23-7-2009 | EFRAGs draft letter on the IASB Paper on Credit Risk in Liability Measurement

EFRAG has issued its draft comment letter in response to the IASB's invitation to comment on a staff paper entitled Credit Risk in Liability Measurement. The letter can be downloaded here and comments are invited on the letter by 21 August 2009.
	The IASB published in June 2009 an invitation to comment on a staff paper that outlines the three most often-cited arguments in favour of and against including credit risk in current measurement of liabilities. The objective of the invitation to comment is to generate a focused discussion that will enhance the debate on this topic.   EFRAG is very pleased that the IASB has taken the decision to prepare and issue a discussion paper on one of the more contentious aspects of the fair value measurement debate: whether, and if so to what extent, own credit risk should be reflected in liability measures. EFRAG has considered the arguments for and against the inclusion of own credit risk in the measurement of liabilities.  However, we think the key issue is what approach would result in the most useful information.  Using this test, we concluded that: ·        Own credit risk should only be taken into account in the initial measurement of a liability if own credit risk is priced into the transaction that gave rise to the initial recognition of a liability.  In all other circumstances it should not be included. ·        Changes in own credit risk should not be taken into account in subsequent measurements of liabilities.
Document : EFRAGs draft letter on the IASB Paper on Credit Risk in Liability Measurement.pdf
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