EFRAG Issues Final Endorsement Advice and Effects Study Report on IAS 16/38 Amendments

European Financial Reporting Advisory Group has submitted a letter to European Commission supporting and explaining impacts of reforms made to International Accounting Standard (IAS) – 16 and IAS – 38.

European Financial Reporting Advisory Group backs the reforms and suggests that the European Commission should support the changes because it believes that the advantages of implementing those changes are more than the cost of doing so.

The changes refer to ‘Clarification of Acceptable Methods of Depreciation and Amortization’. These reforms were issued on 12^th of May 2014 and are effective for implementation with effect from 1^st of January 2016 with an option of early adoption. These reforms clarify that revenue based method for calculating depreciation and amortization is not the suitable one as revenue is not the true reflection of use of economic benefits embodied in an asset.

European Financial Reporting Advisory Group has conducted an appraisal of the reforms and issued its initial analysis for stakeholder’s opinion. When drafting its final recommendation and letter to European Commission, European Financial Reporting Advisory Group took into consideration the opinions it received in this respect. European Financial Reporting Advisory Group’s analysis is based on contribution from market partakers, accounting standards setters and other concerned parties.

European Financial Reporting Advisory Group is in favor of reforms and has concluded that they are in line with laws of European parliament and basic accounting principles.