The European Financial Reporting Advisory Group (EFRAG) on September 30 published draft comments on the International Accounting Standards Board’s (IASB) July 26 exposure draft that would permit eligible subsidiaries to apply International Financial Reporting Standards (IFRS) with reduced disclosure requirements in their financial statements.
EFRAG generally expressed its support for the reduced disclosure requirements in the exposure draft, but it also highlights some questions about scope, as well as some concerns and suggestions.
In addition, EFRAG comments on specific proposed disclosure requirements for subsidiaries applying the standard in the draft – including with respect to International Accounting Standard (IAS) 12, Income Taxes.
EFRAG suggests that the disclosure requirement in the draft relating to an explanation of a change in the applicable tax rates compared with the previous period could be presented in the form of a numerical reconciliation, as required under IAS 12 paragraph 81(c) when explaining the relationship between tax expense (income) and accounting profit.
Regarding discontinued operations, EFRAG also highlights the importance to users of financial statements of disclosures on the tax expense relating to the gain or loss on discontinuance and the profit or loss from the ordinary activities of the discontinued operation for the period.
EFRAG further highlights as relevant, for entities with significant investments, disclosures on the aggregate amount of temporary differences associated with investments in subsidiaries, branches, and associates and interests in joint arrangements.
Furthermore, EFRAG suggests “it is vital” to include a disclosure requirement on evidence of a deferred tax asset.
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