerns raised by constituents and is consistent with FAS 157. Discussion at the July 2008 IASB Meeting – Expert Advisory Panel on Valuing Financial Instruments in Inactive Markets: Meeting update The project manager on the fair value measurement project gave an oral update on the activities of the expert advisory panel.The purpose of this panel is to assist the IASB in reviewing best practices in the area of valuation techniques as well as formulating any necessary additional guidance on valuation methods for financial instruments and related disclosures when markets are no longer active. The panel or subgroup met three times. At the kick-off meeting the panel identified specific issues that panel members felt must be addressed (such as forced transactions, the use of pricing services, illiquid markets). It was noted that there seemed to be consistency in applying the fair value measurement requirements in IAS 39 despite the use of different tech niques. The staff informed the Board that there will be a draft document to be discussed end of July on those issues, but that it is not clear yet who will publish it. The panel would then turn to appropriate disclosures with the aim to have an exposure draft published in Q4/08.It was noted that there would be ongoing communications with the consolidations project team. Discussion at the July 2008 IASB Meeting At this session the staff asked the Board to decide on a definition of ‘fair value' – what is the measurement object for items with a measurement basis currently referred to as ‘fair value'? The staff acknowledged that some aspects of fair value have not been discussed yet, but will be brought to the Board at future meetings (for example, principal market and day-one gains/losses). Staff's view, however, is that whether fair value means an entry or exit price can be decided separately. The staff then turned to the standard-by-standard review as requested by the Board.This review had been requested to help the Board to decide whether: †¢ To retain the term ‘fair value' and define it appropriately, or †¢ To replace the term ‘fair value' with more specific terms more appropriate in the individual context. It was noted that a consistent definition of fair value might lead to fewer instances where the Board would require or permit its use. It was also highlighted that a precise definition of fair value would help to ensure proper application where it is required or permitted. The Board had a lengthy discussion about whether entry and exit price would be the equal for the same item on the same date in the same market.Also, the Board discussed which market an entity should refer to in measuring fair value and whether an exit price could include exit by consumption of assets. Board members expressed a range of views on these issues. No clear consensuses were reached. Some Board members observed that if the Board cannot cl early define what fair value means, it would be even more difficult for constituents in applying IFRSs. Board members said that some of the issues that are to be brought back for discussion at future meetings must be resolved before the Board can agree on a definition of fair value. The staff also asked the Board to consider whether to keep the term ‘fair value' or abandon it. The Board seemed to be split on that issue.The Board discussed whether, in measuring the exit-price fair value of an asset the entity is using, the measurement should take viewpoint of the entity or of an independent market participant. Board members' views varied, and no decision was reached. The staff distributed a flow chart which was not part of the observer notes that was intended to facilitate the discussion. The Board decided that, once fair value is precisely defined, each reference to fair value in IFRSs should be assessed in relation to the definition. Where ‘fair value' as used in an IFR S is not consistent with the agreed definition, the term should be replaced with a more descriptive term.Discussion at the September 2008 IASB Meeting – Credit Crisis: Proposed amendments to disclosure requirements Please see separate project page on Amendments to IFRS 7 – Credit Crisis Discussion at the September 2008 IASB Meeting – Expert Advisory Panel on Valuing Financial Instruments in Inactive Markets: Update The staff presented the Board with an update on the work of the expert advisory panel formed in response to recommendations from constituents. The panel's task is to develop best practice guidance on measurement and disclosures for financial instruments in inactive markets. It was noted that the panel had met six times and will meet again in October. One single document would be published covering both measurement and disclosure. A draft report has just been posted on the IASB's website. The staff informed the Board that although comments would be sol icited until 3 October, comment letters would not be published on the IASB's website.Asked by a Board member, the staff confirmed that this non-mandatory guidance would be considered when developing the fair value measurement standard and, hence, might become mandatory in the future. Discussion at the September 2008 IASB Meeting – Fair Value Measurements Exposure Draft The staff introduced the session by highlighting the objectives and timeline. The purpose of the session was to seek the Board's decision on: †¢ Whether a fair value measurement exposure draft should state that fair value reflects the highest and best use of an asset; and †¢ Whether blockage factors should be excluded from fair value measurement. Blockage factors The staff started with the second issue on blockage factors.The staff highlighted that it only sought the Board's input on this type of discount, not on other discounts or premia. The staff defined a blockage discounts as a discount that repr esents a discount to the quoted price of an instrument (usually equity securities) to reflect the reduction in the price if the entity were to sell a large holding of instruments at once. The Board had a lengthy debate on this. Some Board members were concerned about ignoring blockage factors as they would represent a real economic phenomenon. Others were of an opposite

The Success Of New Managers - 1239 Words

Gain experience. New managers tended to strictly follow rules, because that is how they succeeded as nurses and doctors. However, this was not ideal behavior for a manager. It was precisely their ability to apply their expertise in unique ways to unique situations that brought the most value to their work (Cathcart Greenspan, 2013). Andron stated this another way, â€Å"strictly-regulated organizational cultures will never be creative and innovative, thus, companies nurturing such organizational cultures might not successfully adapt their operations to the dynamic and flexible profile of the modern organizations aiming to success† (2013, p. 189). Instead, the best decisions managers made were based on merging the rules with the wisdom of†¦show more content†¦Instead, managers needed to learn how to take risks, how to think beyond the rules, and how to use their expertise as a platform for innovation. Successful managers learned from failures, examined the reasons, and adjusted for the future (Andonovic et al., 2015). Although practical wisdom develops via experience over time, the learning time can be decreased through exposure to other leaders’ experiences. In other words, new leaders benefitted from hearing stories from existing leaders. Specifically they improved themselves after hearing examples of how other leaders leveraged their experience to handle challenging situations, including working outside the rules (Cathcart Greenspan, 2013). Hearing that this behavior was not only acceptable but desired, and hearing this information at the beginning of their health care leadership careers, could help new managers apply their own practical wisdom sooner. This concept was central in the book Influencer. The New Science of Leading Change which, among other factors, touted the power of storytelling to create change (Grenny, Patterson, Maxfield, McMillan, Switzler, 2013). Maintain expertise in the field. The conventional wisdom in business management was that a good manager can manage any team, that managers did not need to know

Destroyed Dreams On A Yellow Paper - 808 Words

I believe the story â€Å"Contents of the Dead Man’s Pockets† should be renamed â€Å"Destroyed dreams on a yellow paper†. â€Å"Contents of the Dead Man’s Pocket† isn’t a good title because it doesn’t give the reader an idea of what is happening in the story. This title vaguely explains the purpose of this story. If a dream is place in a dead man’s pocket it means nothing it has no use. Tom spent all of his time focusing on his intent to get promotion with no success. This title â€Å"Destroyed dreams on a yellow paper† will help the reader understand the significance and theme of the story The story starts with Tom Benecke, a serious, young man working on an independent project for his job. While working on his project, his wife, Clare decided to go the†¦show more content†¦At that moment, Tom trembles with fear. He is unbalanced and at risk of falling off the ledge. Calmly, Tom tries to walk across the ledge to get back to his window. With another simple cadence and determination, Tom made it to his window. Kneeling on the ledge, Tom is dreaming of going into his warm, cozy apartment. Tom then tries to open his window but he couldn’t. His fingers couldn’t fit under the outer sill to push it open. Also, the upper window panel was frozen tight with dry paint. Tom then folds the yellow paper in his pocket and tries to think of ways to get people on the street attention. With many attempts, Tom didn’t get anyone to notice him on the ledge. He decided to wait on the ledge until Clare came home, but checking his watch she was only gone for eight minutes. Then, Tom started to regret not going to the movies with his wife. He now understands that he didn’t need to stay to work on his project. He realizes that working on the yellow wasn’t worth more than spending quality time with his wife. In the story, the text it says, â€Å"He wished, then, that he had not allowed his wife to go off by herself tonight-and on similar nights.† He recognizes that he need balance. Tom then muscles up the courage to break his apartment window. With a balled fist and a loud short screaming Clare, Tom was able to break the window. He went into his apartment and placed the yellow paper on the desk weighing it down with a pencil. He went to get his coat from the closetShow MoreRelatedThe Path Between the Seas Book Report Essay1540 Words   |  7 Pagessum of time spent constructing railroads in Panama, were familiar with the local climate, this information was completely disregarded by the French.   Similarly, word of the potentially fatal diseases that were extremely common to the area such as yellow fever and malaria were blatantly ignored by Ferdinand de Lesseps.   De Lesseps seemed prone to feigning ignorance in regards to other issues of import as well.   Budget restrictions and engineering limitations, for instance, were forgotten, regardlessRead MoreLand Of Sunshine State Of Dreams By Gary Mormino1267 Words   |  6 Pagesunique natural wo nders which has made it a location of wonder within the U.S. Even with Florida’s majestic natural appeal the state in its territorial years struggled with its public image as Indian attacks were common place in the region along with yellow fever and environmental phenomena such as hurricanes. Following in the end of the Seminole and the Civil war Florida began to search for a new identity and sense of prosperity in the face of massive changes to its economy and societal structure. WithRead MoreJohn Lennon : The Embodiment Of Experimental Perfection1583 Words   |  7 Pageswith smirks on their faces, fish and chip crumbs on their shirts, and a little tune to sing gave the world color. Underneath the grey English sky, they turned to music, for it was the only thing that made sense to them. The Beatles created a world of yellow submarines, octopus gardens, weeping guitars, and walruses; they reminded us that All We Need Is Love, they made us Twist and Shout, they made us Come Together. John Lennon, Paul McCartney, George Harrison, and Ringo Starr welcomed us into their mysticalRead MoreAfrican American Women During The Civil War1137 Words   |  5 Pagesor become involved in multiple different themes including: politics, midwives or physicians, inventors, literary or arts figures, feminists, suffrage or equal rights activist, wealthy women, academics, fighters- physical or metaphorical etc. This paper will exemplify three special women, all the while providing background, some life achievements and details of their last years. These women are Ida Wells, Isabella Baumfree (A.K.A Sojourner Truth) and Harriet Tubman. All African American abolitionistRead MoreThe Story Of An Hour By Kate Chopin2170 Words   |  9 Pagesfollow her own dreams and wishes, and not anyone else’s, just her own. She was finally free, even whenever she was not even sure what that really meant. Mrs. Mallard started daydreaming about her new life without her husband, a life w ith no strings or barriers on what she could do or not. And even when he was a good husband, that loved her and cared for her, she didn’t have the same feeling towards him. Although all this is fast destroyed when her husband appears in the door. All her dreams banished andRead MoreSimilarities Between3772 Words   |  16 PagesSimilarities Between Charlotte Gilman s The Yellow Wallpaper and Jean Rhys s Wide Sargasso Sea. Charlotte Gilman s The Yellow Wallpaper and Jean Rhys s Wide Sargasso Sea are stories about women s tragic lives in the late nineteenth and mid twentieth centuries. These two stories contain many similarities. In the novel Wide Sargasso Sea, the main character Rochester drives his wife to insanity. Similarly, in the short story The Yellow Wallpaper, John drives his wife insane. In additionRead More Henri Matisse Essay2592 Words   |  11 Pageswho had seen them. Louis Vauxcelles, gave them the name the â€Å"Fauves† (Flam 79). They were nicknamed the â€Å"wild beasts† because of their use and experimentation with bright, unnatural colors. Their grass was not green, but yellow or orange. Skies were not blue, but pink or yellow. Even though European art collectors turned away from his art, he was able to attract attention from wealthy American art collectors and this exhibit helped send his prices through the roof (Essers 14, Getlein 80). In 1909Read MoreThe Gothic Ele ments in the Picture of Dorian Gray4109 Words   |  17 Pagesas he was alone, he lit a cigarette and began sketching upon pieces of paper, drawing first flowers, and bits of architecture, and then human faces. Suddenly he remarked that every face that he drew seemed to have a fantastic likeness to Basil Hallward. . The existence of reflective devices in this novel is supported by Elizabeth MacAndrew’s assertion in The Gothic Tradition of Fiction: Just as a Gothic tale is itself a dream and also a mirror showing the reader his mind, everything within theseRead MoreAn Analysis Of Jon Krakauer s Into The Wild2135 Words   |  9 Pagesbackground information of this essay will explore the need for nature in modern life. This essay will also provide a brief summary of Jon Krakauer’s book Into the Wild. Finally, the paper will show that Christopher McCandless lived the dream of throwing off the trappings of modern life and living off the land. His dream was to exist as o ne with nature but he found through his journeys that nature is a force that will test men relentlessly, especially men who are ill prepared. Background We liveRead More Genghis Khan and the Mongolian Culture Essay2837 Words   |  12 Pagesculture of his people, the Mongols. Readers might be confused on who Borjigin Temà ¼jin is, he was the man known today as Genghis Khan. This paper will illustrate how Temà ¼jin’s ability to lead developed by exploring his beginnings and how through his exceptional leadership skills he went on to create the largest contiguous empire in history. The first part of the paper will concentrate on Mongol culture in the 12th century, Temà ¼jin’s upbringing in that culture and how he changed it through the consolidation