27 September 2011

ESMA's comment letter to EFRAG regarding IASB's Exposure Draft on Improvements to IFRSs

ESMA, like EFRAG, is generally supportive of the proposed amendments but does not share EFRAG's position on the following:

In its draft comment letter EFRAG states in paragraph 7 that it is not clear whether paragraph 23(a) of appendix D refers to borrowing costs as defined by IFRS of those defined under an entity’s previous GAAP. ESMA believes that paragraph D23(a) does refer to the entity’s previous GAAP. ESMA would welcome it if EFRAG could further explain their comment by drafting a proposal how the IASB could improve paragraph D23(a).

EFRAG notes an inconsistency between paragraphs 52B and 58 and 61A of IAS 12 'Income Taxes'. As the apparent inconsistency is not clear to ESMA, ESMA would welcome it if EFRAG could elaborate on that. Indeed, IAS 12 paragraph 52B states that the income tax consequences of dividends are recognised when a liability to pay the dividend is recognised, and are recognised in profit and loss in the same period except for the circumstances of paragraph 58. Paragraphs 58 and 61A state that current and deferred tax shall be recognised outside profit and loss if the tax relates to items that are recognised outside profit and loss.

Full paper

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