EFRAG's primary reason is that:

[IFRIC 3] creates a measurement mismatch (whereby some items are measured at cost (IAS 38 and IAS 20) and others at fair value (IAS 37)) and a reporting mismatch (whereby some gains and losses are reported in profit and loss (IAS 37 and IAS 20) and others in equity (IAS 38)) ....

EFRAG believes that application of IFRIC 3 will not always result in relevant financial information because in certain cases it does not faithfully represent the economic reality. EFRAG also believes that the disadvantages that would arise from endorsing the interpretation outweigh the advantages of guidance on the accounting of emission rights schemes. EFRAG has therefore concluded that IFRIC 3 does not meet all of the requirements of the Regulation EC No. 1606/2002 of the European Parliament and of the Council on the application of International Accounting Standards....

For the reasons given above we believe that it is not in the European interest to adopt IFRIC 3 in its present form. EFRAG therefore recommends that the EU Commission should not endorse IFRIC 3 Emission Rights.

Click to Download EFRAG's Letter (PDF 303k). EFRAG has also posted on its Website its draft comment letter on IFRIC D15 Reassessment of Embedded Derivatives.