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Constituents split over proposed deferral of effective date of September 2014 amendments to IFRS 10 and IAS 28

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09 Oct 2015

With the comment period ending today for the IASB's Exposure Draft (ED) of proposed amendments to IFRS 10 and IAS 28 aimed at deferring the effective date of the September 2014 amendments to these standards indefinitely until the research project on the equity method has been concluded, it has become obvious that constituents are split as to whether this proposed deferral should be finalised.

In August 2015 the IASB proposed in ED/2015/7 Effective Date of Amendments to IFRS 10 and IAS 28 deferring the effective date of the 2014 amendments because it wants to deal with a series of issues around IAS 28 - including an identified conflict of the September 2014 amendments with IAS 28  - more comprehensively as part of its research project on the equity method of accounting. The proposed deferral is intended to avoid that entities would need to change the way in which they apply IAS 28 repeatedly in a short period of time.

Constituents arguing against the deferral note that the amendments issued in September 2014 were broadly supported (by the respondents to ED/2012/6) and have fully passed the IASB's due process. They also point out that the September 2014 amendments lead to an increased clarity and the reduction of diversity in practice for the majority of transactions that are in the scope of the amendments while the identified inconsistency in IAS 28.31 only affects a small number of transactions. Among the comment letters not supporting the IASB proposal are those from the standard-setters of Australia, Germany, and New Zealand as well as from the European Securities and Markets Authority (ESMA).

Constituents arguing for the deferral stress in particular that the deferral is important to enable entities to avoid changing the way in which they apply IAS 28 twice. However, they are split as to whether early application should continue to be permitted which some believing it would help address diversity in practice and some believe it would even increase diversity. All parties agree that if such a deferral is finalised, the IASB needs to prioritise its work on the research project on the equity method and come to conclusions soon. Among the supporters of the deferral are the Canadian, the Korean, and the Spanish standard-setter. In September, the European Financial Reporting Advisory Group (EFRAG) published a draft comment letter supporting the deferral, however, a final letter has not been published yet.

Please click for access to all comment letters made available publicly so far on the IASB website.

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