Draft Comment Letter on the Conceptual Framework Discussion Paper Released by the EFRAG
The International Accounting Standards Board (IASB) previously issued Discussion Paper (DP) that contained certain topical areas where it considered that revision and amendment was necessary to the existing Conceptual Framework. The European Financial Reporting Advisory Group (EFRAG) has released issued its draft comment letter on the above mentioned Discussion Paper.
The EFRAG agreed with the high priority given by the IASB to the said project and appreciated the work done by the IASB in identifying and analyzing the problematic areas in the past. The EFRAG supported the practical approach taken by the IASB in the project to complete it within the next few years. Although it supported the practical approach, it did not agreed with all of the solutions proposed. It believes that in some of the cases, the IASB should address the issues on a more conceptual basis. Following are the important comments made by the EFRAG:
· It does not agree with the decision not to consider Chapter 1 and Chapter 3 of the existing Framework
· It believes approaches regarding prudence, stewardship and reliability should be opened for discussion
· It agreed that the measurement of assets should be based on how they contribute to the future cash flows and the liabilities should be measured based on how they will be settled
· It encouraged the distinction made by the Discussion Paper between equity and liability but did not agree with all the proposals made regarding this matter
· It supported the vies of the IASB that financial statements can be made more relevant if it is considered how an entity conducts its business activities
The EFRAG is giving very high attention to this project. It has found a number of ways by which it will contribute to the discussion paper and solicit views of stakeholders and interested parties. It has also started a series of outreach events that are being held all over the Europe to discuss the proposals included in this Discussion Paper.