23-9-2009 | EFRAG's letter on the IASB Paper on Credit Risk in Liability Measurement is issued

EFRAG has finalised its 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
	The IASB published in June 2009 an invitation to cmment on a staff paper that outlines the three most often-cited arguments in favour of and against including credit risk in the 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 prepared a paper on one of the more contentious aspects of the measurement debate, although it urges the IASB to try to ensure that the FASB is appropriately included in any future deliberations and decisions on the subject so that a converged approach can be developed. EFRAG believes that the key issue is what approach to own credit risk would result in the most useful information. Using this test, it concludes 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 the liability. In all other circumstances it should not be included. - Changes in own credit risk should be taken into account in the subsequent measurement of a liability only if it is a financial liability that is both held by the entity for trading purposes and actively traded. In all other circumstances, changes in own credit risk should not be taken into account unless and until they are 'realised' in the form of cashflows.
Document : EFRAGs letter on the IASB DP Credit Risk in Liability Measurement doc.pdf
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