27/01/2022 - EFRAG Comment Letter on ED/2021/3 Disclosure Requirements in IFRS Standards - A Pilot Approach
EFRAG has published its comment letter on ED/2021/3 Disclosure Requirements in IFRS Standards - A Pilot Approach (Proposed Amendments to IFRS 13 and IAS 19) (‘The ED’).
The comment letter can be found here.
A summary of the findings from the extensive outreach conducted by EFRAG is provided in the Annex to the Comment Letter.
EFRAG welcomes the objective of the project and agrees with the proposal to work closer with users and other stakeholders early in the standard-setting process.
However, based on the extensive outreach, field-testing and consultation conducted with European stakeholders, EFRAG concludes that the proposed approach in the ED may not achieve its intended objective. Instead, the proposed approach is likely to:
- Be ineffective in addressing the disclosure problem and not result in providing more useful and relevant information and could even result in relevant information being omitted;
- Result in impairing comparability for users of financial statements by introducing a more flexible approach to disclosures;
- Increase enforcement and audit challenges; and
- Be more costly for preparers and their auditors.
EFRAG suggests an alternative approach and a less radical change to address the disclosure problem, whereby the IASB would combine the introduction of overall and specific objectives (as proposed in the ED) with a list of items of disclosures always required (subject only to a materiality assessment) to meet those objectives. This would be complemented by application guidance describing users’ needs and illustrative examples, illustrating how to apply judgements to meet the objectives under various circumstances and supporting preparers, auditors and enforcers to develop a common understanding about the application of objectives-based disclosures.
In addition, EFRAG encourages the IASB to further consider the interactions between its proposed approach to develop disclosure requirements and:
- The role of the notes of the financial statements taken as a whole;
- The increasing use of technology and digital reporting;
- The application of the materiality concept; and
- The assessment of stewardship.
Lastly, should the IASB decide to proceed with the proposals in the ED, EFRAG provides input and recommendations on the application of those proposals to IAS 19 Employee Benefits and IFRS 13 Fair Value Measurement in its detailed response.
EFRAG's comment letter can be found here.
A summary of the findings from the extensive outreach conducted by EFRAG is provided in the Annex to the Comment Letter.
