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Proactive - Classification of Claims


The EFRAG Discussion Paper Classification of Claims discusses the credit side of the balance sheet and the classification of the claims on an entity.


The IASB Discussion Paper A Review of the Conceptual Framework for Financial Reporting identified two potential ways of distinguishing between equity instruments and liabilities. The majority of respondents to the Discussion Paper, including EFRAG, did not support either of the two approaches as discussed. In its final comment letter EFRAG suggested that the IASB should not attempt to provide the conceptual basis for a distinction as part of the current revision of the Conceptual Framework but should, in parallel, undertake a more comprehensive discussion on what the distinction means and is attempting to portray.

Following consultation with the Accounting Standards Advisory Forum, the IASB has decided to tackle the equity/liability distinction in parallel with the wider Conceptual Framework project. The IASB plans to release a Discussion Paper on the equity/liability distinction at approximately the same time as the publication of an Exposure Draft of the entire revised Conceptual Framework.

The Discussion Paper

The paper was written to assist the IASB in developing its Discussion Paper and to support constituents in engaging with the project.

Classification of Claims considers more than just the distinction between equity and liabilities and addresses wider questions, including how many elements the claims on an entity should be classified into, the objective of classification requirements and how dilution can be depicted. The paper does not take a position on how the distinction between claims should be made. Its purpose is to discuss approaches to defining elements, identify the choices that must be made in classifying the claims on an entity and the consequences of those choices. The paper also identifies the extent to which each of the choices is consistent with the identified objectives and how these objectives may conflict with each other.

The paper also includes a glossary that EFRAG has developed to assist in establishing a common language for discussing and understanding the various issues.

Comment period

The comment period closed on 31 October 2014. All comment letters received are available below and a summary of the feedback received will be published at a future date.

Feedback statement

EFRAG published on 31 March 2015 a feedback statement summarising the main messages from respondents to EFRAG's Discussion Paper. EFRAG received eleven comment letters. Respondents to the Discussion Paper generally supported the identified framework but most respondents to and participants in the outreach meetings on the DP Classification of Claims considered that current binary classification model in IFRS should be retained, with a negative definition of equity and refinement of the positive definition of a liability.

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