EFRAG comment letter on improved conceptual framework for financial reporting - Chapter 1 and 2

22 October 2008

EFRAG has several concerns with the proposal and remains strongly of the view that no part of the Framework should be finalised until the whole Framework is ready to be finalised.

EFRAG remains strongly of the view that no part of the Framework should be finalised until the whole Framework is ready to be finalised. Otherwise the Framework will no longer be internally consistent.

 

• EFRAG believes that the link between what is relevant for external users and what is relevant to management is important, and should not be overlooked.
• The Framework seems to understate the importance to users of understanding the reporting entity’s business model; EFRAG is concerned that this might imply that the IASB does not consider an entity’s business model to be of much relevance to its financial reporting.
• EFRAG remains very concerned about the ED’s proposal that the entity perspective should be used in preparing financial reports. We do not believe that the issue has been properly debated and we believe the material in the Basis for Conclusions on the issue is insufficient to enable that debate to take place. We are also concerned that, as the IASB itself acknowledges, the implications of that proposal for the rest of the Framework have not yet been identified.
• EFRAG remains uncomfortable with the proposal that the notion of ‘reliability’ should be replaced by the notion of ‘faithful representation’. We agree with the ED’s explanation that ‘reliability’ is often misunderstood, but think ‘faithful representation’ is no better understood.

 

Final letter

 

© EFRAG - European Financial Reporting Advisory Group