EFRAG's final advice on the measurement of long-term investments in equity instruments

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

31 Jan, 2020

In 2018, the European Financial Reporting Advisory Group (EFRAG) received a request from the European Commission (EC) to advise on alternative accounting treatments on the measurement of long-term investments in equity instruments. EFRAG has now submitted its final advice.

EFRAG did not find sufficient evidence to determine whether the non-recycling treatment of equity instruments within IFRS 9 Financial Instruments has an impact on investor behaviour. However, EFRAG also notes that the reasoning behind the IASB's decision for prohibiting recycling is not one of the reasons stated in the revised Conceptual Framework for doing so. EFRAG, therefore, advises the EC to recommend to the IASB a review of the non-recycling treatment of equity instruments in IFRS 9, testing whether the revised Conceptual Framework would justify recycling of fair value gains and losses accumulated in other comprehensive income on such instruments when realised. EFRAG also recommends that if recycling was to be reintroduced, the IASB should also consider the features of a robust impairment model, including the reversal of impairment losses.

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