Considering the Effects of Accounting Standards
Position Paper and Feedback Statement for proactive project ‘Considering the Effects of Accounting Standards
The European Financial Reporting Advisory Group (EFRAG) and the Accounting Standards Board (the ASB) of the FRC published the Position Paper: Considering the Effects of Accounting Standards
(PDF) and the related Feedback Statement
(PDF) . The Position Paper has been developed as part of EFRAG’s proactive agenda to contribute to improving the way in which accounting standard setters develop and implement standards throughout their due process, from start to finish.
EFRAG and the ASB have finalised the position paper and the feedback statement that they jointly developed on ‘Considering the Effects of Accounting Standards’. Comment letters were received from Europe, but also from a wider audience, in the public consultation to the Discussion Paper ‘Considering the Effects of Accounting Standards’, published in January 2011, and that input has proven to be invaluable to EFRAG and the ASB.
EFRAG and the ASB express the view that ‘effect analysis’ should be integrated into the standard setting process over the life-cycle of projects, from the agenda proposal stage through to the final standard stage, so as to further enhance the transparency of the due process and to increase the accountability and credibility of the standard setter. Effect analysis may be used to assess the extent to which a standard will meet its intended outcomes, as defined at the outset of the project.
The paper affirms that the standard setter should primarily assess the effects of a standard from the standpoint of whether it contributes to the delivery of improved financial reporting. Micro-economic effects, that is the effects on investors and reporting entities, should be the focus of the standard setter. Potential macro-economic effects, if identified, should trigger communication with relevant authorities, so that appropriate actions or coordination can take place.
Reflecting on comments received, EFRAG and the ASB have limited their recommendations to setting out an outline process (objective and key steps) for effect analyses. A detailed methodology should be developed by the standard setter, after gaining benefit from practical experience. The IFRS Foundation has asked the IASB to take action to that end. EFRAG and the ASB are ready to contribute to this effort.
EFRAG and the ASB would like to thank all the respondents to the Discussion Paper, and the National Standard Setters in Europe who supported the positions reached in the Position Paper, for their contribution to influencing the development of IFRS.