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In the first phase of the project, the EC asked EFRAG to collect quantitative data on the current holdings of equity instruments and their accounting treatment and investigate if entities expect that the new accounting requirements will affect their decisions in relation to investment in equity instruments. EFRAG reported its findings from this phase to the EC in January 2018.
In the second phase of the project, the EC asked EFRAG to provide advice on whether and how the requirements in IFRS 9 on accounting for holdings of equity instruments could be improved. As part of its due process, EFRAG is now publishing this Discussion Paper ('DP') to gather constituents' views on recycling and impairment of equity instruments designated at fair value through other comprehensive income. EFRAG has not included a preliminary view on the issues explored in this DP. Feedback from constituents will be considered in developing its technical advice to the EC.
In this DP, EFRAG analyses the relevance of recycling in the context of a long-term investment business model. It also presents arguments on the conceptual relationship between recycling gains and losses on derecognition and impairment.
The DP considers how the application problems identified with IAS 39's impairment model for available-for-sale equity instruments could be addressed. It illustrates an impairment model and a revaluation model but does not express a preliminary view as to which, if either, of these two models is preferable.
Comments are requested by 25 May 2018.