25/02/2022 - EFRAG's Final Comment Letter on the IASB ED Subsidiaries without Public Accountability: Disclosures
EFRAG has published its Final Comment Letter in response to the IASB's Exposure Draft ED/2021/7 Subsidiaries without Public Accountability: Disclosures. In the ED, the IASB proposes that eligible subsidiaries can provide reduced disclosure requirements together with the recognition, measurement and presentation requirements in IFRS Standards.
In addition, EFRAG has issued a Summary of the inputs received from preparers that includes the feedback received from EFRAG's survey "Would you prefer less disclosures for subsidiaries? and a Briefing prepared by the EFRAG Secretariat focused on the compatibility of the Accounting Directive 2013/34/EU with the IASB's ED.
EFRAG Comment Letter
In its Final Comment Letter, EFRAG welcomes the IASB's efforts in developing reduced disclosure requirements for subsidiaries without public accountability and agrees with the proposed project objective.
EFRAG recognises the benefits and the support from its constituents for the IASB's proposals to permit eligible subsidiaries to apply IFRS Standards with reduced disclosure requirements.
European constituents asked for the IASB to consider widening the scope and provided different suggestions. EFRAG acknowledges that there are potential benefits of a broader scope, nonetheless EFRAG also recognises that there is no consensus on whether and to what extent the scope should be widened. Therefore, any decision on the extension of the scope is likely to be challenging and controversial.
Considering this, at this stage, EFRAG supports that the IASB should proceed with its project with the current scope.
Nonetheless, EFRAG recommends that, before the issuance of a new IFRS Standard on reduced disclosures, the IASB clarifies the concept of holding assets in a fiduciary capacity (as insurers, for example, do not in general regard themselves as holding assets in a fiduciary capacity) and, therefore, explores the applicability of the Exposure Draft to the insurance sector.
EFRAG also believes that the IASB should, in parallel to the finalisation of this project, assess the possibility of extending the proposed benefits to other type of entities (associates, joint ventures, joint operations, non-listed banks that are subsidiaries, separate financial statements of ultimate parent entities and all entities without public accountability).
Finally, EFRAG highlights that the IASB's proposals in this project are likely to put pressure on the definition of 'available for public use' and 'public accountability' and welcomes further application guidance in this area.
In addition, EFRAG raises some concerns and provides suggestions on the IASB's approach for developing the draft Standard, the proposed structure of the draft Standard, the proposed list of disclosure requirements (including not reducing the disclosure requirements for IFRS 17 Insurance Contracts) and some other topics.
More details can be found in EFRAG's Final Comment Letter.
Other Publications
The EFRAG Secretariat has also issued its second Briefing focused on the compatibility of the Accounting Directive 2013/34/EU with the IASB's ED. The views expressed in this Briefing are tentative and reflect the EFRAG Secretariat's understanding of whether there are different disclosure requirements in the Accounting Directive 2013/34/EU and the Exposure Draft and whether there are any disclosures in the Accounting Directive 2013/34/EU that are not required in the IASB’s Exposure Draft. The Briefing is available here.
Finally, EFRAG
has issued a Summary of the inputs received from preparers that includes the feedback received from EFRAG's survey "Would you prefer
less disclosures for subsidiaries?", which was focused on the
costs and benefits and some of the content of the IASB’s proposals. The summary report is available here.
