This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

EFRAG publishes technical advice on IFRS 9 to the European Commission

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

30 Nov 2018

In response to a European Commission request, the European Financial Reporting Advisory Group (EFRAG) has investigated the potential effects on long-term investments in equity instruments of the requirements of IFRS 9 'Financial Instruments'.

In the first phase of the project, the European Commission asked EFRAG to collect quantitative data on the current holdings of equity instruments and their accounting treatment and investigate if 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 investigated whether and how the requirements in IFRS 9 on accounting for holdings of equity instruments could be improved. EFRAG published a 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 made available the results of a literature view on IFRS 9 and long-term investment on 28 March 2018. EFRAG has now published its final response to the second phase of the EC request. The response addresses the interaction between an impairment model and the reintroduction of recycling, and what characteristics an impairment model for equity instruments could have. The letter notes:

The majority of respondents that expressed a view were in fact more supportive of an impairments model similar to IAS 39. [...] However, there is no consensus on how to reach an approprioate balance between relevance and comparability. [...] EFRAG maintains that a degree of rigour in the use of the election or the impairment model would be essential to ensure comparability.

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

EFRAG also notes that it is currently working on a second request for technical advice on possible alternative accounting treatments for equity and equity-type instruments. The European Commission asked for EFRAG's technical advice on this aspect of IFRS 9 by the second quarter of 2019.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.