Date

17 Aug 2015

Attendees

Jeff Braswell

Elisa Kendall

Gareth Isaac (Unlicensed)

Ian Maung (Unlicensed)

David Saul (Unlicensed)

Former user (Deleted)

Decisions

Main discussion was around creating a more general definition for Financial Instrument, possibly the definition that Jeff Braswell proposed, or the new FASB definition, which are both included below. Folks who were on the call and/or participating in this group should review these, along with a new proposal based on these that will be sent around later this week, for further discussion next week.

Everyone will review the text of the standard this week and provide comments using pdf comments; email them to Elisa for correlation (hopefully by Friday).

Proceedings

Reviewed the content of the slides, including the status of the current draft specification. The main challenge here has been posting content larger than 10 MB, which Dennis is working on.

Reviewed open actions – several have been closed (done), including refactoring of the Products and Services ontology. Gareth reiterated that he will assist in working on the EU Jurisdiction content; he will send Elisa times when he is available for a one-on-one call for Friday, 8/21.

Reviewed suggested definitions for Financial Instrument to replace the current definition (see table 9-3 in the current draft specification). These include:

From Jeff Braswell:

A financial instrument is a general class of a wide range of contractual vehicle patterns that establish financial arrangements among the respective parties to each arrangement as specified by the roles of parties and terms required or determined by the contractual structure of the type of arrangement.
As a class concept, a financial instrument can be thought of as a template that defines an arrangement structure that remains to be originated with terms and parameters in order to establish a specific instance of the contract type.
Examples of financial instrument categories include: cash, evidence of an ownership interest in an entity, or a contractual right to receive (or deliver) cash, or another financial instrument.

2. From Gareth Isaac / Latest FASB Definition:

Cash, evidence of an ownership interest in an entity, or a contract that both:

a. Imposes on one entity a contractual obligation either:

1. To deliver cash or another financial instrument to a second entity

2. To exchange other financial instruments on potentially unfavorable terms with the second entity.

b. Conveys to that second entity a contractual right either:

1. To receive cash or another financial instrument from the first entity

2. To exchange other financial instruments on potentially favorable terms with the first entity

.

The use of the term financial instrument in this definition is recursive (because the term financial instrument is included in it), though it is not circular. The definition requires a chain of contractual obligations that ends with the delivery of cash or an ownership interest in an entity. Any number of obligations to deliver financial instruments can be links in a chain that qualifies a particular contract as a financial instrument.

Contractual rights and contractual obligations encompass both those that are conditioned on the occurrence of a specified event and those that are not. All contractual rights (contractual obligations) that are financial instruments meet the definition of asset (liability) set forth in FASB Concepts Statement No. 6, Elements of Financial Statements, although some may not be recognized as assets (liabilities) in financial statements—that is, they may be off-balance-sheet—because they fail to meet some other criterion for recognition.

3. EU Reg 2003/6/EC - "Financial instrument" shall mean:

- transferable securities as defined in Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field(9),
- units in collective investment undertakings,
- money-market instruments,
- financial-futures contracts, including equivalent cash-settled instruments,
- forward interest-rate agreements,
- interest-rate, currency and equity swaps,
- options to acquire or dispose of any instrument falling into these categories, including equivalent cash-settled instruments. This category includes in particular options on currency and on interest rates,
- derivatives on commodities,
- any other instrument admitted to trading on a regulated market in a Member State or for which a request for admission to trading on such a market has been made.

4. EU Reg 2006/49/EC - ‘financial instruments’ means any contract that gives rise to both a financial asset of one party and a financial liability or equity instrument of another party;

For some financial instruments, the right is held by or the obligation is due from (or the obligation is owed to or by) a group of entities rather than a single entity.

Everyone agreed to spend the week reviewing the latest draft specification and to providing comments on it. Elisa will post the 10+ MB version (emailed to some folks who were on the call but not all) once Dennis has fixed the wiki, and will email a notice to everyone.

Action items

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