We comment on debt investment disclosure proposals
16 Jan 2009
Deloitte has submitted a Letter of Comment on the IASB's exposure draft (ED) of Proposed Amendments to IFRS 7: Disclosures of Investments in Debt Instruments.
We do not support issuance of the ED as currently drafted for a number of reasons:
- We do not consider the proposals have a clear objective and therefore cannot determine whether the objective is met. The proposals do not illustrate the profit or loss effect and carrying values of all financial assets had they been classified differently; nor do they show the effect on impairment losses of applying different impairment loss models. Without a clearly identified objective that responds to an identified demand from users for specific information we cannot support the proposals as drafted.
- The proposals show alternative measurement bases even though the entity may have been prevented from measuring on that basis. In addition, had the entity been able to measure financial assets differently it may have made different classifications decisions for financial liabilities, eg applying the fair value option. The disclosures may as a result be confusing or be misunderstood.
- The discussions at the roundtable on the credit crisis in November and December 2008 that led to the issue of the ED focused on determining the most appropriate impairment model for AFS debt instruments. We believe consideration of this remains a priority and that the proposed 'as if' disclosures do not fill this gap or provide information to users that is most meaningful.
- We believe there is insufficient time for many entities, particularly those with calendar year-ends, to provide the proposed disclosures as required by the effective date. The amount of work needed to provide the disclosures is significant, particularly when determining the amortised cost for AFS debt instruments that have previously been subject to impairment losses. This applies to all entities in all sectors.
