EFRAG letter to the EC on the endorsement of amendments to IFRS 10 and IAS 28

  • EFRAG document (dk green) Image

15 Feb, 2016

The European Financial Reporting Advisory Group (EFRAG) has written to the European Commission (EC) bringing to its attention a number of issues it should consider before it takes a decision on the endorsement process for the September 2014 and December 2015 amendments to IFRS 10 and IAS 28.

In December 2015, the IASB published Effective Date of Amendments to IFRS 10 and IAS 28 (“the 2015 Amendments”) which deferred indefinitely the effective date of Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) (“the 2014 Amendments”) by removing the original effective date of 1 January 2016 and indicating that a new effective date would be determined at future date when the IASB finalises the revisions, if any, that would result from the research project on equity method.  The 2015 amendments continued to allow earlier application of the September 2014 amendments.

In its letter, EFRAG comments:

the original intent of the 2014 Amendments was to reduce diversity in practice by eliminating conflicts between standards. However, allowing an early application of the 2014 Amendments in Europe without specifying an effective date is opposite to the original objective of the amendments. This is because the conflicts between standards identified as a source of diversity will remain as long as there is no effective date for the amendments. Moreover, enabling the early application of the 2014 Amendments as an option would potentially give rise to renewed diversity in practice within the IFRS community by bringing a special focus on this issue. EFRAG notes that without these amendments, management will continue to use judgement in developing an accounting policy for these specific transactions, taking into account IFRS as endorsed in European Union. In many cases an accounting policy will already have been developed and, in those cases, it is unlikely that there will be any reason to amend that policy.  Finally, EFRAG highlights that whether the amendments are endorsed or not in Europe, entities will still be able to claim compliance with IFRS as issued by the IASB.

The press release and full letter are available on the EFRAG website. 

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