Wednesday, October 30, 2019
Organizational Ethical Issue and Policy Essay Example | Topics and Well Written Essays - 1250 words
Organizational Ethical Issue and Policy - Essay Example The laws should insist that truth has to be reported and beyond going to the truth is unlawful. 4 1. Why I chose this dilemma? This dilemma selected is of high relevance in respect to the mounting IT related security issues today. An array of websites in various industries tends to disclose clients’ important personal information deliberately or inadvertently through their websites. This involves numerous security issues as the website owners or even other users of the sites can misuse the date disclosed. 2. Why you chose the three principles? Confidentiality is the core element of every online business, especially which deals with clients data. Hence, organizations and their members have the moral responsibility ensure data security while they carry out their business activities irrespective of the size or nature of the websites they own. Finality is another important principle as there are situations when an organization has to extend its service beyond legal, religious, or social parameters to ensure reliability. Justice also becomes important when an organization pays attention to clients requirements fairly without any bias. In this regard, the firm will ensure that all risks and benefits are equally distributed among the beneficiaries involved. 3. An analysis of the research used to identify the actions in the matrix An extensive research has been conducted to analyze the way various websites collect and use clients’ information. Admittedly, many of the social networking sites are highly prone to data theft. The research altogether reached the conclusion that legal intervention is essential in this matter to curb the intensity of the threat. Organizational Policy to Address the Issue The ethical dilemma based on the dependency to information technology is evident in every sector as there are possibilities of manipulation and illegal activities. Today there are many websites existing with wrong intention of deceiving the users or more specifi cally general public. The prime motto of such websites is to interfere into the privacy of individuals. Apart from the mere interference and proclamation, they also exaggerate the fact with rumors, finally destroying the character of an individual or the reputation of the organization itself. Many policies have been proposed to safeguard the individuals from the treat caused by technology. Reynolds (2011, p. 105) insists the importance of establishing a security policy to meet the basic requirements of an acceptable ethical standard. There is more than one reason behind choosing this particular dilemma. Although the term ethical dilemma seems ambiguous, in fact it is simple as Reynolds describes it. According to him, it is â€Å"moral code or morality†that is highly related to business application and relation to information technology (p.3). Today many websites exist in the networking world collecting and disclosing information which is highly personal. Although, the target ed individuals are not very often ordinary people, in
Monday, October 28, 2019
Strategic Human Resources Management of Sony
Strategic Human Resources Management of Sony Introduction In a growing economy and technology on their progress, many companies have benefited from the opportunities offered by science. Given the continued growth of technology companies have the means to continue the success of competitive products and services available. One particular company that has been fully adopted by Sony this feature. This company was very successful, but because his way of thinking strategically and incredible talent to use every ounce of new technologies can be used. But using e-commerce or e-commerce Sony has skyrocketed. Sony is a manufacturer of audio, video, communications and information technology products for consumer and professional markets. Background of Sony Japans Sony Corporation (Sony) Final parent company isSony. The company is mainly focused on electronics, such as audiovisual and information technology and components; game, such as PlayStation, entertainment such as motion pictures and music, and financial services such as insurance and banking. It has five segments: electronics, games, photos, and other financial services. Sony makes this one of the largest and most diverse entertainment worldwide. In the Electronics segment develops, designs, manufactures and sells various types of electronic equipment, tools and devices for consumer and professional markets. During the rally, Sony Computer Entertainment Inc. develops manufactures, markets and distributes PlayStation Portable (PSP), PlayStation 2 and PlayStation 3 computer entertainment system. Vision, Mission and Values Business mission is a summary of key policies for the company to achieve its objectives, and explains the key that every effort should be employed. Tend a few words or short phrases, but also long term is more than one page. Objectives For this vision to be realized, Sony aims to strengthen the core electronic business application of information technology in the design, manufacture, distribution and sale. It is believed that the value of Sony Music, photos, games and financial services industry as they become available through the network. So, Sony has now launched a sub-network enabled products in four categories: digital TVs and set-top boxes, home VAIO PC, PlayStation 2 and mobile devices. Sony make. Believe Sony make. Believe (dot It), a new message to another group of origin indicated by Sony in electronics, games, movies, music, web services and mobile phones. Make. Believe Sony is to introduce a spirit of creativity innovation, marking the first time, the company has unified brand message that is both entertainment and electronics. TASK1 What is human resource management? Each organization has three basic components that target people and structure. A Human Resources Management (HRM) to study the activities of people working in an organization. HRM is the management of people working in an organization. It is particularly relevant to the person who can say that people can manage. Leadership of organizations to their needs and helps the organization resolution. HRM seeks to how people can be managed within the organization. He is responsible for hiring people to train to organize the command, the benefits of their work problems and recommend appropriate. Strategic HRM: Where all HR activities (including workplace learning) to help organizations achieve strategic objectives and vision, either directly or indirectly. This means that for all D activities to be strategic. So it is important to understand exactly how everything is done (what you offer), which contribute to your organizations mission, vision and strategy. Otherwise, how can you value your work and how to organize the value of your work? Please note that this can contribute indirectly. For example, to improve the quality of working life have a significant impact on profitability by reducing errors and accidents, reduce absenteeism and turnover and increase productivity and improve customer service. basic functions of human resource management Basic functions of HR functions are the same as saying the government by managers plan, organize, manage and control staff. HR staff and to participate in policies and practices related to persons working for the organization. Human Resources Department meeting the following functions to manage all sizes: Teams (includes planning, recruitment and selection) Human Resources Development (It covers the education and training required by the employee) Benefits (incentives for employees based on performance or policy) health and safety (including issues related to health and safety policy of the individual) The relationship between employee and labor Maintenance Records The importance of strategic human resource management (SHRM) Human Resource Management is to manage the size and normative theory would require coherent set of personnel policies in accordance with organizational strategy to determine the quality of work, commitment and employee performance and organizational effectiveness and competitive advantage. Sony HRM policy is to manage their employees and to be successful. Because it considers the variation in different regions. Sony, for example, encourages their employees to participate in decision-making, so that the company public meeting in each unit provides opportunities for employees to give their opinion. And different places in Europe, where appropriate, Sony. Total Number of Employees Sony total number of employee (Sony website) is working, where labor costs involved in these negotiations, in accordance with the law and working conditions. Sony provides education and skills training for workers in different countries and business sectors. But there are different training systems in different regions. Kio Morita, founder of Sony Corporation, said there is no magic in the success of Japanese companies most popular and Sony in particular. The secret of success is just the way they treat their employees. Head of Mission of Japan to the manager to develop a healthy relationship with its employees as family resemblance in the company to create the impression that employees and managers share the same fate. Most successful companies in Japan has succeeded in the sense of common destiny for all employees to create, what the Americans and labor management and shareholders to appeal. When Morita was president of Sony, said new employees and all employees who are lucky enough to find jobs and to decide persona lly if he has spent his lifetime working with Sony. TASK2 Define Human resource planning The concept of human resource planning within the organization is as old as human culture itself.There the idea of à ¢Ã¢â€š ¬Ã¢â‚¬ ¹Ãƒ ¢Ã¢â€š ¬Ã¢â‚¬ ¹a better workforce planning and new business effectively in the field of human activity. Applications are reviewed by various people, scientists acceptance and design management. Definition of human resource planning are listed below- According to F. William Glueck,  Human resource planning is the process by which management attempts to provide adequate human resources to achieve organization objectives. Business factors HRM is central coordination and management fundamentals organizations. There internal and external factors affecting various business hiring and training. Control factors are external factors that have little or organizations, but to better understand these factors, it can better adapt and develop appropriate strategies for managing human resources. The external environment refers to conditions outside the organization, including potential legal, social and political interests of customers, competitors, unionization, labor market conditions, industry characteristics and national cultures (Susan et al, 1995). Some internal factors are affecting HRM technology functions, structure, size, organizational strategy and culture. Technological environment is perhaps one of the most astonishing powers that the HRM practices of the company (Zammuto OConnor, 1992) shape. Technology puts an important role in reducing costs, improving efficiency and customer access to relevant informa tion available to help businesses increase productivity (Kotler et al 2004). Requirement of sound HR planning JL and RW Gold Decgar a book Management of personnel and recommended to the requirements of effective labor planning and success as:       à ¢Ã… ¾Ã‚ ¢ planning should contribute to a lot of time.       à ¢Ã… ¾Ã‚ ¢, the alternative plan or amendment, if any, should be included       à ¢Ã… ¾Ã‚ ¢ Planning should be based on need.       à ¢Ã… ¾Ã‚ ¢ Planning should elements of flexibility and elasticity.       à ¢Ã… ¾Ã‚ ¢ planning to be economics.       à ¢Ã… ¾Ã‚ ¢ Planning should be efficient and effective. The purpose of the Human resource plan for this species members and staff is to get the right thing at the right time. Human resource planning is a question of method. Human resource planning is developed by certain activities in a row. What steps are described as follows-     à ¢Ã… ¾Ã‚ ¢ identify the target     à ¢Ã… ¾Ã‚ ¢ Gather information     à ¢Ã… ¾Ã‚ ¢ provide human resources to implement     à ¢Ã… ¾Ã‚ ¢ human resource supply prediction     à ¢Ã… ¾Ã‚ ¢ plan and the necessary programs STGES OF PLANNING a) The purpose of the organization: The purpose of the organization must be established before the introduction of human resource planning. After determining the purpose of the organization, the Human Resources Director might develop human resources to the organization to achieve this objective.  b) The collection of information: The second phase of human resource planning to gather information. Cant predict or plan to be better than the data they are based.Human resource planning requires two types of information. They are          à ¢Ã‚ -Data from the external environment          à ¢Ã‚ -Data within the organization                 à ¢Ã…“â€Å"Data from the external environment, external environment information, including information about current conditions and expected changes in                       à ¢Ã… ¾Ã‚ ¢ Economics                      à ¢Ã… ¾Ã‚ ¢ Technology                      à ¢Ã… ¾Ã‚ ¢ Competition                      à ¢Ã… ¾Ã‚ ¢Labor                 à ¢Ã…“â€Å"Data organization of data within the organization that contains information about Current conditions and expected changes include in-                      à ¢Ã… ¾Ã‚ ¢ plans short and long term organizational strategies                      à ¢Ã… ¾Ã‚ ¢Prevailing human resources                   à ¢Ã… ¾Ã‚ ¢Turnover and mobility    c) HR Demand: In this step, because it determines the resources needed to achieve the goal. Once planners have the information internally and externally, they can predict the demand for workers.    d) Estimating: The human resources supply: In this stage, planners predict labor supply. Planners forecast internal supply of workers and their skills and availability of different types of people probably promo ability outside the labor market.    e) Plan and the necessary programs: the final stage of human resource planning is to plan specific programs to ensure that our available depending on future demand.Programs include-                        à ¢Ã… ¾Ã‚ ¢ increase or decrease the size of the labor                        à ¢Ã… ¾Ã‚ ¢ changing skill mix                        à ¢Ã… ¾Ã‚ ¢ management succession plan                        à ¢Ã… ¾Ã‚ ¢ Career Development Plan                        à ¢Ã… ¾Ã‚ ¢ disincentives for early retirement incentives The desire to achieve objectives through human resources planning is meaningless unless its assessment of the results of the activities of human resource management planning: f) Feedback on the planning process: If demand and supply projections were as accurate as desired, Feedback is given to improve the forecasting process. Although these programs are inadequate or inappropriate, you can change them. HRM model Human resource strategy is generally high. Human resources strategy will not solve the problem of ownership of HR processes. The strategy defines the strategic role of human resource initiatives in the organization and within a few years. Human resources is the best tool for ownership of HR processes to be determined. It also helps identify gaps in the organizational and human resources skills and competencies of HR. The model makes the management of human resources to operate smoothly. What is the purpose of the HRM model? The result is most of the HRM model clear principles for the design and execution of tasks and responsibilities of human resources and human resources allocated to various projects in human resources unit. Template definition is not easy, but saves a lot of conflict in the future. The HR builds stronger and more competitive in the HR organization. TASK3 The purpose of human resource management policies in Sony Since its inception in 1946, Sony should remain at the forefront of technological development, based on what has been done consistently with the new lifestyle. Sony has new innovative companies to also promote, through an innovative approach to the challenge of national and regional boundaries. Sony values à ¢Ã¢â€š ¬Ã¢â‚¬ ¹Ãƒ ¢Ã¢â€š ¬Ã¢â‚¬ ¹of communication between management and workers are essential if the management transfer policy for employees and employers to encourage their opinions. Sony puts a high priority on communication between management and individual employees. Since fiscal 2005,Sony CEO Howard Stringer, the time to visit the Sony world to communicate directly with employees at public meetings and other opportunities for dialogue to create. contact senior also Sony Group employees by posting on the intranet or e-mail Sony and facilitate information exchange and creating a sense of unity with the Sony Group. Sony aims to create a workplace that respects human rights and equal employment opportunities for people with the best of their abilities. Because of the diversity of human rights initiatives and businesses, Sony is an important function that every employee at work, and he knew of any problems you can get Sony Corporation Disabled Employees Ratio *4  Staff Development Development and staff development for Sony dynamic engine of growth for Sony. Sony recognizes that population growth is supported by large asset management. A Sony aims to enhance motivation and personal development of its employees worldwide through learning by doing, as well as access to a variety of programs tailored to local needs, including education of engineers, management training and training to build capacity and skills of employees. Developing leader If a company does business in countries and regions around the world, Sony recognizes the importance of cultivating leadership qualities, and aims of international respect for different cultures and working environments. Sony has implemented a series of initiatives to bring the full potential of employees to meet and the next generation of business leaders worldwide to promote. Training programs for employees Sony is organizing various training programs for employees at all levels of graduates from senior managers for each region and industry. In Japan, Sony Group offers over 300 courses, including technical education and training bodies, different approaches, including group training using e-learning and correspondence courses, in accordance with the objectives. These courses are supported by approximately 230 front-line employees who have the expertise needed to develop curriculum and textbooks Sony technology in all areas Employee training program by Sony in Japan(www.sony.net) Impact of regulatory requirements on human resources policies in Sony Basic Policy on Human Rights and Equal Opportunities Sony Group Code of Conduct, adopted in May 2003, has sections on human rights and global policy provides rules governing human rights and related activities within the Sony group. For example, the section provides for the Sony Group Code of Conduct, equal opportunities in employment policy on the recruitment, hiring, training, promoting and otherwise treat applicants and employees without regard to non-race features, including religion, color , national origin, age, gender and disability. These provisions are based on existing international standards, including the United Nations adopted the Universal Declaration of Human Rights. Health and safety Sony targets healthy labor market and employment practices and establish a healthy environment, safe working and productive stands. Political and database management system In 1998, Sony has adopted a general policy on health and safety (OH S), which acts as a standard group, reflecting Sonys commitment to the health and safety of its employees. Simply policy regarding the laws of the countries and regions of OH S, but also with complementary activities undertaken as part of their health and safety management structure. Employee Health Sony Corporation aims to help create jobs in good health. related activities are focused on providing different health check-up, support and dissemination of information via the intranet an overview of health issues raised.  Work-Life Balance Looking at work is a much more diverse lifestyles and employees to fully express their skills to keep up, Sony has created support systems and flexible work styles, including the importance of the optimal work-life balance stress . Work and life balance in Sony Source- www.sony.net Flexible work styles Sony does not follow the laws and customs of the countries and regions in which it operates, but also provide working arrangements to help employees to achieve work-life balance effectively. Child care and nursing Sony is offering special holiday savings plan for child care workers to be caring for children and paid leave, which can be used in conjunction with parental leave and offers up to 20 days for employees who leave after birth . A significant number of workers who leave. Sony also offers a System theme and use of paid annual leave on an hour for child care or nursing.  Human Resources Information Technology Three years ago, Sony Electronics has a sharp eye on the HR information system, and not liked what he saw. Only 18 percent of the 14,000 employees in six locations systematically used HR applications, allowing the human resources department document generation. Not that the workers do not blame Sony Electronics indifference upgrade to PeopleSoft 5.2 universal platform within five years, turning out new versions and patches new home tend to be a doctor. In terms of hardware and software, long lived HRIS system utility, said Edward J. Cotter, Sony Electronics vice president of human resources. TASK4 Impact of organizational structure on human resource management The organizational framework clarifies the responsibility of the shares to managers and employees. Organizational structures can help companies retain employees, while the suibiachtà ºlacht the chain of command, among other benefits. Staff retention is how the company is focused on maintaining a low staff turnover and more experienced workers to ensure that employees remain with the company. Organizational structures can establish minimum expectations of personal conduct. Organizational structures often contain companys mission or vision. This information allows companies to include information on benefits for employees who reach certain goals or the company. It promotes good behavior and employee retention. Companies cannot fully sum workers to take compensation as a reward. Organizational structures can ensure employment growth and development of employees to retain employees for longer periods where they want to learn more about the company and improve their professional skills. Role of organizational culture in SHRM Corporate culture is an important role in selecting the best candidate. Candidate sourcing and recruiting and interviewing candidates, to find ways to determine whether someone is suitable for culture. Organizational culture is often difficult to describe, but if you look at the candidates during the recruitment and selection processes, it is easy enough to see whether they match the work to be filled.  Recruitment The first step in the recruitment process of the job to ensure that it is necessary to accurately reflect the functions of the job to review. Building on its work, including a brief description of the business of supplying information on the organizational culture. Interviews of person-to-face is the best way to decide whether the work history and career goals to send candidates to your organizations needs. For example, that the applicant work history primarily on the activities carried out independently of the office is the challenge of working for an organization where most projects are achieved through teamwork. During the interview, describe as precisely as possible, the work environment. Choosing the right person When the shortlist of candidates for those two or three, but here is where one can ensure a true match for the company. In this phase of the selection a wise decision to candidates based tour company possible. various personal presentation and interaction and exchanges with employees observe non-verbal. Monitoring and control This is the final step in the planning of the organization human resources. When the program is approved and implementation has begun, it must be checked. Human Resources department must follow up to see what happens in terms of available resources. The idea is to make sure we use all available talent available to us to fail if we continue to fight to the top. Recommendation Creating a culture of teamwork For teamwork happen, these powerful actions happen. leaders clearly hope that the teamwork and collaboration are expected. Nobody is working space or the process itself. People who own work processes and location open to ideas and feedback from others on the team. Team teaching model held in their interaction with each other and the rest of the organization. They maintain teamwork even when things go wrong. Members talk about the organization and the value of teamwork culture identification.  ®When writing formal and shared values, teamwork is one of the five or six keys. Teamwork and rewards have been identified. Lone Ranger, even if it is an excellent producer, is rated lower than the person who obtains the results with others in teamwork. Performance management system focuses on teamwork and value. Often 360 degree feedback system is integration. Conclusion Sony plans and strategies reflect different depending on their unique vision and mission. Strategies, plans and even their threats failures that contributes to the company. Sony Corporation to take into account not only new technologies, new products and automation, but the environment is healthy. Human resource management is even possible cultural and national differences. Policies should distinguish IHRM organization and integration of all units. Sony is an example to explain. Human Resources supports the general conclusion that human resource management for the benefit of employees and human resources activities in accordance with the strategic goals of Sony. Sony managers held on the need for staff and delegates tasks to assess these good impressions on the leaders and they believe the company delegated authority, which in turn increases job security for frames. Programs for different levels of employees is to create a team spirit among employees and a culture in w hich everyone is entitled to make progress in the promotion.
Friday, October 25, 2019
Voltaires Candide Essay -- Enlightenment Voltaire Essays
Voltaire's Candide Candide is a reflection of the philosophical values of the Enlightenment. Voltaire’s novel is a satire of the Old Regime ideologies in which he critiques the political, social, and religious ideals of his time. A common intellectual characteristic of the Enlightenment was anti-feudalism. Philosophers were against the separations in the Old Regime and pushed for equality among human beings. Voltaire parodies the pompousness of the nobility several times throughout his novel. As we are introduced to the Baron Thunder-ten-tronckh, Voltaire describes his castle as luxurious, even though it is inferred that Westphalia is only a moderate estate. Although the name may sound important, Thunder-ten-tronckh lacks the luxury of nobility. The Baron lives off of the labor of others, justifying it by his birth into the right of power. Furthermore, the Baron’s sister refuses to marry Candide’s father because he has one less quarterling than she on his coat of arms. The difference in their lineage is minute; however, the Baroness refuses to marry someone that is less important than she is. Candide himself also experiences a similar incident. The Baron’s son refuses to allow Candide to marry his sister, Cunegonde. Although Candide rescues Cunegonde from several misfortunes, the Baron feels that he is unworthy of someone with such status. In his display of noble arrogance, Voltaire suggests that the accident of birth is meaningless. He continues his parody of the nobility by introducing Don Fernando, the governor of Buenos Ayres. Don Fernando carries with him a long list of names to accentuate his power and wealth. In the days of the Old Regime, this was custom in order to recognize nobility. However, Voltaire portrays Don Fernando as a predator, a liar, and a cheat. He shows that even though Don Fernando may be characterized as wealthy and powerful, he is not superior to others. Finally, Candide’s experiences in the army suggest Voltaire’s bitterness toward the aristocracy. In every war Candide participates in, the common people suffer the consequences of the nobility’s actions. Another characteristic of the Enlightenment was that of optimism; however Voltaire was a pessimist. Voltaire uses Candide to criticize the Enlightenment view that reason can overcome social chaos. Pangloss, Candide’s devoted friend, is an optimist who claims th... ...e a Franciscan can enter the order, they are required to take a vow of poverty. In stealing the jewels, the theft was breaking this religious vow. The Old Woman was the illegitimate daughter of a Pope. He not only broke his vows of celibacy, but he refused to protect his daughter from society. Also, while Candide was in France he met an abbe. The abbe was involved in things such as gambling, extortion, cheating, and stealing. He also promoted loose morals and involved Candide in these practices by introducing him to a seductress. The abbe only showed kindness to Candide because of the jewels and gold he possessed. Finally, Giroflee is introduced as a satire of the church. Friar Giroflee has hired Pacquette for prostitution services. In a monastery, monks are supposed to refrain from participating in any secular activities, especially prostitution. Voltaire cleverly parodies the events of the Old Regime in his novel, Candide. With wit and sarcasm, the ideologies of the Enlightenment philosophers are candidly displayed through fictitious, absurd characters. The entire novel is a satire of the political, social, and religious ideals that Voltaire so tirelessly advocated against.
Thursday, October 24, 2019
Development of the Education System and Society
It is been a fact that our educational system has reached far beyond our imagination. Through the development of our educational system, we are able to enhance our technology by inventing new inventions that will be useful and meet the societies’ needs; and thus, these create positive impacts to our society. It helps our society more lively and makes things accessible and a lot easier. Furthermore, as we continue to study this issue, we should try to understand what is an education and learn a little overview which regards to this.Education is the growth and improvement of the capacity of the individual to be useful member of our society through teaching and learning precise beliefs, skills and knowledge. Confidentially, it is the procedure of taking in knowledge of numbers and language which are learned from parents and more members of the culture of the students and concerning the execution of surrounding objects.The magazines, journals, books and digest in the field of educ ation deal with the teaching and learning preparations and trainings which comprise game playing, testing, record keeping, seating arrangements, lectures, interests, scheduling, bullying, computer access and motivation. It is presently established and renowned that the greatest significant elements in some effectiveness of the teacher are the communication with students and the education and the teacher’s personality.The greatest teachers are competent to interpret knowledge of a subject, excellent adjudication, knowledge and wisdom into an important knowledge of a subject which is comprehend and kept hold of by the student. It is their capability to comprehend a subject expertly enough that they can be able to express its quintessence to a newfangled generation of students which is necessary of every teacher. The objective is to be able to establish a knowledge substance base which permits the student to develop as they are laid open into distinct life happenings. The transi tory of knowledge from generation to other generation permits the student to develop and mature into a serviceable member of our society.The purpose of this study is to explore the development of the education system and its impact it had on society.OverviewIt is generally acknowledged that the procedure of education starts at birth and endures during the course of life. There are many perceive and have confidence with that education begins previous than this- as indication by several parents who play music or read to the baby, hoping that it will persuade and motivate the development of the child. Education is frequently making used to denote to â€Å"formal education†. Moreover, it conceals a variety of occurrences since formal learning up to the constructing of understanding and knowledge amidst of our day to day living.Eventually, every situation that we undergo aids or serves as a form of our education. Distinct people study and discover in distinct approaches and severa l things will have to be made clear several times in several distinct approaches before the majority of the students â€Å"gets it†. Several students, unluckily, will never â€Å"get it†in view of the fact that they don’t give any interest on it or have not able to learn sufficiently of the foundation knowledge of a prearranged subject to go forward to the next level. Each one of us receives informal education from several sources (see â€Å"Education†. Wikipedia, the free encyclopedia. August 25, 2006. http://en.wikipedia.org/wiki/Education). Thus, this informal education and formal education will lead us to bring change in our society by making new or advancements in our technologies, just like in the field of IT.*Development of the Educational System and its impact it had on Society*Through the progress in our educational system, we are able to improve our technologies which help us connect globally. Advance technology is part of the development o f our educational system. Moreover, it also enhances our economic stability by engaging businesses globally using the advance technology that we have learned through our education.Information technology as defined by Ben Meadowcroft in his study that â€Å"it is the technology that is utilized to store, manipulate, distribute or make information. Several nonprofit and institutions are keen and enthusiastic to understand either developing technologies and the Internet posses an authentic positive impact on civil society and either nonprofits are taking hold of the chances to utilize technology in groundbreaking procedures in order to fulfill their assignment. On the other hand, technology can be able to utilize to gather together the people internationally around a shared cause to realize and accomplish world-changing outcomes far beyond the assurance of empowering nonprofit organizations in order to perform significant purposes like as fundraising, and recruiting unpaid workers more efficiently.In distinction to several of the undertakings expressed through William Galston, David Eisner declared that: â€Å"the truly transformative impact that the Internet will have on nonprofits is specifically in the area of building community.†James Austin stated that technology is redefining â€Å"community†while it is no longer concentrated on geography but then on another shared qualities which can connect people throughout cyberspace. He recommended a newfangled description of community â€Å"a group of people bound together by shared activities, purpose, and values.†As stated by Eisner, there are four inclinations that are unfavorable to understanding the internet’s influence in creating societiesØ There are more people who will discover and realize that it is easier to form supplementary associations as outcomes of the internet.Ø Inquiring each individual to give will become simple and uncomplicated since information an d action can presently be incorporated. Example, contributors can read which regard the earthquake in India and then stretched and offer all at once through the use of internet.Ø Reports, fundraising, online societies and procedures to lend a hand, which Eisner called the â€Å"cycle of engagement,†will turn out to be frictionless, in view of the fact that the internet empowers people to learn regarding a dilemma and do something without delay and flawlessly.Ø By mean of networking, people can be able to perform simultaneously more carefully and thoroughly in high-quality information sharing and learning societies.Online interaction gives a strong structural and administrative tool for advocacy operation and promotions. Mike Whitlam stated that â€Å"As a communication tool, as campaigning tool, it’s incredible.†But then, this strong association turn out to be a reality if not, nonprofit organizations posses the capacity to utilize technology. Ei sner stated that:â€Å"What’s really important is even where grants are related to technology,   grant makers need to take an interest in their grantee’s technological proficiency in the same way that they take an interest in their staff capability, their management, and their financial credibility.†Turning to present inclinations in e-philanthropy, Austin declared that same as the Internet business world, the e-philanthropy society (with nonprofit and for profit) is undergoing distress labor pains. As Austin continued that there will be additional terminations and merging, but then the space will not disappear. The internet technology has irrevocably altered the philanthropic capital market. Austin was able to identify the four forces as the precarious shapers of the newfangled technology-based e-philanthropy society. Ant these are economic pressures, mistrust, clashing cultures and technology readiness.An article entitled â€Å"education and Economi c Development†stated that the development of the internet has taken along newfangled chances and enhanced communication to several businesses and people. Globally, IT expenditure is foretold to upsurge by 35 percent in 2010, as stated by the research firm IDC (Worldwide Black Book, 2004). As an outcome, the need will increase for extremely equipped individuals to administer and support IT systems.In United States of America, every year there is an increase in need for those work forces have been the topmost amongst the It sector. Moreover, in several emerging countries, get into training on the newest technologies is either inadequate or unobtainable. An absence of way in to technology and education regarding its use is one issue contributing to the â€Å"gulf†amongst developed and developing economies. The said gulf is known as â€Å"digital divide†(see â€Å"Education and Economic development†http://www.cisco.com/web/about/ac227/ac111/cisco_and_socie ty/education_and_economic_development.html).On the other hand, the article entitled â€Å"Science Education System Standards stated that the science education system standards give standard for adjudicating the presentation of the modules of the science education system accountable for giving schools with essential financial and intellectual means. In spite of the recurrent usage of the terminology â€Å"educational system†, the sense is frequently ambiguous. States are element of a national education system and schools are included as elements of a local society which can comprise universities and colleges, parks and museums, laboratories, community organizations, various media, businesses and nature centers.The initial purpose of the science system is to provide society with technically and methodically well-educated citizens. Resources and information invigorate the system. The information’s nature-the greatness of resources- and the tracks along which they move ar e managed and regulated through policies which are limited and controlled in instruments like judicial rulings, legislation and budgets. Systems can be characterized in an assortment of procedures which depend on the intention and the data to be communicated. An example of this is in figure below which portrays the overlap amongst three systems which persuade the preparation of science education. This kind of illustration is a cue that actions done in sole system have insinuations not only in science education but then again for other systems too (see â€Å"Science Education System Standards†. http://www.nap.edu/readingroom/books/nses/8.html).The overlap of three systems which persuade science educationOrganization of performance amongst the systems can work for as a strong and influential force for alteration. But then, if performances are at cross intentions, their results and influences can be refuted and invalidated and make waste and conflict. The overlap in the figure a bove demonstrates that everyday pursuits of science classrooms are persuaded and manipulated indirectly and directly through several organizations that are themselves systems. National organizations and societies, private sector special- interest groups and government agencies at the local, regional, state, and national levels are three amongst many. Organizations have senior manager officer and administering body that eventually are accountable for the activities of the organizations and persuade on science education.The sovereignty of government organizations to persuade classroom science originates from two sources and these are the: (1) legislative, judicial authority or constitutional, and (2) economic and political act.  Since education is not precisely brought up as a federal power in United States Constitution, authority intended for education exists in states or regional. Federal dollars might be sought out for precise usages but since dollars move through state organiza tions to local regions, their usage is lay open to alteration to meet up the state purposes. State education agencies usually have more unswerving effect on science classroom pursuits compared with federal organizations. The science education is also considered as a network to make easy thinking which concerns the system’s several interacting modules.Science education system’s components aid an assortment of purposes which persuade the classroom’s practice of science education. The functions usually made the decision at the state-but there are times that the local will do- level comprises the substance of the school science course, the traits and qualities of the science program, the character of science teaching, and evaluation practices (see â€Å"Science Education System Standards†. http://www.nap.edu/readingroom/books/nses/8.html)Several distinct organizations and trustworthy individuals interrelate. The illustration below portrays in what way is each individual and every agency from distinct systems interrelates in the groundwork, certification and science teachers’ employment. Science education system’s components which have a main influence on teacher’s certificate match in four classifications and these are: (1) professional societies like the American Association of Physics, American Geological Institute, National Science Teachers Association, National Association of Biology Teachers and American Chemical Society; (2) program-accrediting agencies like the National Council for Accreditation of Teacher Education which confirms teacher educations programs and National Board for Professional Teaching Standards which confirms teachers; (3) higher education’s organizations functioning within and cross state, local levels and national.Professional societies normally are not supposed of as accrediting agencies but rather their membership criterions explain what a professional is. The illustration bel ow was taken from â€Å"science Education System Standards†. http://www.nap.edu/readingroom/books/nses/8.html.A research study published in February 2005 entitled â€Å"the Impact of the State Higher Education System on the Texas Economy†and written by Carole Keeton Strayhorn explained that â€Å"Higher education has an important impact or effect on the Texas’ economy, increasing the Texas economic engine with 33.2 billion USD each year. Seeing that the system obtains just about 6 billion USD yearly in the state general revenue and regional property tariffs, each dollar capitalize in the higher education system of the state finally returns 5.50 USD to the Texas economy. This is an extraordinary and notable return, even for all-or-nothing technology instigation.But then, when it comes to the Texas higher education system, the risk factors are much higher. In favor of, the investors in Texas are capitalizing in the most significant business enterprise for the pr eparation of the young Texans’ future. With this fundamental role, state higher education funding is bringing up the rear ground to other state service industries. After regulating for inflation, expenditure on public protection and alterations increased 223 percent in the previous 15 years at the same time as real higher education spending increased only 44 percent throughout the same span of time. This study of Carole Keeton Strayton scrutinizes the economic impact of higher education by two extensive avenues. The initial and most direct impact is the supplementary sales, profits and service made by external dollars being brought into the Texas economy.The second is the long-term function higher education participates in escalating the capacity of the economy of the state by a more well-informed and beneficial work force. Her research presented that $3.1 billion in yearly student, investigation and health care-correlated higher education spending from out-of-state possessio ns is spent and re-spent by the Texas consumers and businesses every year to sum up $10.1 billion in economic amount produced. Furthermore, the Texas higher education system frequently links with the private sector to make occupations and enhance the Texans’ quality of life. Seeing together the profits and productivity-based methods, the Texas higher education system finally increases and multiplies the productivity capacity of the Texas economy having the average of 23.1 billion USD every year.Adding together the â€Å"supply-side†of profit to the $10.1 billion impacts from out-of-sate spending take along the sum total impact of the higher education system on the economy of Texas to 33.2 billion USD every year. The contribution of higher education to the Texas economy is considerable and significant than to other businesses. In reality, the totality of three years of the economic impact of the higher education exceeds Texas’ 72 billion USD gas and oil business or 62 billion USD high machinery and equipment business. Eventually, a few of higher education victories demonstrate the function of higher education in expanding and intensifying occupations and the eminence of life in every Texan individual (see Strayhorn, C. K. â€Å"The Impact of the State Higher Education System on the Texas Economy†. February 2005. http://www.window.state.tx.us/specialrpt/highered05/).In addition, the Texas higher education system comprises of 145 private and public colleges, health-related organizations and teaching centers and universities, comprising 44 private organizations and 101 state-supported. The admission every in university and college in Texas in 2004’s fall was about 1.2 million and was anticipated to range at least 1.3 million students in 2015.Texas, as one of the most populated states, the students depend heavily upon public instead of the private higher education organizations. As stated by the Texas Higher Education Coordinatin g Board, greater than 90 percent or about 1,064,620 students are admitted at its publicly-funded organizations which comprise universities (483,645), 57 community colleges and other two-year organizations (565,839), 35 and nine public health-related organizations (15,136).  The Texas’ public higher education is funded by a mixture of student fees, tuition, clinic and hospital revenue and other local endowments (see Strayhorn, C. K. â€Å"The Impact of the State Higher Education System on the Texas Economy†. February 2005. http://www.window.state.tx.us/specialrpt/highered05). References 1. â€Å"Education†. Wikipedia, the free encyclopedia. August 25, 2006. http://en.wikipedia.org/wiki/Education 2. Meadowcroft, B. â€Å"The Impact of Information technology on work and society†. http://www.benmeadowcroft.com/reports/impact/ 3. Galston, William. â€Å"Creating Vibrant Spaces for Civil Society Organizations on the Internet after E-Commerce†. http://www.independentsector.org/PDFs/factfind4.pdf. 4. â€Å"Education and Economic development†http://www.cisco.com/web/about/ac227/ac111/cisco_and_society/education_and_economic_development.html 5. â€Å"Science Education System Standards†. http://www.nap.edu/readingroom/books/nses/8.html 6.  Strayhorn, C. K. â€Å"The Impact of the State Higher Education System on the Texas Economy†. February 2005. http://www.window.state.tx.us/specialrpt/highered05
Wednesday, October 23, 2019
Economic Issues Simulation Paper Essay
The Financing of Health Care Economic Issues Simulation Paper Health care system has evolved tremendously in the last few years, with many changes with the health care laws including but not limited to Universal Health Care, many individuals have choices when it comes to their coverage. According to healthcare. gov, in January of 2015, an employer with 50 or more full time employees will have to make an Employer Shared Responsibility Payment if a full time employee gets a lower health coverage premium cost if insurance is purchase in a marketplace. However, employers are not subject to this law if the numbers of employees are lesser than 50 but are still expected to offer coverage for their employees. (healthcare. gov) Employers must make sure that when choosing coverage for their employees, these should be within their needs; within health care requirements as well as inexpensive keeping in mind that lower cost may not necessarily mean better. With many varieties in health care plans such as Preferred Provider (PPO), Point of Service (POS), and Exclusive Provider Organization (EPO); the Health Maintenance Organization (HMO) is the most preferred and utilized group health insurance plan. As a HMO representative of Castor Insurance, health care coverage will be built, including the potential utilization of the services by different enrollees. Castor Collins Health Plan Castro Collins Health Plan is a regional HMO that was founded in 1999. As a HMO, they provide health care services as well as health insurance to individuals in its statewide network of physicians and hospitals utilizing a capitation model to compensate their network of providers. Currently, there are 100,000 enrollees and these numbers are increasing. The responsibility of a Vice President in Strategy and Financial Planning is to interact with new clients and formulating health plans that will suit their needs. With the help of colleagues such as the Chief Financial Officer Helen Fouerman, the Chief Medical Officer Jonathan Wikes, and the Executive Vice President of Planning and Development, Adam Hunter, a plan will be put together that will include pricing and setting insurance premiums. In January of 2006, Castro Collins was approached and met with two groups of people for health insurance coverage. These groups are Constructit and E-editors, neither of them have group employer’s insurance. Constructit have 1000 people and they are willing to pay a maximum of $4000 per person as an annual premium, meanwhile E-editors will pay a maximum annual premium of $4500 per person with 1,600 people. Castor Collins offers three types of health plans: Castor Standard, Castor Enhanced, and the customized plan called Castor Enhanced Minor. The standard plan does not cover pre-existing medical conditions, the enhanced plan, however, cover pre-existing medical conditions and offers more services. Castor Enhanced Minor is a customized plan that is almost equivalent to Castor Enhanced with somewhat lesser services that requires high utilization. Demographics and Health Care Risk Factors There are 550 men and 450 women employees in Constructit with ages 26 to 45 and 60 percent from this age group ranging from 26 to 42 are married. This means, spouses and children need to be considered in getting health plan. Also, great physical activities are involve within thirty- two percent of the people at Constructit, while 25 percent of the people has moderate physical activity. The remainder which is 43 percent of the people involves activities that are sedentary. There are no major health risks out of the thirty-eight percent an equivalent of 170 men and 210 women in the workforce. Injuries, respiratory system diseases, digestive disorders, migraine and allergic conditions are the major causes of absenteeism in Constructit. Obesity related diseases such as hyperlipidemia, high blood pressure, diabetes, and cardiovascular diseases are moderately high for this workforce that consists of 36 percent of men and 43 percent of women. In E-editors, there are 750 men and 840 women with ages 35 to 54 and most of them are married. For the past ten years, ninety-five percent in the workforce have largely been sedentary; their job involves sitting in front of the computer for long periods of time. Only five percent are required moderate activity. Stress related injury (SRI) and problems with vision were acquired by at least 95 people who had this job for a while. There are no major medical health risks for the 170 men and 182 women (22%) from this group. Respiratory disorder is the 26 percent of the group problem because they are heavy smokers. There are 720 people who are obese in this group because of the heavy sedentary lifestyles, eating habits, and lack of exercise. This also means that there are increased risk of diabetes, hypertension, high cholesterol and cardiovascular diseases. Plan Analysis Based on the plans, I would recommend Castor Standard to Constructit and not to provide insurance to E-editors. Since Castor Standard does not cover pre-existing conditions, the risks of providing this plan are low. The premium that Constructit will be responsible annually is $3,428, with Castor Collins Health Plan earning $3. 43 million. Given the health profile and the expected utilization of services for E-editors, I think that not providing insurance is the right decision. There is a high risk of insuring this group and whatever Castor Collins earns from this group are inadequate to cover those risks. The goal is to maximize earnings. If E-editors are willing to pay a different premium they will be considered by providing an appropriate plan that minimized risks and increased earnings. Risk-averse consumers buy health insurance to avoid losing income or wealth when they are unwell. In other words, consumers pay insurance premium to transfer their risks of medical expenses to the insurance company. The premium that Castor Collins receives is a source of revenue. It is compensation for bearing risk and for bearing expenses such as payment to health care providers. If Castor Collins know that a particular group of enrollees is more susceptible to a particular disorder, its risk for providing coverage for that disorder is higher. However, if, as in the case of Constructit and E-editors, a group of individuals is not willing to pay a higher premium to cover greater risks, Castor Collins may not be able to provide coverage for greater risks. Therefore, while selecting a plan and the services to provide under that plan, Castor Collins has to weigh various considerations – the premiums that enrollees are willing to pay, the risks of providing a particular plan or service, the expected utilization and hence, the costs, of providing various services in the plan, and the premium Castor Collins needs to charge to maintain profitability.
Tuesday, October 22, 2019
Fv Project Summary of Fasb and Iasb Essays
Fv Project Summary of Fasb and Iasb Essays Fv Project Summary of Fasb and Iasb Essay Fv Project Summary of Fasb and Iasb Essay 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 FASBs working draft of a final Statement on Fair Value Measurements. In addition, the staff reviewed the scope of FASBs Fair Value Measurements project as it relates to IFRSs and the issues and questions to be addressed in preparing an IASB Exposure Draft and related Invitation to Comment. No decisions were made. At a previous meeting, the Board decided to issue the FASBs 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 FASBs document. Instead, the Invitation to Comment should discuss any areas where the Board disagrees with the FASBs 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 differences between the definitions of fair value in the FASBs 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 staffs 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 staffs 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 members 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 t hat 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 Board 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 FASBs 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 measurement Within each of these sections, the staff made various proposals for the Boards 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 Plans (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 Propert y (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 excluded 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 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) IAS 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 Meeting This 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. FASBs 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 that 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 staffs view, the FASBs 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 definition 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 measurement 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 uncer tainty 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 staffs 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 statement 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 FASBs 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 assessing 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 the FASBs 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 asset 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 Meeting 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 Process The 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 IASBs agenda in September 2005. At that time, the Board decided that they would expose the FASBs 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 IASBs due process requirements. 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 FA SB 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 hopefully 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 document 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 IASBs discussion paper. Day-one Gains and Losses Fair value, as defined in the FASBs document is an exit price. As a result of the Boards tentative approval of the exit price definition of fair value, in circumstances where an asset or a liability is required to be measu red 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 amendments 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 transfer 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 prioritis es 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 entitys 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 FASBs Website without charge. The IASB has on its agenda a project on fair value measurement. It is one of the convergence projects 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 IASBs 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 IASBs 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 Boards preliminary views and requests constituent input on certain matters Non-performance risk The 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 addition to credit risk). Issues in the Invitation to Comment Entry and exit prices The 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 market IAS 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 be 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 hierarchy 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 entitys 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 than fair value. Block premiums and discounts The 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 initial 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 scheduled 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 IASBs 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 FASBs 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 IASBs 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 Discussion Paper The staff reported that several constituents had asked the Board to extend the deadline for comments on the Boards 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 planned 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 IASBs 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 IASBs 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 staffs preliminary project plan. The main points 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 (th at is, more clearly articulate what the Boards 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 asked 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 standards measurement basis is an exit price. 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 Meeting This 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 methodologies 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 particula r 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 liabilities On 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 standard-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 arms 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 only 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 Meeting Whether 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 groups 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 Boards 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 Meeting Representatives 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 members 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 not 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: The 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 expe rt 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 International 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 IASBs 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 mee tings. The last meeting is expected to be in September 2008. Updates on the activities of the panel are also available on the IASBs 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 decided 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 expres s a preliminary view in the DP and/or comments received on the DP indicated a need for further discussion: The exit price measurement objective The 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 use The 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 techniques. 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). Staffs 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 clearly 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 IFRS 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 panels 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 IASBs website. The staff informed the Board that although comments would be solicited until 3 October, comment letters would not be published on the IASBs 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 Boards 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 Boards input on this type of discount, not on other discounts or premia. The staff defined a blockage discounts as a discount that represents 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
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