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EFRAG reports on possible effects on long-term investments of IFRS 9 requirements

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

18 Jan 2018

In response to a European Commission request, the European Financial Reporting Advisory Group (EFRAG) is investigating the potential effects on long-term investments in equity instruments of the requirements of IFRS 9 'Financial Instruments'. EFRAG has now concluded the first phase of the project and has submitted a report to the European Commission.

The first phase of the project was an assessment and consisted of collecting quantitative data on the current holdings of equity instruments and their accounting treatment and investigating whether, and to what extent, entities expect the new accounting requirements to affect their decisions in relation to investment in equity instruments.

In its endorsement advice on IFRS 9, based on the limited evidence available at the time EFRAG, assessed that it was unlikely that long-term investors would change their investment strategy as a result of the implementation of IFRS 9. The assessment phase has confirmed that while the majority of respondents do not expect to modify their holding period for equities following the introduction of IFRS 9, some entities expect to modify their asset allocation decisions (while also conceding that their asset allocation decisions are driven by a plurality of factors). EFRAG also stresses that insurance entities are still at an early stage of assessment since they will apply IFRS 9 only in 2021.

Please click to access the full report on the EFRAG website.

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