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EFRAG concerns on IASB measurement paper

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

11 Feb 2006

The European Financial Reporting Advisory Group (EFRAG) has invited comments on its draft response to the IASB Discussion Paper Measurement Bases for Financial Accounting - Measurement on Initial Recognition.

In its draft response, EFRAG expresses "a number of fundamental concerns regarding the reasoning and conclusions reached in the paper", including the following:
  • The paper's exclusive focus on initial measurement in isolation from subsequent measurement.
  • The "basic assumption... that perfect markets (or at the very least active and liquid markets that involve low transaction costs) exist for every asset and liability". In EFRAG's view this is the exception rather than the norm.
  • The necessity to decide on financial statement concepts of financial performance and financial position before addressing measurement issues.
  • Lack of evidence for the superiority of market value measurement objectives over entity-specific measurement objectives. "If the arguments in the paper are the only arguments in favour that exist and have been expressed in the paper in the best way possible, we do not understand how the paper could have reached the conclusions it has."
Click to download EFRAG's Draft Letter (PDF 100k). EFRAG requests comments by 1 May 2006.

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