ESMA has serious concerns that this interim standard will jeopardise the IASB objective to provide users of financial statements with high quality financial information that is understandable, comparable, enforceable and globally accepted.
Like EFRAG, ESMA does not support the approach followed by the IASB to allow first time adopters to recognise deferral accounts in accordance with local GAAP, even if this carve-in is only temporary. ESMA believes that “deferral accounts” do not meet the definitions of assets and liabilities as set out in the IASB Conceptual Framework. ESMA believes that the IASB should not develop standards that increase diversity in practice even if it is on a temporary basis. Additionally, ESMA would like to point out that the interim standards “IFRS 4 – Insurance Contracts and IFRS 6 – Exploration for and Evaluation of Mineral Resources” clearly demonstrate that an interim standard is not a guarantee for a quick solution.
Therefore, ESMA has serious concerns that this interim standard will jeopardise the IASB objective to provide users of financial statements with high quality financial information that is understandable, comparable, enforceable and globally accepted.
Like EFRAG, ESMA is also concerned about the possible implications of applying the principles from this ED on other standards that are currently in place. Although the IASB tried to minimise the effects resulting from the interaction of developing this interim standard with other standards, ESMA has doubts that all cross-cutting issues are solved. ESMA believes that there may be cross-cutting issues regarding the interaction of this interim standard with the application of IFRS 3 – Business Combinations concerning the recognition and measurement of goodwill if the acquired company adopts this standard, or with the application of IAS 36 – Impairment of Assets concerning the recognition and allocation of impairment if deferral accounts are included in a cash generating unit (for instance there are doubts if an entity should recognise and allocate impairment to deferral accounts if they are not impaired under the local GAAP or if impairment is an allowable cost that is expected to be recovered through future rates).
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