The research paper, published in December 2013, concludes that the business model should continue to play a role in financial reporting, that it is time for a change to the current ad-hoc use and that the concept of the business model should be included in the Conceptual Framework with appropriate guidance for standard-setting.

ESMA agrees that the use of the business model at a standard level “could result in more relevant information on the financial performance, financial position and cash flows of any entity and assist investors in their risk assessment and economic decisions”.  However ESMA comments that “the use of different accounting treatments for different business models could harm comparability amongst issuers”.  It argues that when deciding upon such an approach “there should be a duly justified trade-off between relevance and comparability of the information” and that this decision should be made at a standards level.

Regarding inclusion of the business model concept in the Conceptual Framework, ESMA believe that “a general provision that the ‘business model’ should be assessed when setting individual standards could be sufficient”.  It comments that introducing a too broad a definition of ‘business model’ “might lead to too many different accounting models not justified by fundamental differences between business models”.

The full comment letter can be accessed on the ESMA website.