EFRAG’s initial view is that implementation of an Expected Cash Flow Approach will involve significant operational challenges in Europe, such as the need for systems changes and new control processes over an increased use of management judgement involved in estimating future cash flows and the lack of relevant historical data. 

 

Given the operational challenges involved with the Expected Cash Flow Approach, EFRAG thinks care needs to be taken to ‘get the requirements right’ at the outset so that further expensive changes are not required later. For example, the IASB needs to consider the implications of the model for all preparers, not just financial institutions. This is important, EFRAG  believes, because the Expected Cash Flow Approach fits well within the context of commercial short-term receivables. IASB needs to consider simplifications to the model for these types of financial asset. 

EFRAG commends the IASB for seeking such advice early in the development of these proposals. They consider that this type of request is in line with the IASB’s commitment to prepare and publish impact assessments for all new accounting standards.