IFRS 19 - EFRAG's survey on the expected costs and benefits of IFRS 19 - Users

IFRS 19

IFRS 19 is the response to stakeholder feedback to the IASB’s 2015 Agenda Consultation, allowing some eligible subsidiaries to apply IFRS Accounting Standards with reduced disclosure requirements – which are all listed in IFRS 19. IFRS 19 aims to simplify subsidiaries’ financial reporting when the parent company applies IFRS Accounting Standards for consolidated financial statements as:

• Subsidiaries applying local GAAP (or the IFRS for SMEs Accounting Standards) have recognition and measurement differences between their own financial statements and the amounts reported to their parent for group consolidation purposes;
• Subsidiaries applying IFRS Accounting Standards do not face recognition and measurement differences, however, they consider the disclosure requirements disproportionate to users’ information needs.

Therefore, on 9 May 2024 the IASB issued IFRS 19 Subsidiaries without Public Accountability: Disclosures. IFRS 19 is a voluntary Standard and has an effective date of 1 January 2027, with early application permitted. More information on IFRS 19 can be found here.
 

Scope

A subsidiary is eligible to apply IFRS 19 if:

• it does not have public accountability; and
• its ultimate or any intermediate parent produces IFRS consolidated financial statements available for public use.

An entity has public accountability if:

• its debt or equity instruments are traded in a public market, or it is in the process of issuing such instruments for trading in a public market; or
• it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.

Reduction in disclosure requirements

In developing IFRS 19, the IASB was guided by the six broad principles also used to develop the disclosure requirements:

1. users of the financial statements of eligible subsidiaries are particularly interested in information about short-term cash flows and about obligations, commitments or contingencies, whether or not they are recognised as liabilities.
2. users of the financial statements of eligible subsidiaries are particularly interested in information about liquidity and solvency.
3. information on measurement uncertainties is important for eligible subsidiaries.
4. information about an entity’s accounting policy choices is important for eligible subsidiaries.
5. disaggregation of amounts presented in eligible subsidiaries’ financial statements are important for an understanding of those statements.
6. some disclosures in IFRS Accounting Standards are more relevant to investment decisions in public capital markets than to the transactions and other events and conditions encountered by typical eligible subsidiaries.

Feedback received from EFRAG suggested that the relevant user community interested in subsidiaries’ financial statements are typically credit analysts, who focus primarily on short-term cash flow information.

The IASB’s Effects Analysis provides an overview of the expected effects for companies and users of financial statements.

For example, the diagram below illustrates the percentage reduction in disclosure requirements:


Source: IASB, 2024
 

The EU Perspective

For European entities to be able to apply IFRS 19 on a voluntary basis, the following conditions need to be met:

• the EU decides to endorse IFRS 19;
• the entity falls within the scope of the Standard; and
• EU Member States permit or require the use of IFRS Accounting Standards[1]

In addition, IFRS 19 could be seen, to a certain extent as ‘competing’ with national GAAPs and the Accounting Directive[1]. Therefore, users’ input on whether the Standard will be meeting their information needs is essential.

As part of its endorsement activities, EFRAG invites users of eligible subsidiaries’ financial statements to provide their views on the expected costs and benefits of the implementation of IFRS 19, by filling in this survey.

[1] If you would like to know more about the differences between the disclosure requirements between IFRS 19 and the EU Accounting Directive, please refer to this link: Briefing - "STUDY ON COMPATIBILITY OF THE EU ACCOUNTING DIRECTIVE WITH IFRS 19".

Purpose and Content of the Survey

Objective
The objective of this survey is to support EFRAG in performing a cost-benefit assessment of the implementation of IFRS 19. The survey results will be used and play an important role in EFRAG’s cost-benefit assessment, which forms part of the EU endorsement process and the assessment of whether the Standard is ‘conducive to the European public good’.

Structure
The survey consists of 14 questions, sorted into the following sections:

• Section 0 – General Information – (Questions 1-3)
• Section 1 – Cost and benefit assessment (Questions 4-11)
• Section 2 - Information needs (Questions 12-13)
• Section 3 - Other information (Question 14)

The completion of this survey should take up to 10 minutes.

Deadline and relevant information
Please submit your answers by 28 February 2025 by clicking on the ‘Submit’ button at the end of the survey.

Please note that you can save the draft questionnaire and go back to it at a later time by clicking on the button ‘Save and continue later’ in the right top corner of the page. EFRAG will only consider completed surveys.

Thank you for completing this survey!