ESBG responds to EFRAG Draft Comment Letter on IASB's Exposure Draft

“Prepayment features with negative compensation ​–​ proposed amendments to IFRS 9” 

>> See the ESBG response

​​Savings and retail banking association ESBG sent this week a position paper to the European Financial Reporting Advisory Group related to an EFRAG Draft Comment Letter in response to the IASB's Exposure Draft: Prepayment Features with Negative Compensation – proposed Amendments to IFRS 9.

A closer look at the response shows ESBG's positions line up with EFRAG's comments on the IASB Exposure Draft. Take eligibility criteria: the paper backs the amendment and proposes to delete the additional criterion which restricts the scope of that exception to prepayment features the fair value of which is “insignificant" “initially" for the party recognising an asset. Both associations share the opinion that the treatment of prepayment features with negative compensation should be aligned with the treatment of prepayment features with positive compensation.

The paper also focuses on Basis for Conclusion, where ESBG sees a need to delete BC 18 – the part going beyond the scope of the amendment.

ESBG does, however, differ with EFRAG on the proposed effective date. ESBG writes that the amendment should be endorsed and become applicable in the European Union from 1 January 2018. They argue it is crucial that the amendment's EU implementation date fall on the same date, and not later, to avoid inconsistencies in the measurement of certain financial assets within a time-frame of a few months.

EFRAG recommended that the IASB include an effective date of 1 January 2019, with early application permitted, recognising that, if the amendments can be endorsed before the end of the first quarter of 2018, entities in the EU that file financial statements on a quarterly basis will not be negatively affected.


>> See the ESBG response

IFRS; Accounting Standards