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EFRAG has been requested by the European Commission (‘EC’) to consider alternative accounting treatments to measurement at FVPL for equity instruments. Possible accounting treatments should properly portray the performance and risks of long-term investment business models, in particular for those equity and equity-type investments that are much needed for achieving the UN Sustainable Development Goals and the goals of the Paris Agreement on Climate Change.
EFRAG advises, in particular, that the EC recommend to the IASB an expeditious review of the non-recycling treatment of equity instruments within IFRS 9 Financial Instruments (‘IFRS 9’), testing whether the revised Conceptual Framework for Financial Reporting (March 2018) (‘Conceptual Framework’) would justify the transfer to profit or loss (‘recycling’) of fair value gains and losses accumulated in other comprehensive income (‘FVOCI gains and losses’) on such instruments when realised. If recycling was to be reintroduced, the IASB should also consider the features of a robust impairment model, including the reversal of impairment losses.