16 September 2011

EFRAG Update September 2011

On 2 September, EFRAG held a conference call on Business Combinations Under Common Control (BCUCC) and approved the Discussion Paper on BCUCC for public consultation, subject to drafting.

From 7 to 9 September 2011, EFRAG held its monthly meeting. The following topics were discussed during the monthly meeting:

• IASB Project 'Investment Entities'
• IASB new standards – IFRS 10 'Consolidation', IFRS 11 'Joint Arrangements' and IFRS 12 'Disclosure of Interests in Other Entities'
• IASB Project 'Revenue Recognition'
• IASB Project 'Financial Instruments'
• IASB Project 'Mandatory Effective Date of IFRS 9 Financial Instruments'
• EFRAG Proactive Project 'Corporate Income Taxes'
• EFRAG Proactive Project 'Users of Financial Statements'
• EFRAG Proactive Project 'Separate Financial Statements'
• EFRAG Proactive Project 'Business Combinations under Common Control'
• EFRAG Proactive Project 'Role of the Business Model in financial reporting'

EFRAG issued its draft comment letter in response to the IASB Exposure Draft 'Mandatory Effective Date of IFRS 9'.  EFRAG welcomes the IASB‟s decision to postpone the effective date of IFRS 9 'Financial Instruments', but considers that the revised effective date of 1 January 2015 provides insufficient relief.

EFRAG discussed its draft comment letter on the Exposure Draft ("ED") on 'Investment Entities' which was issued by the IASB on 25 August 2011.  The ED proposes an exception from the consolidation principle in IFRS 10 'Consolidated Financial Statements' to consolidate its controlled investees for a parent entity that meets the definition of an investment entity. To qualify as an investment entity, the ED proposes six criteria that must be satisfied. EFRAG, in general, supports the exception to the consolidation principle because measuring an investment entity controlled investees at fair value provides better decision useful information for users. EFRAG is also supportive of the investment company criteria to the extent that it applies at the entity level. However, EFRAG questions whether the unit of account when applying the criteria is consistent with existing IFRS. EFRAG in its draft comment letter will raise a question to constituents to seek views on the appropriate unit of account.

At its September 2011 meeting, EFRAG held preliminary discussions in the view of the forthcoming re-exposure document on Revenue Recognition. The main issues discussed were the following:

• The consequences of a possible restriction in scope by specifying that contracts entered into with a party which is a collaborator or a partner rather than a customer would be excluded from the scope of the standard.
• How the “reasonable assurance” criterion would apply in practice and interact with the transfer principle.

EFRAG received an update on the latest developments in relation to the IASB's redeliberations on hedge accounting, impairment, and offsetting financial assets and financial liabilities.

EFRAG discussed a near-final draft of the Discussion Paper on 'Corporate Income Taxes' for public consultation. The Discussion Paper was approved subject to drafting to reflect comments made by EFRAG during this meeting and to consider additional comments made by the German Accounting Standards Board (GASB) at its recent meeting, and further comments that might be noted by the Accounting Standards Board (ASB) at their meeting the next day.

Full paper

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