EFRAG comments on the IASB Paper on Credit Risk in Liability Measurement
23 July 2009
EFRAG has considered the arguments for and against the inclusion of own credit risk in the measurement of liabilities. However, the key issue is what approach would result in the most useful information.
EFRAG has issued its draft comment letter in response to the IASB's invitation to comment on a staff paper entitled Credit Risk in Liability Measurement.
EFRAG is very pleased that the IASB has taken the decision to prepare and issue a discussion paper on one of the more contentious aspects of the fair value measurement debate.
EFRAG has considered the arguments for and against the inclusion of own credit risk in the measurement of liabilities. However, we think the key issue is what approach would result in the most useful information. Using this test, we concluded that:
· Own credit risk should only be taken into account in the initial measurement of a liability if own credit risk is priced into the transaction that gave rise to the initial recognition of a liability. In all other circumstances it should not be included.
· Changes in own credit risk should not be taken into account in subsequent measurements of liabilities.
Deadline for comments is 21 August 2009
© EFRAG - European Financial Reporting Advisory Group
