In May 2008 the IASB amended IAS 20, as part of the Annual Improvement Project, in order to require government loans with a below-market rate of interest to be measured at fair value on initial recognition. The IASB required applying the amendments prospectively to new loans in order to avoid fair value measurements at a past date.

The Exposure Draft - Government Loans (Proposed Amendments to IFRS 1) proposes to amend IFRS 1 in order to allow first-time adopters of IFRSs the same prospective application of the provision set out in IAS 20.

EFRAG is supportive of what the proposed amendments are trying to achieve, but it believes that the Board should limit the scope of the proposed transitional relief to entities that, under their previous GAAP, accounted for government loans as liabilities.

Comments are invited on the letter by 27 December 2011.