19 July 2012

EFRAG's draft comment letter on the proposed IASB and IFRS Interpretations Committee Due Process Handbook

EFRAG would welcome if the Due Process Handbook would explain the objectives of the IASB’s due process in addition to the underlying principles, in terms of ensuring shared identification of needs for improvement of financial reporting; allowing for proper consultation and discussion; and setting the legitimacy of the resultant standards or interpretations by gathering arguments and evidence. EFRAG emphasises that the overarching principle of bringing improvement to financial reporting at an acceptable cost should be the sole driver for changes to standards and interpretations.

EFRAG's main comments are:

Improving the proposals for the standard setting process:

• EFRAG welcomes the research programme in coordination with accounting standards bodies and others, that has been introduced in the IASB due process and that reflects recommendations EFRAG has made at the time of the IFRS Foundation Strategy Review.
• EFRAG would like to promote a shared due process between the IASB and regional and national accounting standards bodies.
• EFRAG believes that the Due Process Handbook should set guiding principles to apply to how the IASB identifies and analyses users’ needs.
• EFRAG believes that results of public fatal flaw reviews, and  when appropriate of field tests, should be assessed, in a public meeting, before the IASB makes its final decision on a standard or amendment.
• The IASB staff should support the decision-making process of the IASB, albeit never in a position of direction or decision.
• While ultimate approvals remain with the IASB, the IFRS Interpretations Committee should be an important partner in standard-setting.
• EFRAG urges the Trustees to stipulate clearly that the IFRS Interpretations Committee should not issue any rejection notice that would be akin to an interpretation.
• EFRAG believes that every decision made in the standard-setting process should be subject to the super majority required for the whole standard.

Considering due process oversight:

• EFRAG believes that the focus of the due process oversight responsibility should be on substance, and not on form.
• The IFRS Foundation should be cautious of adding too much detail into the Due Process Handbook that would undermine the principles-based character of the standard-setting process and leave no room for any flexibility in the due process.

Press release

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