The European Association of Cooperative Banks (EACB) gladly takes the opportunity to comment on the EFRAG’s consultation about possible alternative approaches to IFRS 9 on reporting of equity instruments for long-term investing issued by the EFRAG Secretariat on 6th May 2019.
The EACB welcomes the EFRAG’s efforts to complement previous EFRAG discussions and consultations on the accounting treatment for equity and equity-type instruments for long-term investing. The current consultation tries to address the IFRS 9 changes compared to IAS 39 for some of these long-term financing instruments.
We appreciate that EFRAG points out that given the nature of the business model of long-term investors, their reported performance should include both returns from dividends and gains or losses on disposal. In this respect, Fair Value through Profit Loss (FVPL) treatment has the effect that all such returns are included in profit or loss, while the Fair Value through Other Comprehensive Income (FVOCI) treatment has the effect that only dividends are included. As a result, some long-term investors may indeed be reluctant to hold equity instruments on a long term base under such approaches.