EFRAG final comment letter in response to the IASB's exposure draft on financial instruments with characteristics of equity
16 Apr, 2024
The European Financial Reporting Advisory Group (EFRAG) has published its final comment letter in response to the International Accounting Standards Board’s (IASB's) exposure draft 'Financial Instruments with Characteristics of Equity (proposed amendments to IAS 32, IFRS 7 and IAS 1)' ('the ED').
In its final comment letter EFRAG welcomes the IASB's efforts and approach to address issues that arise in practice related to IAS 32 by clarifying some of the underlying principles in IAS 32 and adding application guidance to facilitate consistent application of the principles.
EFRAG agrees with many of the proposed amendments.
However, EFRAG suggests some improvements in several areas. It suggests that the IASB should:
- discuss further measurement issues of financial liabilities with contingent settlement provisions under the scope of IAS 32;
- allow reclassification if the terms and conditions become, or stop being, effective with the passage of time; and
- ensure that proposed disclosure requirements are clear, can be implemented by entities and ensure an adequate cost-benefit balance, particularly on disclosures of terms and conditions related to priority on liquidation.
- reconsider its proposals on the effects of relevant laws and regulations;
- reconsider the initial accounting within equity for written put options on non-controlling interest;
- discuss more comprehensively measurement issues of written put options on non-controlling interest; and
- further consider subsequent measurement of the redemption amount.
EFRAG suggests that the IASB separates the topics on the effects of relevant laws and regulations and written put options on non-controlling interest from the remaining topics in the ED and deal with them in a separate project; thus ensuring that the other topics in the ED are not delayed by these two topics.
The press release and the final comment letter are available on the EFRAG website.
