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14/02/2017 - EFRAG requests comments on its Draft Endorsement Advice on IFRS 16 Leases

​​Following a ​Preliminary Consultation which closed last December, ​EFRAG has now issued its Draft Endorsement Advice on IFRS 16 Leases. EFRAG seeks the views of constituents, by 13 March 2017, in particular on its preliminary assessment of whether endorsing IFRS 16 would be conducive to the European Public Good. EFRAG also welcomes views on other relevant matters. 

EFRAG is conducting the consultation on its endorsement advice in two phases:

In the Preliminary Consultation Document (consultation closed 8 December 2016), EFRAG sought views on:

  • Whether IFRS 16 meets the qualitative characteristics of relevance, reliability, comparability and understandability, raises no issues regarding prudent accounting and is not contrary to the true and fair view principle (see Appendix 2 of the draft endorsement advice).
  • Whether IFRS 16 would improve financial reporting, compared to IAS 17 Leases and the associated Interpretations it replaces and the lack of full convergence with the equivalent Standard on leases in US GAAP would not put European entities at a competitive disadvantage (see relevant components of Appendix 3).
  • A preliminary assessment of the cost and benefits expected to arise from the application of IFRS 16.

EFRAG is now seeking comments on its complete Draft Endorsement Advice which reflects:

  • comments from constituents on the Preliminary Consultation Document;
  • responses to the user questionnaire issued in November 2016 seeking the views of users.
  • additional research undertaken in respect of the impact of IFRS 16 on SMEs;
  • findings from the economic study commissioned by EFRAG; and
  • expert advice from the European Central Bank and the European Banking Authority in specific areas of those organisations' expertise.

EFRAG's overall assessment is that IFRS 16:

  • Meets the qualitative characteristics of relevance, reliability, comparability and understandability, leads to prudent accounting, and it is not contrary to the true and fair view principle.
  • Would improve financial reporting and would reach a cost-benefit trade-off that is acceptable. EFRAG has not identified that IFRS 16 would have major deleterious effects on the European economy, including financial stability and economic growth. Accordingly, EFRAG has assessed that adopting IFRS 16 is conducive to the European public good.

EFRAG welcomes comments on any part of the Draft Endorsement Advice, but notes that the Preliminary Consultation Document included a complete draft of Appendices 1 and 2 which is largely unchanged in this document. Accordingly, EFRAG is primarily interested in comments on specific components of Appendix 3 of the Draft Endorsement Advice, along with supporting evidence, if applicable.

The Draft Endorsement Advice can be found here.

Comments are requested by 13 March 2017. You can comment on EFRAG's Draft Endorsement Advice by clicking on the 'Comment publication' link below.

EFRAG has also updated its Endorsement Status Report, which can be downloaded here.