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21 May 2010

EFRAG disagrees with the IASB measurement model in IAS 37


EFRA believes that IASB should ensure that existing IAS 37 treatment for warranties continues to apply until new IFRS replacing IAS 18 comes into place. EFRAG also disagrees with the removal of the “probability of outflows” recognition criterion without any proper debate on this aspect.

EFRAG has concerns about the proposals and does not support the measurement model in the Exposure Draft. EFRAG has also commented on its concerns about the due process and the need for a more thorough debate on the other changes on recognition of non-financial liabilities which were not included in the ED. 
EFRAG is disappointed that the IASB is not re-exposing the full Standard because the Board considered that the decisions made in the re-deliberations process did not fundamentally change the proposal in the original 2005 Exposure Draft. EFRAG believes that the proposals introduce fundamental changes in the recognition and measurement of liabilities and have important consequences for the accounting issues. EFRAG also notes that many respondents to the original ED expressed concern about the original proposal. For that reason EFRAG believes that a full re-exposure of the document would have been appropriate. EFRAG also thinks that recognition and measurement are inextricably linked and it is somehow artificial to separate the two. 
 
EFRAG main comments are:
·         EFRA believes that IASB should ensure that existing IAS 37 treatment for warranties continues to apply until new IFRS replacing IAS 18 comes into place.
·         EFRAG disagrees with the removal for the “probability of outflows “recognition criterion without any proper debate on this aspect of the conceptual framework, and
·         EFRAG is not persuaded that the guidance provided on conditions of uncertainty and sources of evidence in paragraphs 13 and following is sufficiently clear to ensure consistent application.
 
 
 
 
 
 
 
 


© EFRAG - European Financial Reporting Advisory Group

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