EFRAG final comment letter on the IASB's Exposure Draft ED/2013/11 Annual Improvements to IFRSs 2012— 2014 Cycle

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

13 Mar, 2014

The European Financial Reporting Advisory Group (EFRAG) has issued their final comment letter on the IASB's Exposure Draft ED/2013/11 'Annual Improvements to IFRSs 2012–2014 Cycle' which was published on 11 December 2013. EFRAG agrees with most of the proposals in the Exposure Draft (ED) but has expressed concern about the proposed amendment to IAS 19 Employee Benefits and comments that the amendments in respect of IFRS 5 “should be applied retrospectively”.

The IASB uses the annual improvements project to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.  The ED proposes amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits and IAS 34 Interim Financial Reporting

The proposed amendment to IAS 19 clarifies that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid (thus, the depth of the market for high quality corporate bonds should be assessed at currency level). 

EFRAG “supports the IASB’s effort to develop short-term guidance dealing with countries where a high-quality corporate bond market does not exist and that use the same currency as other countries".  However EFRAG identify a number of “specific concerns” that they would like the IASB to consider before finalising the proposed amendment and comment that “in some circumstances it is unclear if the proposals would result in an outcome that is consistent with the IASB’s objectives”. 

Before finalising the IAS 19 proposals, EFRAG also comment that the IASB should “clarify the objectives and the rationale underlying the selection and use of a discount rate in measuring post-employment benefit obligations” to allow constituents to be able to use their judgment in applying the requirements of paragraph 83 of IAS 19.

EFRAG’s concerns regarding the proposed amendments to IAS 19 are also shared by the Financial Reporting Council in their comment letter.

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