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In March 2018 EFRAG issued the Discussion Paper Equity Instruments - Impairment and Recycling. The Discussion Paper aimed at gathering constituents' views on recycling and impairment of equity instruments designated at fair value through other comprehensive income under IFRS 9 Financial Instruments.
EFRAG is now issuing a summary of responses received from constituents. EFRAG will consider the input in developing its final advice to the EC.
Many of the respondents focused on the main questions in the DP, without replying to all the detailed questions. Although the DP did not specifically asked questions on the timing or process of the project, more than half of the total respondents suggested that it would be preferable to wait for the IASB’s Post Implementation Review (PIR) of IFRS 9 before suggesting changes and/or that any change needs to be agreed with the IASB and not introduced at the European level. For some of these constituents, one or both of these suggestions substantively represented their complete response to the DP. Nearly three-fourths of the 49 respondents who expressed a view on recycling agreed that its reintroduction would improve the depiction of financial performance of long-term investors. However, some National Standard Setters and users reject this view or would prefer to have fair value changes recognised immediately in profit or loss. An overwhelming majority of respondents to the question as to whether recycling needed to be accompanied by an impairment model agreed that it did. Twenty out of the thirty-one respondents who expressed a preference about an impairment model, preferred a model similar to IAS 39, mainly because it attempted to make a distinction between temporary and other declines in fair value, even if some of them remarked that experience had proven that the IAS 39 “significant and prolonged’ approach failed to be effective regarding comparability among entities due to the wide range of thresholds retained.