FEE calls for an international solution of the effective date problem
21 Nov 2015
The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has commented on the draft letter from the European Financial Reporting Advisory Group (EFRAG) to the European Commission supplementing its endorsement advice on adoption of IFRS 9 'Financial Instruments'.
Just as the European Securities and Markets Authority (ESMA) yesterday, FEE believes the problem should not be solved on a European level alone (by means of a carve-out). On 10 November 2015, EFRAG published a draft letter to the European Commission, stating that EFRAG is "not in a position to amend" its endorsement advice on IFRS 9 and extend it to businesses carrying out insurance activities.
FEE point out that the problem does not only affects European companies, therefore an international solution needs to be found - as the IASB is trying to do in its dedicated limited scope project. However, FEE notes in its letter that the approaches the IASB is pursuing are of different merit. FEE believes that the deferral approach should be chosen over the overlay approach as the latter was too complex. However, FEE also points out that the deferral approach needs to be investigated further as the current requirement of passing an insurance activities’ predominance test at the reporting entity level would mean that some insurers and more generally the insurance activities included in the financial statements of banking groups would not qualify. FEE suggests finding a deferral solution that goes below the reporting entity level or to widen the scope of the solution by reconsidering the predominance test for insurance activities.
Please click to access the full comment letter on the FEE website.
