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FRC responds to the IASB’s Exposure Draft proposing amendments to IAS 7

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26 Mar 2015

The Financial Reporting Council (FRC) has published its response to the exposure draft (ED) ‘Disclosure Initiative (Proposed amendments to IAS 7)’ issued by the International Accounting Standards Board (IASB). The amendments aim to clarify IAS 7 to improve information provided to users of financial statements about an entity's financing activities and liquidity.

The FRC broadly supports the proposals in the ED and notes that research has provided clear evidence of investor demand for disclosures that provide more information about an entity’s net debt, liquidity, capital structure and cash management.  Although it notes that the reconciliation requirement proposed in the ED is a good starting point, the FRC states that it would have preferred the standard to include a requirement to present a net debt reconciliation and suggests that the standard should clarify that the proposed disclosures may be incorporated into a net debt reconciliation.
The FRC expresses concern that the scope and objective of the requirements for disclosing restrictions on cash and cash equivalents are unclear and could be interpreted too broadly in practice. It also questions whether the inclusion of proposed amendments to the IFRS taxonomy as part of IASB consultations on proposed amendments could result in an inefficient process and proposes that changes to the taxonomy should be consulted on together with changes arising from amendments to other standards, to promote consistency.
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