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EFRAG draft comment letter on proposed amendments on the application of the definition of a business

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

27 Jul 2016

The European Financial Reporting Advisory Group (EFRAG) has issued a draft comment letter on the IASB exposure draft ED/2016/1 'Definition of a Business and Accounting for Previously Held Interests'.

EFRAG welcomes the IASB proposal and supports the following:

  • A more comprehensive framework and reduces the workload when distinguishing business combinations from asset acquisitions compared to the current guidance in IFRS 3.
  • Inclusion of a ‘screening test’ with some suggested improvements to accommodate more borderline cases.
  • Different sets depending on whether the set of activities and assets has outputs.
  • The use of illustrative examples but with a greater focus on guidance that requires significant judgement.
  • The clarification of the accounting for previously held interests to align with the definition of a business.

Further, the EFRAG encourages a converged approach by the IASB and FASB regarding the proposals.

Comments on EFRAG's draft comment letter are requested by 18 October 2016. For more in­for­ma­tion, see the press release and the draft comment letter on the EFRAG website.

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