Interestingly, the vote on IAS 39 was five in favour and six against, but under EFRAG's constitution a standard is recommended to be endorsed unless two-thirds of the members are against it. Ten pages of the 16-page draft letter on IAS 39 contain the views of dissenting TEG members. EFRAG was formed in 2001; this was the first meeting of TEG at which public observers were admitted. Click to download
Draft Letter on IAS 32 (PDF 41k) and
Draft Letter on IAS 39 (PDF 132k). EFRAG seeks comments on its draft letters by 5 July 2004. Here is an excerpt from the draft letter on IAS 39:
EFRAG is united in supporting all significant aspects of IAS 39 relating to recognition and derecognition of financial instruments, fair value measurement and impairment, the implementation of which is likely to lead to improved financial reporting in Europe.
In particular, all members of EFRAG, and the three European national standard setters represented on EFRAG support the fair value measurement of financial derivatives at least when not used as part of an effective hedge.
However, as regards certain aspects of hedge accounting, the treatment of liabilities repayable on demand and some other measurement issues, EFRAG members are divided:
- The assenting members (i.e. those supporting endorsement of IAS 39), while hoping that further improvement will be possible in the medium term to meet the concerns raised below, believe that IAS 39 now meets the requirements of the IAS Regulation. Accordingly, they favour endorsement of IAS 39.
- The dissenting members disagree with the requirements related to these issues, for reasons set out below in detail, and believe that IAS 39 in its present form does not meet the criteria of the IAS Regulation and therefore should not be endorsed.
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EFRAG also completed its endorsement process on the following IASB standards and recommended that the EU endorse them, though some concerns are expressed. Click to download the EFRAG letter:
