EFRAG consults on operational effects of financial instruments: amortised cost and impairment
18 March 2010
The objective of the proposed standard is to establish principles for the measurement of financial assets and financial liabilities at amortised cost. This is so that users of financial statements can be provided with useful information for the assessment of the amounts and future cash flows.
On 22 February 2010, EFRAG published a draft comment letter (‘the DCL’) on the IASB’s Exposure Draft Financial Instruments: Amortised Cost and Impairment (‘the ED’). In the DCL EFRAG cautiously supported the proposals in the ED on conceptual grounds, but noted that it needed to further investigate the practical and implementation issues arising from the proposals. EFRAG therefore decided to conduct an outreach programme in order to more clearly understand the operational concerns inherent in the proposals (‘the Consultation’).
The questionnaire includes a number of broad questions designed to provide structure to interviews with preparers.
The results of the consultation will be considered by EFRAG at its meeting in early May 2010 and will assist in deciding on the most appropriate course of action in finalising its comment letter on the ED to the IASB. An analysis of responses to the questionnaire will be circulated to EFRAG TEG in a summarised form and no individual response or comment will be attributed.
Preparers from all industries are encouraged to participate in the Consultation. If you would like to participate, please contact one of the EFRAG staff below to arrange an interview. Alternatively, you can forward a written response to the questionnaire.
This includes the allocation of expected cash flows over the expected life of financial instruments based on conditions existing at initial recognition, as well as the subsequent impairment of the financial instruments. The key issues relate to:
(a) The effective interest method; and
(b) The expected cash flow approach (including future credit losses).
The ED also includes guidance on presentation and disclosure which aims to support the measurement objective.
Deadline for comments is 15 April 2010
© EFRAG - European Financial Reporting Advisory Group
