EFRAG final comment letter on the IASB’s proposed amendments to classification and measurement of financial instruments

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

22 Jul, 2023

The European Financial Reporting Advisory Group (EFRAG) has issued its final comment letter on the International Accounting Standards Board’s (IASB's) proposed amendments to the classification and measurement of financial instruments.

ED/2023/2 was published by the IASB in March 2023.

In its final comment letter, the EFRAG welcomes the IASB’s proposed amendments, particularly the clarifications to the general solely payments of principal and interest (SPPI) requirements, which the EFRAG says would provide a good basis for evaluating whether contractual cash flows of financial assets with ESG-linked or similar features meet SPPI requirements.  The EFRAG is urging the IASB to prioritise the publication of the proposed clarifications to SPPI requirements over the rest of the proposals included in the ED, given the increasing number of financial assets with ESG-linked features in Europe.
Despite a general agreement with the proposed amendments, the EFRAG also raises some concerns and provides some suggesed amendments to the IASB.  In particular, the EFRAG suggests:
  • amending paragraph B3.1.6 of IFRS 9 Financial Instruments to include how an entity should apply settlement date accounting to financial liabilities;
  • that the IASB carefully considers the impact of the proposed requirements about “magnitude” and “contingent event specific to the debtor” on existing financial instruments currently meeting the SPPI requirements; and
  • either deleting paragraph 20B(b) of the ED (as a preferred solution) or limiting the scope of contingent events to be disclosed to what users of financial statements would deem relevant and useful for their analysis.

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

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