27 March 2015

FRC commented on proposed amendments to IAS 7

The FRC's preference would be for the IASB to introduce a requirement for entities reporting under IFRS to disclose a net debt reconciliation. In the FRC´s view, the reconciliation proposed in the ED provides a good starting point. However, the FRC believes that it would be helpful to clarify in the standard itself that entities may build upon the disclosure requirements proposed in the ED to provide a net debt reconciliation, rather than this permission being stated in the basis for conclusions only.

The FRC´s main comments on the ED are summarised below:

Flexibility in reporting debt and net debt

The FRC acknowledges the difficulties associated with developing a definition of ‘debt’ or ‘net debt’. In the absence of a definition, the disclosure requirements should make it clear that entities have the option to provide a single note which includes components of net debt that are not captured by the disclosure proposed in paragraph 44A. The FRC believes this flexibility will result in more meaningful and useful disclosures for investors.

Objectives for the reconciliation

The FRC believes that including in the standard a clear objective for the disclosure would assist each entity with identifying the relevant components that it is appropriate to include in the reconciliation in its particular circumstances.

Restrictions on the use of cash and cash equivalents

The FRC agrees that disclosure of restrictions on the use of cash and cash equivalents may provide relevant information to investors. However, the FRC believes that the scope and objective of the requirement in paragraph 50A is unclear and it may be interpreted too broadly. In particular, the IASB should clarify how the requirement to disclose ‘restrictions’ is distinct from the existing requirements in paragraphs 48 and 49 of IAS 7.

IFRS Taxonomy

In the FRC´s view, including proposed amendments to the IFRS taxonomy as part of the IASB’s consultations on proposed amendments to the standards will result in an inefficient process. There is also a risk that proposed amendments to the IFRS taxonomy unintentionally interpret proposed amendments to the standards or detract from the aim of developing principles-based standards.

Full comment letter

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