30 January 2020

EFRAG’s advice to the European Commission on the measurement of long-term investments in equity instruments

EFRAG publishes its advice to the European Commission on alternative accounting treatments to measurement at fair value through profit or loss for equity and equity-type instruments held in long-term investment business models.

EFRAG has been requested by the European Commission (‘EC’) to consider alternative accounting treatments to measurement at FVPL for equity instruments. Possible accounting treatments should properly portray the performance and risks of long-term investment business models, in particular for those equity and equity-type investments that are much needed for achieving the UN Sustainable Development Goals and the goals of the Paris Agreement on Climate Change.

EFRAG advises, in particular, that the EC recommend to the IASB an expeditious review of the non-recycling treatment of equity instruments within IFRS 9 Financial Instruments (‘IFRS 9’), testing whether the revised Conceptual Framework for Financial Reporting (March 2018) (‘Conceptual Framework’) would justify the transfer to profit or loss (‘recycling’) of fair value gains and losses accumulated in other comprehensive income (‘FVOCI gains and losses’) on such instruments when realised. If recycling was to be reintroduced, the IASB should also consider the features of a robust impairment model, including the reversal of impairment losses.

Full press release on EFRAG

Advice on EFRAG

Feedback Statement on EFRAG

Supporting paper on EFRAG

 

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