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24 March 2010

CESR: comments on EFRAG's draft response to IASB's measurement of liabilities in IAS 37


CESR has concerns about the due process applied to this project. It shares the views of EFRAG and of the two dissenting board members that the IASB should re-expose not only the proposed measurement requirements but also the entire proposed standard.

CESR has concerns about the due process applied to this project. It shares the views of EFRAG and of the two dissenting board members that the IASB should re-expose not only the proposed measurement requirements but also the entire proposed standard. This is because measurement objectives and methods and recognition criteria are closely related.
 
CESR urges the IASB to reconsider its approach and to take into account that:
 
a) The 2005 exposure draft raised many concerns among constituents. CESR was particularly concerned about the fundamental changes the IASB introduced in the recognition and measurement of liabilities (the removal of the probability of outflow criterion).
 
b) CESR is aware of the IASB’s publication in February 2010 of a working draft of the entire revised standard but is also aware that no comments were sought from constituents. It does not believe this publication is an adequate counterbalance to the disadvantages of the partial re-exposure process as expressed above.
 
c) CESR notes that there is a significant divergence among board members on the inclusion of a risk margin and a profit margin in the measurement of a liability. It thinks that such a significant number of dissenters (six out of 15!) is unusual and an indication that further deliberations might be helpful. Re-exposure would be beneficial as it would allow the IASB to reconsider the proposals carefully and would ensure a balanced and transparent debate with stakeholders.
 
d) Finally, the CESR would like to note that it is not aware of clear indications (amongst other things based on the enforcement cases in CESR’s database) that the current standard has led to significant or extensive application problems that would oblige the IASB to fix the standard quickly and would consequently not allow time for a full re-exposure.
 
 


© CESR - Committee of European Securities Regulators

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