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02/02/2017 - EFRAG's draft comment letter on the IASB's ED/2017/1 Annual Improvements to IFRS Standards 2015-2017 Cycle

​EFRAG has published its draft comment letter in response to the IASB's ED/2017/1 Annual Improvements to IFRS Standards 2015-2017 Cycle and seeks constituents' views on the proposals. Comments are requested by 3 April 2017.

​On 12 January 2017, the IASB issued the Exposure Draft ED/2017/1 Annual Improvements to IFRS Standards 2015-2017 Cycle ('the ED') with a comment period ending on 12 April 2017. 

The ED proposes the following amendments: 

  • IAS 12 Income Taxes: The IASB is proposing to clarify that the requirements in paragraph 52B of IAS 12 apply not just in the circumstances described in paragraph 52A of IAS 12, but to all income tax consequences of dividends. 
  • IAS 23 Borrowing Costs: The IASB is proposing to amend paragraph 14 of IAS 23 to clarify that, when a qualifying asset is ready for its intended use or sale, an entity treats any outstanding borrowing made specifically to obtain that qualifying asset, as part of the funds that it has borrowed generally.
  • IAS 28 Investments in Associates and Joint Ventures: The IASB is proposing to clarify that an entity is required to apply IFRS 9 Financial Instruments, including its impairment requirements, to long-term interests in an associate or joint venture that, in substance, form part of the net investment in the associate or joint venture but to which the equity method is not applied. 

In its draft comment letter, EFRAG broadly agrees with most of the proposals in the ED, but is concerned that amending IAS 12 without providing guidance on how to determine whether the payments are distributions of profits may not lead to a significant improvement in consistent application compared to the current situation.

Moreover, EFRAG recommends that the IASB should include an example or other guidance illustrating the application of the proposed amendment to IAS 28. 

Lastly, whilst EFRAG understands the benefits from aligning the effective date of the amendment to IAS 28 with the effective date of IFRS 9, we are concerned about the short time period between the expected date of issuing the amendment and the proposed effective date of 1 January 2018.

EFRAG requests comments by 3 April 2017.

The draft comment letter is available here.