18 December 2013

EFRAG, ANC and FRC issue research paper: ‘The role of the business model in financial statements'

The research paper argues that the business model should play a role in financial reporting and be part of the revised Conceptual Framework. It is open for comment until 31 May, 2014.

The term ‘business model’ appeared in the IFRS literature for the first time when IFRS 9 Financial instruments was issued in 2009. The Research Paper considers the use of the term and shows that the notion has been an implicit part of IAS/IFRS for a long time. The business model provides insight into how value is captured and net cash flows generated through income in the normal course of a business and it is not clear why the notion is not been more broadly used in IFRS.

The Research Paper argues that the business model should play a role in financial reporting and be part of the revised Conceptual Framework.  Therefore, all standards must be capable of representing faithfully the business model, and, where applicable, the business model should explicitly be incorporated on a standard-by-standard basis. Its consequences for recognition, measurement, and presentation and disclosures should be assessed, and decisions should be taken whether and how the business model should affect financial reporting.

It is hoped that the Research Paper leads to a constructive debate within Europe and elsewhere. Those that have an interest in the role that the business model plays in financial reporting are strongly encouraged to respond to the invitation for comments. 

Press release

Research paper

Presentation

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