09 July 2014

EFRAG: discussion paper on classification of claims and responses sought

EFRAG has published a Discussion Paper “Classification of Claims” to assist in developing an informed and reasoned approach to the claims side of the balance sheet, including the equity/liability distinction. Responses are sought from interested parties.

In response to the IASB Discussion Paper on the revision of the Conceptual Framework, EFRAG recommended that the IASB consider the equity/liability distinction in parallel to, and separate from, the wider project. The IASB is expected to publish a discussion paper of its own at the same time as an ED of the revised Conceptual Framework.

To assist the IASB and to support all European constituents in engaging with the project, EFRAG has published a Discussion Paper Classification of Claims. The paper addresses wider questions than just the distinction between equity and liabilities, including how many elements the claims on an entity should be classified into, the objective of classification requirements and how dilution can be depicted.

The paper is educational in nature. It does not take a position on how the distinction between claims should be made. Its purpose is to discuss approaches to defining elements, identify the choices that must be made in classifying the claims on an entity and the consequences of those choices. The paper also identifies the extent to which each of the choices is consistent with the identified objectives and how these objectives may conflict with each other.

The paper also includes a glossary that EFRAG has developed to assist in establishing a common language for discussing and understanding the various issues. 

Responses are sought by 31 October 2014.

Press release

Discussion paper

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