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On 29 May 2015 the IASB issued the Exposure Drafts ED/2015/3 Conceptual Framework for Financial Reporting (‘the ED’) and ED/2015/4 Updating References to the Conceptual Framework (‘ED/2015/4’).
On 8 July 2015 EFRAG issued a Document for Public Consultation on the ED which was updated on 8 November 2015 to reflect EFRAG’s preliminary views. EFRAG has considered the comments received in response to its Document for Public Consultation and has submitted its comment letter to the IASB.
EFRAG is of the view that the ED provides solution to some current problems. It therefore represents an improvement compared with the current Conceptual Framework. Unfortunately, however, there are still many, and probably too many, areas where the ED does not provide the necessary principles that could effectively direct future standard setting. These areas include measurement and the use of OCI although the development of such guidance was one of the main objectives of the revision of the Conceptual Framework. In others, such as prudence and stewardship, EFRAG is not yet satisfied with the IASB’s proposals.
In its comment letter in response to the proposals on how to update references to the Conceptual Framework, EFRAG expressed its concerns about possible unintended effects resulting from the proposed amendments – other than amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - and considers that the amendments should remain editorial in nature and therefore not require any transition provision. EFRAG further questioned the feasibility and the enforceability of the amendment to IAS 8 as many different factors may have influenced the design of accounting policies, i.e. analogy to existing IFRS or other GAAP, and the exclusive link to the Conceptual Framework may be difficult to establish. It therefore recommended that the IASB perform an effects analysis before making any changes as a result of the revised Conceptual Framework. Furthermore, EFRAG could not support retrospective application without the possibility of assessing the practicality of the requirement.
Letter on ED/2015/3 Conceptual Framework for Financial Reporting
Letter on ED/2015/4 Updating References to the Conceptual Framework