To summarise, EFRAG agrees in principle with the proposals in the ED, although EFRAG sometimes raises some issues in detail or sees a need for some rewording or for additional amendments to make the issue clearer. In particular, EFRAG believes that the changes proposed to IAS 32 'Financial Instruments: Presentation' need to be extended.

Amendments to IAS 32 'Financial Instruments: Presentation'

The purpose of these Amendments is to clarify that income tax relating to distributions to holders of an equity instrument, and income tax relating to transaction costs of an equity transaction should be accounted for in accordance with IAS 12. EFRAG agrees with the proposal but believes that the IASB should address the inconsistency between paragraphs 52B, 58 and 61A of IAS 12. EFRAG is not convinced that the accounting for income tax on dividends, in situations like those described in paragraphs 52A and 52B of IAS 12 'Income Tax', is consistent with the general principles underlying IAS 12.

In EFRAG‟s view, the general principle in IAS 12 is to classify income tax income (expense) based on the underlying transactions. EFRAG believes that the real issue lies with the inconsistency between the guidance in paragraph 52B and paragraph 58 and 61A of IAS 12. In paragraph 52B, dividend payments are deemed transactions that are related to profit and loss. While one might conclude under paragraphs 58 and 61A that dividends are an equity transactions with shareholders.

EFRAG believes that amending IAS 32, without addressing the inconsistency above, may not resolve the lack of clarity on how to account for income tax income (expense) on dividends. The IASB might wish to explain whether the recognition event that "triggers" the income tax consequence is (1) the income from which the dividends are paid or (2) the declaration of dividends.

Amendments to IFRS1 'First-time adoption of International Financial Reporting Standards'

EFRAG acknowledges that first-time adopters from new jurisdictions moving to IFRSs may face not exactly the same first-time adoption issues as entities that have adopted IFRSs in earlier years. However, EFRAG is concerned that the continued addition of new exemptions will lead to increasing complexity of IFRS 1 and to potentially overlapping exemptions (e.g. the clarification of borrowing costs partially overlaps the “fair value as deemed cost” exemption for PP&E). Therefore, EFRAG recommends the IASB to consider the longer-term development of IFRS 1 both as other new standards are finalised and before proposing future exemptions.

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