IAS 7 Amendments - Disclosure Initiative

Completed
Published in the Official Journal
Hocine Kebli

Project history

The objective of this project is to enable users of financial statements
to evaluate changes in liabilities arising from financing activities. On 18
December 2014, the IASB issued an Exposure Draft in which the IASB was
proposing:

  1. that an entity should disclose a reconciliation of the amounts in the
    opening and closing statements of financial position for each item for which
    cash flows have been, or would be, classified as financing activities in the
    statement of cash flows, excluding equity items.

  2. to extend the disclosures required by IAS 7 Statement of Cash Flows
    about an entity’s liquidity and proposes disclosures about the restrictions that
    affect the decisions of an entity to use cash and cash equivalent balances,
    including tax liabilities that would arise on the repatriation of foreign cash
    and cash equivalent balances.

The Exposure Draft also included proposed changes to the IFRS Taxonomy to
reflect the effect of the proposed amendments to IAS 7.

EFRAG’s Comment Letter

On 11 February 2015, EFRAG published its draft comment letter.

A written procedure to approve EFRAG’s final comment letter on the ED was
launched with the EFRAG Board on 4 May 2015 and was concluded on 11 May 2015.

On 11 May 2015, EFRAG published its final comment letter where it:

  1. supports the objective to provide information on the period-on-period
    movements in debts but expresses dissatisfaction with the piecemeal approach to
    modifying current guidance and introducing prescriptive guidance without first
    establishing objectives for the disclosures;

  2. calls for principle-based objectives for the proposed disclosures and for
    sufficient flexibility to allow entities to exercise judgement in deciding the
    components of their liabilities to reconcile; and

  3. does not support the proposed disclosures about restrictions on cash and
    cash equivalent balances and encourages the IASB to provide clarifications to
    the existing standards, rather than introduce additional disclosure
    requirements.

The Amendments

On 29 January 2016, the IASB issued the final amendments to IAS 7. The
amendments require companies to provide information about changes in their
financing liabilities and come as a response to requests from investors for
information that helps them better understand changes in a company’s debt. The
IASB decided not to include disclosures on cash and cash equivalents in the
amendments to IAS 7 related to the reconciliation of liabilities from financing
activities.

EFRAG's Endorsement Advice

On 11 April 2016, EFRAG issued its draft endorsement advice in which EFRAG concluded that the Amendments satisfy all criteria for EU endorsement and therefore recommended their endorsement.

After having considered feedback from its constituents, EFRAG published its final endorsement advice on 6 June 2016 where it supported the adoption of the Amendments and recommended their endorsement. EFRAG’s recommendation is explained in the letter to the European Commission and the accompanying Appendices.

Endorsement 

The Amendments were endorsed on 6 November 2017. The endorsement decision was published in the Official Journal of the European Union on 9 November 2017.