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EFRAG publishes results of literature review on IFRS 9 and long-term investment

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

28 Mar 2018

​In the context of its investigation on the potential effect of IFRS 9 on long-term investments, the European Financial Reporting Advisory Group (EFRAG) commissioned a literature review on the topic. The literature review complements EFRAG's discussion paper on the impairment and recycling of equity instruments published in early March 2018.

The European Commission asked EFRAG for technical advice on the topic. EFRAG already submitted quantitative data on the current holdings of equity instruments and their accounting treatment and whether entities expect that the new accounting requirements will affect their decisions in relation to investment in equity instruments. EFRAG reported its findings from this first phase in January 2018.

In the second phase of the project, EFRAG is investigating whether and how the requirements in IFRS 9 on accounting for holdings of equity instruments could be improved. EFRAG published the discussion paper to gather constituents' views on recycling and impairment of equity instruments designated at fair value through other comprehensive income on 1 March 2018 and has now made available the results of the literature view. The literature review concludes:

The limited academic evidence on the effects of IFRS 9 and related recycling issues make it difficult to draw conclusions about the possible effects of accounting requirements on long-term investors’ investment strategies. Nevertheless, we suggest that standard setters may consider that recycling may be seen as a complex issue and that investors and other users of financial information might not clearly understand the issue.

Please click to access the results of the literature review on the EFRAG website.

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