14 March 2016

EFRAG´s feedback statement in response to ED/2015/3 Conceptual Framework for Financial Reporting

The feedback statement summarises the main comments received by EFRAG on its Document for Public Consultation in response to the IASB’s ED/2015/3 Conceptual Framework for Financial Reporting (the ‘ED’) and explains how those comments were considered by EFRAG in its discussions on its final comment letter.

The main differences between the Document for Public Consultation and the comment letter are explained in the following paragraphs.

- The comment letter included additional information on what information the assessment of management’s stewardship would require. Several constituents expressed uncertainty about this the implications of including the objective of assessing management’s stewardship in the Conceptual Framework, and EFRAG accordingly decided to provide its view on the issue.

- EFRAG’s Document for Public Consultation presented the view that where preparers tend to converge and oppose to some IASB proposals because, in their view, the outcome would not be a meaningful depiction of the entities’ financial position and/or performance, the IASB should, if it would confirm its preliminary decisions, explain how and why meaningful information will be provided. Some constituents thought that this indicated that EFRAG considered the views of preparers more important than the views of, for example, accountants. This was not the intention of EFRAG. EFRAG accordingly replaced the wording by stating that if preparers consider that the information resulting from a  Standard is useful for them, it could indicate that information resulting from a Standard is useful for users.

- In relation to prudence, EFRAG noted that some constituents thought that prudence would eliminate the use of fair value. EFRAG accordingly decided to state in its comment letter that prudence should not stop the use of fair value measurement in appropriate circumstances or the recognition of fair value gains in financial statements.

- In its document for public consultation, EFRAG argued that the term ‘reliability’ should be reintroduced and replace the term ‘faithful representation’. Constituents had mixed views on this issue. While EFRAG acknowledged that there were good arguments for replacing ‘faithful representation’ with ‘reliability’, it decided not to suggest this in its comment letter. EFRAG thought that the main issue would be the content of the term rather than the name of it. EFRAG thought that no matter whether the term ‘reliability’ or ‘faithful representation’ would be used, it should include measurement uncertainty.

- In its document for public consultation, EFRAG had suggested guidance on when it would be useful to recognise executory contracts and when it would not. Some constituents did not agree with this guidance. EFRAG therefore decided not to include the suggestion in its comment letter. Instead EFRAG asked the IASB to develop such guidance.

- On the unit of account, EFRAG decided to reflect a comment from some of its constituents that the unit of account should be established in conjunction with developing recognition and measurement guidance for that unit of account – not after as the ED could suggest. 

Full feedback statement

© EFRAG - European Financial Reporting Advisory Group