EFRAG: consultation on proactive work

Comments from ACCA to the European Financial Reporting Advisory Group (EFRAG), September 2010.



Preliminary remarks

ACCA is pleased to have this opportunity to comment on the European Financial Reporting Advisory Group (EFRAG) consultation on its proactive work, which was considered by ACCA's Financial Reporting Committee. ACCA has itself an active research programme in the area of financial reporting of which we are happy to provide EFRAG with full details. ACCA is very willing to co-operate and co-ordinate with EFRAG's work in this regard, as we confirmed when we met with Mario Abela in July.

ACCA'S answers to EFRAG's questions

Q1 Awareness of EFRAG's proactive work

We are aware and have responded to a number of EFRAG's proactive papers in the past ourselves directly and by way of our input to FEE. 

EFRAG asks whether these have had a sufficient focus on European issues. We  see there being a restricted number of specifically European issues, as in general financial reporting faces much the same challenges across the world.

Q2 At what stage should EFRAG concentrate its work?
EFRAG should be thinking about input at all stages of the development of standards to

  • provide evidence that projects are needed before IASB begins to consider them
  • outline feasible solutions or issues that need to be explored
  • provide evidence of the likely impact of proposals as they develop through the IASB due process - to inform EFRAG's comment letters
  • assess the effect of changes after their implementation

EFRAG might also consider whether it might have a role to co-ordinate European research generally in this field. National standards setters (NSS) are active, but they are part of EFRAG's mechanism. In addition to NSS, universities/academics, EU Commission, national governments, accountancy firms and professional bodies are involved to some extent as well.

Q3. Ranking of proposed projects
Taking them in the order they appear in Table 2





Proposed projectCommentsRanking
Post implementation reviews (PIR)A methodology will be important but will flow presumably from the actual effects studies or PIRs1
PIR for IFRS3 on business combinationsSeems helpful. The potential issues could be highly significant just in terms of the scale of the values involved. We may also be approaching another active time in M&A activity. This study could look at the effects of the two successive versions of IFRS3.2
PIR for IFRS8 on operating segmentsSeems helpful and an issue applying to every IFRS company.3
PIR for IFRIC12 service concessionsHelpful. The impact of the interpretation was said to be potentially detrimental to infrastructure projects, but clearly of a narrower impact than IFRS3 or IFRS8.4
Government grantsThis could be helpful in assessing whether the IASB project should be restarted. EFRAG could do some preliminary assessment of what the scale of any lack of comparability generated by the different treatments.8
Decision environments of usersThis should potentially be helpful in generating evidence for guiding standards development. But it seems less clear how any output could be framed so that it would.9
IFRS and individual financial statementsThis is predominantly a European issue, but it is not clear how many subsidiaries use IFRS for their individual financial statements. Could cover IFRS for SMEs as well.7
Performance reportingDeciding what in principle should be included in P&L and what in OCI is becoming an urgent matter. Ideally this would be tackled by the IASB directly.6
Share based paymentsIt may be helpful to have a PIR on IFRS2, as this is acknowledged (eg by a recent ACCA survey of preparers) to be a difficult and complex area.5

Q4. Additional possible topics
We have identified a number of matters which IASB should be looking into at some point in order to identify the priorities for their future agenda.

  • Methodologies for identifying and measuring complexity in accounting
  • Methodologies for assessing gaps and problems in financial reporting
  • Carbon accounting and the wider issue of integrated reporting
  • Accounting for the not-for-profit sector

EFRAG might consider whether there are any where they feel they could helpfully contribute.