The ASB is strongly of the view that standards on the measurement and disclosure of derivatives and other financial instruments are important. Following the release of the revised text of IAS 32 'Financial Instruments: Presentation and Disclosure' and IAS 39 'Financial Instruments: Recognition and Measurement', it has decided to implement both standards in the UK for accounting periods beginning on or after 1 January 2005.

In FRED 30 the ASB proposed that the UK standards based on IAS 39 and the disclosure parts of IAS 32 should apply to certain entities only. Now it is proposing, in a new supplement to FRED 30, two extensions to the scope set out in FRED 30.

The first scope extension proposed is that the measurement and hedge accounting requirements of IAS 39 should apply to all listed entities in addition to those entities using the fair value accounting basis that will be incorporated into the Companies Act from 2005 on implementation of the Fair Value Directive. FRED 30 proposed only that the latter would be required to adopt those requirements.

The intention is that the UK measurement standard will be based on the latest version of IAS 39, which includes the recent changes for macro hedging. The Directive was drafted with an earlier version of IAS 39 in mind and, as a result, the option in the latest version of IAS 39 to designate any financial instrument as fair value through profit or loss will not be available under the Companies Act without recourse to the true and fair override.

The second scope extension proposed in the new Supplement to FRED 30 is that all entities (other than those applying the FRSSE) should be required to provide the IAS 32 disclosures; FRED 30 proposed they should apply only to listed entities and unlisted banks. The ASB has always made clear its intention at some point to extend the requirement for fair value and risk disclosures about financial instruments beyond the limited scope of FRS 13 to all entities other than those adopting the FRSSE. In its view, now is the time to make that change.

These proposals when taken together with those in FRED 30 mean that, for accounting periods beginning on or after 1 January 2005:

• all listed entities and all others choosing to adopt fair value accounting should apply the measurement and hedge accounting requirements of IAS 39; and
• all entities should apply IAS 32's requirements on presentation (which deal mainly with the equity/liability classification) and disclosure.

As indicated in FRED 30, it remains the ASB's intention not to implement in the UK standard the IAS 39 material on recognition and derecognition for the time being.