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EFRAG consultation on a "long-term investment" business model

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

08 May 2013

Connecting a European green paper on possible ways for supporting long-term investment and the IASB's suggested new separate business model of "held to collect and sell", the European Financial Reporting Advisory Group (EFRAG) has launched a public consultation on long-term investing activities business models.

The European Commission green paper considers possible ways for supporting long-term investment and asks in one paragraph whether fair value accounting is or can be detrimental to long-term investment. At the same time the IASB has proposed limited scope amendments to IFRS 9 Financial Instruments that would introduce a 'fair value through other comprehensive income' (FVOCI) measurement category for particular financial assets thus indicating that fair value measurement and long-term horizons are not mutually exclusive.

Into the tension between those two positions EFRAG has launched its consultation to determine

  • how a 'long-term investment' business model could be characterised in the context of financial reporting,
  • whether this ‘long-term investment’ business model could be supported by objective evidence (and what the observable characteristics would be),
  • whether the 'long-term investment' business model arrived at would be similar to long-term models found in practice (eg with insurance companies or pension funds), and lastly
  • whether such a business model would justify specific accounting.

Results from the survey will be used to give feedback to the European Commission as well as the IASB. The EFRAG consultation closes on 25 June 2013.

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