We support the Board’s review of the Framework

  • Deloitte Comment Letter Image

15 Jan, 2014

We have published our comment letter on the IASB Discussion Paper DP/2013/1 'A Review of the Conceptual Framework for Financial Reporting'. We agree with many of the preliminary views provided in the discussion paper; however, there are some areas where we believe have not been fully addressed. In particular, concepts that relate to the distinction between liabilities and equity instruments, capital maintenance and the unit of account. We encourage the Board to conduct additional research in these areas and include the Accounting Standards Advisory Forum in further deliberations.

Some key suggestions made in the comment letter include:

To serve its intended purpose, the Board should treat the Framework as a living document to be updated as necessary to keep pace with changes in thinking on conceptual matters. There should be an established process for reviewing the Framework on a recurring basis. Unless the Framework is kept up to date, there is a risk of tension and conflicts between the Framework and conclusions that the Board reaches in individual projects. As the IASB develops new standards, it should have such a process to evaluate whether decisions it makes are consistent with the Framework. Departures should be identified and justified.

The IASB should have a plan for identifying and addressing any conflicts between the concepts and guidance in a revised Framework and existing IFRSs. It should identify any existing requirements that are contrary to the revised Framework and an action plan for resolving such conflicts. It would be unhelpful and potentially confusing to permit conflicts to exist for an extended period of time, in particular since those who apply and interpret existing IFRS requirements do so in the context of the Framework as it exists at any given time (see, for example, IAS 8.11).

The IASB should not amend the Framework to include new ideas and concepts that have not been fully deliberated and tested. This is another reason that the Framework should be a living document and amended only as work in different areas is completed.

The IASB should provide an appropriate level of detail in the Framework. The Framework should provide sufficient detail in its discussion of concepts such that it is clear how they are intended to be applied. However, the Framework should not to go into excessive detail about the accounting for particular transactions or events (e.g., how to measure or present particular transactions or when to derecognise elements of the financial statements). The IASB should not ‘hardwire’ views on accounting issues that would more suitably be resolved in individual standard-setting projects. In some areas, the discussion paper is too general and does not go into sufficient detail to be helpful (e.g., in Section 9 related to unit of account). In other areas, the discussion paper goes into more detail than seems suitable for a framework document (e.g., in Section 5 on distinguishing between liabilities and equity).

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