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Response to EFRAG consultation on IFRS 9

Response to EFRAG consultation on IFRS 9



​Equity Instruments -- Research on Measurement: Alternative accounting treatments to IFRS 9 Financial Instruments requirements for equity and equity-type instruments held in a long-term investment business model.

>> See ESBG response to consultation (.pdf) 


Why is EFRAG consulting? 

As part of its Action Plan on Sustainable Finance, the European Commission ("EC") announced it would ask EFRAG to explore potential alternative accounting treatments to ("FV") measurement for long- term investment portfolios of equity and equity-type instruments. In June 2018, EFRAG received a request for advice from the EC in relation to the accounting requirements for investments in equity instruments. The request for advice is part of the EC’s initiatives to orient capital flows towards investment in sustainable activities. The request for advice asks EFRAG to consider alternative accounting treatments to measurement at fair value through profit or loss (FVPL) for equity instruments. According to the request for advice, such possible alternative accounting treatments should serve the following objectives: properly portray the performance and risks of long-term investment business models, in particular for those equity and equity-type investments that are much needed for achieving the UN Sustainable Development Goals and the goals of the Paris Agreement on Climate Change; preferably enhance investors’ insight in the long-term performance of investments, as opposed to recognising point-in-time market-based value changes in reported profit or loss during the duration of the equity investment. 

The questionnaire 

EFRAG has developed this questionnaire in order to gather views from constituents on alternative accounting treatments to IFRS 9 Financial Instruments requirements for equity and equity-type instruments held in a longterm investment business model. Such alternative treatments should serve the objectives mentioned above. Respondents are encouraged to read the EFRAG Secretariat background paper available here. The EFRAG Secretariat background paper provides background information on the request for advice. It explains how the consultation relates to the EC’s initiatives on sustainable growth, illustrates the accounting requirements in IFRS 9 and explores some possible alternative measurement approaches. The possible alternatives in the background paper are to be considered as examples; respondents may suggest other measurement approaches that they consider appropriate. Additionally, the background paper provides indications of how the concepts of ‘long-term investment business model’ and "equity-type instrument" may be considered in the context of the questionnaire. In addition to submitting replies to the questionnaire, constituents can provide their input on the topic and ask questions about the survey by writing to: Fredre Ferreira (fredre.ferreira@efrag.org), or Isabel Batista (isabel.batista@efrag.org). Respondents are encouraged to respond to all questions but are not required to do so. EFRAG will still consider their answers. EFRAG will disclose the responses, unless a respondent asks for confidentiality. Please complete this survey by 5 July 2019.

>> See ESBG response to consultation (.pdf) 


Accounting Standards; Accountancy; IFRS