How we responded to feedback on the 2013 Discussion Paper
In developing the Exposure Draft Conceptual Framework for Financial Reporting, the IASB considered feedback received on the 2013
Discussion Paper A Review of the Conceptual Framework for Financial Reporting. The following table summarises:
 the suggestions in the 2013 Discussion Paper;
 the feedback received on those suggestions; 1 and
 how the IASB has responded to that feedback.
Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Introduction—Purpose and status of the Conceptual Framework
Purpose
The Discussion Paper suggested that:
 the primary purpose of the Conceptual
Framework should be to assist the IASB by
identifying concepts that the IASB will use
when developing and revising Standards.
 the Conceptual Framework may also assist
parties other than the IASB to:
o understand and interpret existing
IFRSs; and
o develop accounting policies when no
Standard or Interpretation specifically
applies to a particular transaction or
event.
 some aspects of the Conceptual
Framework should be for the IASB only.
1
Many disagreed that the IASB should be
identified as the primary user of the Conceptual
Framework. They argue that this understates
the importance of the Conceptual Framework
to other parties.
Some respondents disagreed with the
suggestion that some aspects of the Conceptual
Framework should be for the IASB only. They
pointed out that preparers sometimes need to
refer to the Conceptual Framework.
Some respondents expressed the view that the
Discussion Paper was not sufficiently
aspirational, because in some areas it described
the judgements the IASB will have to make
The IASB agrees with those respondents who
argued that the status of the Conceptual
Framework suggested in the Discussion Paper
understated the importance of the
Conceptual Framework. Hence, the Exposure
Draft now proposes that the purpose of the
Conceptual Framework is to:
 assist the IASB to develop Standards;
 assist preparers to develop consistent
accounting policies when no Standard
applies to a particular transaction or
event, or when a Standard allows a
choice of accounting policy;
 assist all parties to understand and
interpret the Standards.
Agenda papers 10A–10M presented at the March 2014 IASB meeting provide a more detailed summary of the feedback received.
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Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
when setting Standards and, in their view, did
not examine fundamental concepts.
The Exposure Draft does not propose that
aspects of the Conceptual Framework should
be for the IASB only.2
The IASB is of the view that the Conceptual
Framework should be a practical tool that will
help when developing Standards. An
aspirational document of the type suggested
by some respondents would be unlikely to
fulfil this role.
Status
The Discussion Paper suggested that:
 the Conceptual Framework is not a
Standard and does not override any
Standard.
 in rare cases, in order to meet the overall
objective of financial reporting, the IASB
may decide to issue a new or revised
Standard that conflicts with an aspect of
the Conceptual Framework. In such cases,
the IASB would describe the departure
from that aspect of the Conceptual
Framework, and the reasons for it, in the
Basis for Conclusions on that Standard.
2
Many respondents agreed that the Conceptual
Framework is not a Standard and should not
override any Standard.
Although a few respondents disagreed, many
stated that the IASB should be permitted to
depart from the Conceptual Framework.
The IASB has carried forward from the
Discussion Paper the suggested status of the
Conceptual Framework. Hence, the Exposure
Draft states that:
 the Conceptual Framework is not a
Standard and does not override
Standards.
 in a limited number of cases, the IASB
may depart from aspects of the
Conceptual Framework if that is needed
to meet the overall objective of financial
reporting. If the IASB does so, it will
explain the departure in the Basis for
Conclusions on the Standard in question.
The Basis for Conclusions on the Exposure Draft notes that only the IASB when setting Standards would be able to rebut the presumption proposed in the Exposure Draft
that an item of income or expenses should be included in the statement of profit or loss, because IAS 1 prohibits the inclusion of items of income and expenses in OCI when
no Standard permits or requires this.
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Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Chapter 1—The objective of general purpose financial reporting and Chapter 2—Qualitative characteristics of useful financial information3
Approach
In 2010, the IASB revised two Chapters of the
Conceptual Framework, dealing with:
 the objective of financial reporting; and
 the qualitative characteristics of useful
financial information.
The Discussion Paper stated that the IASB did
not intend to fundamentally reconsider those
two chapters.
Many respondents stated that the IASB should
reconsider aspects of these Chapters.
In particular, respondents suggested that:
 the objective of financial reporting should
refer to stewardship more prominently;
 an explicit reference to prudence should be
reintroduced;
 the Conceptual Framework should describe
the role of substance over form in financial
reporting;
 reliability should be reintroduced as a
qualitative characteristic of useful financial
information;
 the IASB should consider changes to the
description of the primary user group; and
 the Conceptual Framework should discuss
how to avoid unnecessary complexity.
In response to these comments, the IASB now
proposes to make a number of changes to
these Chapters.
The Exposure Draft proposes:
 to give more prominence, within the
discussion of the objective of financial
reporting, to the importance of providing
information needed to assess
management’s stewardship of the entity’s
resources;
 to reintroduce an explicit reference to
prudence (described as caution under
conditions of uncertainty) and clarify that
prudence is important for achieving
neutrality;
 to state explicitly that a faithful
representation represents the substance
of an economic phenomenon rather than
merely representing its legal form.
In response to concerns raised that reliability
is no longer identified as a qualitative
characteristic, the IASB proposes to clarify
3
The ‘Chapters’ referred to in this document are the Chapters in the 2015 Exposure Draft The Conceptual Framework for Financial Reporting.
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Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
that measurement uncertainty is one factor
that can make information less relevant.
Hence, there is a trade-off between the level
of measurement uncertainty and other
factors that make information relevant.
Other aspects of the qualitative characteristic
of reliability are very similar to aspects of the
Exposure Draft’s description of the qualitative
characteristic of faithful representation.
Hence the IASB thinks it is unnecessary to
reintroduce the term reliability.
The IASB continues to believe that existing
and potential investors lenders and other
creditors have the most critical and
immediate need for financial information.
Hence the IASB proposes not to change the
description of the primary user group.
The IASB believes that the proposed
Conceptual Framework will provide it with all
the tools it will need to enable it to address
concerns about complexity by considering
whether the information required by a
particular Standard is understandable and
whether the benefits of providing that
information justify the costs. Hence the IASB
proposes not to add a discussion of
complexity to the Conceptual Framework.
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Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Materiality
The Discussion Paper suggested no changes to
the existing description of materiality. It
stated that this description is clear.
Many respondents agreed with that statement.
However, some suggested amendments or
clarifications.
The Exposure Draft proposes no amendments
to the concept of materiality, except to clarify
the reference to users.
The IASB will consider suggestions made by
respondents for amendments and
clarifications in its Disclosure Initiative.4
Chapter 3—Financial statements and reporting entities
Going concern
Some respondents:
The Discussion Paper identified three
 expressed concern that the Discussion
situations in which the going concern
Paper appeared to downplay the
assumption is relevant (when measuring assets
importance of the going concern concept;
and liabilities, when identifying liabilities and
 suggested that additional disclosures about
when making disclosures about the entity).
going concern are needed;
 asked for additional guidance on going
concern (including clarification of the time
horizon) and on the link between going
concern and notions such as ‘practically
unconditional’ and ‘no realistic alternative’
discussed in the guidance on the definition
of a liability; and
 requested guidance on financial statements
4
In response to concerns that the Discussion
Paper downplayed the importance of the
going concern assumption, the Exposure Draft
clarifies that going concern should continue
to be treated as an underlying assumption.
The Exposure Draft proposes the following
guidance on the interaction between the
going concern assumption and the liability
definition:
 if a present obligation could be avoided
only by liquidating the entity or ceasing
trading, the entity has a liability;
 an entity does not have a liability for a
The Disclosure Initiative is a collection of implementation and research projects aimed at improving disclosure in IFRS financial reporting.
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Suggestion in 2013 Discussion Paper
Feedback received
that are prepared when an entity is not a
going concern.
How the IASB responded
transfer that would be required only if the
entity is liquidated or ceases trading.
The IASB does not believe that further
guidance on the going concern assumption is
needed.
The IASB has no plans to produce a Standard
on financial statements of entities that are
not a going concern. The needs of users of
such financial statements may depend
significantly on local legal requirements
governing the liquidation.
Reporting entity
Because the IASB had previously issued a
Discussion Paper and Exposure Draft on the
reporting entity, the Conceptual Framework
Discussion Paper did not address the reporting
entity.
A few respondents to the Conceptual
Framework Discussion Paper stated that there
is no need for a separate reporting entity
chapter: a broad description of a reporting
entity would be sufficient.
The Reporting Entity Exposure Draft:
 described a reporting entity and its
features;
 proposed that the boundary of a reporting
entity should be determined by control;
 stated that unconsolidated financial
statements might provide useful
information if they were presented
In response to the Reporting Entity Exposure
Draft:
 some noted that the IASB has no authority
to determine who must, should or could
prepare financial statements;
 many agreed that an entity controlling one
or more entities should prepare
consolidated financial statements;
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The IASB believes that the Conceptual
Framework needs to describe the reporting
entity.
Instead of describing who must, should or
could prepare financial statements, the
Exposure Draft simply describes a reporting
entity as an entity that chooses, or is
required, to present general purpose financial
statements.
The Exposure Draft also discusses the
boundary of a reporting entity and notes that
the boundary can be determined either by
Suggestion in 2013 Discussion Paper

together with consolidated financial
statements;
stated that combined financial statements
might provide useful information about
entities under common control.
Feedback received
How the IASB responded

direct control only (resulting in
unconsolidated financial statements) or by
both direct and indirect control (resulting in
consolidated financial statements). It notes
that, in general, consolidated financial
statements are more likely to provide useful
information to users of financial statements
than unconsolidated financial statements.

some suggested that the IASB should
permit entities to present unconsolidated
financial statements in a separate
document from the consolidated financial
statements or without preparing
consolidated financial statements at all;
many welcomed a discussion of combined
financial statements but disagreed with
restricting their use to entities under
common control.
The Exposure Draft no longer requires
unconsolidated financial statements to be
presented together with the consolidated
financial statements. Instead the Exposure
Draft proposes that entities that choose or
are required to present unconsolidated
financial statements should disclose how
users may obtain the consolidated financial
statements.
The IASB has modified the discussion on
combined financial statements. The Exposure
draft now states that if two or more entities
that do not have a parent-subsidiary
relationship prepare financial statements,
those financial statements are referred to as
combined financial statements.
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Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Perspective
The Discussion Paper did not discuss the
perspective from which financial statements
are presented (entity perspective or propriety
perspective).
Some respondents to the Discussion Paper
stated that the Conceptual Framework should
discuss the perspective from which financial
statements are presented.
The Exposure Draft proposes that financial
statements should be prepared from the
perspective of the reporting entity as a whole.
Chapter 4—The elements of financial statements
Definitions of assets and liabilities
The Discussion Paper suggested that the
definitions of assets and liabilities should be
amended to confirm more explicitly that:
 an asset (or a liability) is the underlying
resource (or obligation), rather than the
ultimate inflow (or outflow) of economic
benefits; and
 an asset (or a liability) must be capable of
generating inflows (or outflows) of
economic benefits. Those inflows (or
outflows) need not be certain.
Consequently, the Discussion Paper suggested
the following definitions:
 an asset is a present economic resource
controlled by the entity as a result of past
events.
 a liability is a present obligation of the
entity to transfer an economic resource as
a result of past events.
 an economic resource is a right, or other
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Many respondents agreed with the focus on the The Exposure Draft proposes to use the
right or obligation.
definitions suggested in the Discussion Paper,
but with two changes to the definition of an
Many respondents agreed that the reference to economic resource:
‘expected’ in the existing definitions should be
 to use the phrase ‘has the potential to’
replaced with ‘capable’. However:
rather than ‘capable’. This term, together
 some found the term ‘capable’ unclear; and
with the proposed supporting guidance, is
intended to clarify that no probability
 some expressed the view that an explicit
threshold is intended. This reflects the
probability threshold should be retained in
IASB’s view that assets and liabilities can
either the definitions of assets and liabilities
exist even when there is only a low
or the recognition criteria.
probability of a flow of economic benefits.
 to delete ‘or other source of value’. The
Some respondents felt that ‘other source of
value’ was too vague.
IASB proposes instead to explain that the
notion of a ‘right’ encompasses not just
legal rights but also access that an entity
controls in other ways, for example by
keeping know-how secret.
The Exposure Draft clarifies that when there
is only a low probability of an inflow or
Suggestion in 2013 Discussion Paper
Feedback received
source of value, that is capable of
producing economic benefits.
Rights approach
The Discussion Paper suggested defining an
economic resource (and, hence, an asset) as a
right.
For example, for a physical object (such as a
building), the asset is not the underlying
physical object but a bundle of rights to obtain
the economic benefits generated by the
building.
outflow of economic benefits, recognising an
asset or liability may in some cases not
provide relevant information.
Although many respondents supported the idea
that an economic resource is a right, some felt
that some items are best viewed as physical
objects rather than as a bundle of rights.
The Exposure Draft adopts the same
approach as the Discussion Paper.
Many respondents agreed that the definition of
a liability should include at least some
obligations that are conditional on an entity’s
future actions (ie they agreed with the IASB’s
The Exposure Draft proposes that the
definition of a present obligation should
reflect Approach 2. Hence, it proposes that
an entity has a present obligation to transfer
The Discussion Paper noted that in many
cases, the bundle of rights over a physical
object (such as a building) will still often be:
 accounted for as a single item; and
 described in the financial statements as the
physical object, if a more precise
description is not needed.
Present obligation
The Discussion Paper discussed three
approaches to identifying a present obligation,
which must have arisen from past events:
 Approach 1: a present obligation must be
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How the IASB responded
The IASB notes that ownership of a physical
object arises only because of rights conveyed
by law. Furthermore, full legal ownership of a
physical asset differs from the right to use an
asset for 99 per cent (or 50 per cent or even 1
per cent) of its useful life, but although those
rights differ in their extent, they do not differ
fundamentally in nature—they are all rights
of one kind or another. Hence, the Exposure
Draft proposes defining an economic resource
as a right. Nevertheless, consistently with the
Discussion Paper the Exposure Draft notes
that describing the set of rights as a physical
object will often provide the most concise,
clear and understandable information.
Suggestion in 2013 Discussion Paper


strictly unconditional.
Approach 2: a present obligation must be
practically unconditional.
Approach 3: a present obligation may be
conditional on the entity’s future actions.
Feedback received
How the IASB responded
rejection of Approach 1). However, views were
mixed on whether the IASB should adopt
Approach 2, Approach 3 or some hybrid of
those approaches.
an economic resource if both:
 the entity has no practical ability to avoid
the transfer; and
 the obligation has arisen from past
events; in other words the entity has
received the economic benefits, or
conducted the activities, that establish the
extent of its obligation.
The IASB tentatively rejected Approach 1.
However, it did not reach a preliminary view in
favour of either Approach 2 or Approach 3.
The IASB rejected Approach 1 because
restricting obligations to those that are
strictly unconditional would be unlikely to
provide useful information to users of
financial statements.
The IASB rejected Approach 3 because the
term ‘obligation’ implies that there must be
some limit on the entity’s ability to avoid the
transfer of an economic resource.
Executory contracts
The Discussion Paper described the rights and
obligations that arise under executory
contracts.
Many respondents stated that the guidance on
executory contracts needed further
development.
The IASB has refined the discussion of
executory contracts. The Exposure Draft
states that:
 an executory contract creates a single
asset or single liability; and
 is an asset if the terms of the exchange
are favourable, and is a liability if the
terms of the exchange are unfavourable.
The IASB proposes that the Conceptual
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Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Framework should not provide explicit
guidance on the measurement of executory
contract assets and liabilities. Thus, the
measurement guidance proposed for all
assets and liabilities would also apply to such
assets and liabilities.
As noted in the Exposure Draft, if an
executory contract is measured at historical
cost, it is measured at zero (and, hence, is not
recognised) unless it is onerous.
Equity
The Discussion Paper suggested that:
 the Conceptual Framework should retain
the existing definition of equity as the
residual interest in the assets of the entity
after deducting all its liabilities.
 the IASB should use the definition of a
liability to distinguish liabilities from equity
instruments.
 an entity should:
o update the measure of classes of
equity claim at the end of each
reporting period.
o recognise updates to those
measurements in the statement of
changes in equity, as a transfer of
wealth between classes of equity
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Many respondents supported retaining the
existing definition of equity, and using the
suggested definition of a liability (or a similar
definition) to distinguish liabilities from equity
instruments. However, some respondents
expressed concerns about such an approach.
The IASB is not proposing any changes to the
definitions of a liability, or of equity, to
address the problems that arise when
classifying instruments with characteristics of
both liabilities and equity. The IASB will
further explore how to distinguish between
liabilities and equity in its research project on
Many respondents also supported presenting or Financial Instruments with Characteristics of
disclosing additional information on the effects Equity.
of different classes of equity claims; however,
many expressed reservations about the
Consequently, the Exposure Draft does not
suggestion to update the measurement of
discuss presentation or disclosure about
classes of equity claim and to highlight the
classes of equity claims, measurement of
results using an enhanced statement of changes equity claims, or the use of a statement of
in equity.
changes in equity.
Suggestion in 2013 Discussion Paper

Feedback received
How the IASB responded
Many respondents stated that there is no need
to change the definitions of income or expenses
(except to align them with the revised
definitions of assets and liabilities).
The Exposure Draft proposes changes to the
definitions of income and expenses to align
them with the proposed definitions of assets
and liabilities. The proposed definitions are
as follows:
 Income is increases in assets or decreases
in liabilities that result in increases in
equity, other than those relating to
contributions from holders of equity
claims.
 Expenses are decreases in assets or
increases in liabilities that result in
decreases in equity, other than those
relating to distributions to holders of
equity claims.
claim.
if an entity has issued no equity
instruments, it may be appropriate to treat
the most subordinated class of instruments
as if it were an equity claim.
Definitions of income and expenses
The Discussion Paper briefly discussed possible
changes to the definitions of income and
expenses resulting from the suggested
changes to the definitions of assets and
liabilities.
However, a few respondents suggested that the
IASB should not define income and expenses
solely in terms of changes in asset and
liabilities.
Although the Exposure Draft still defines
income and expenses in terms of changes in
assets and liabilities, it emphasises that
information about financial performance is
just as important as information about
financial position.
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Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Unit of account
The Discussion Paper suggested that the unit
of account will normally be decided when the
IASB develops Standards and that in selecting
the unit of account, the IASB should consider
the qualitative characteristics of useful
information.
Many respondents agreed with the suggestions
in the Discussion Paper. However, some stated
that the Conceptual Framework should include
more guidance on determining the unit of
account. They did not indicate what sort of
guidance would be helpful.
Although the IASB still thinks that the unit of
account will normally be decided when it
develops Standards, the Exposure Draft
proposes guidance on:
 possible units of account; and
 factors to consider when determining the
unit of account.
Some respondents read the Discussion Paper as
setting a presumption that all assets and
liabilities should be recognised. They disagreed
with such a presumption.
Others disagreed with the implication that only
the IASB when developing Standards could
decide that an asset or liability should not be
recognised.
The Exposure Draft proposes an even-handed
approach to recognition with neither a
presumption that all assets or liabilities
should be recognised nor a presumption that
they should be recognised only if they meet
stringent criteria. Instead, the Exposure Draft
proposes criteria based on the qualitative
characteristics of useful financial information
and on the cost constraint.
Some respondents agreed that the recognition
criteria should refer to relevance and faithful
representation. However, some suggested that
it would be clearer and more straightforward to
retain probability and reliability of
The supporting guidance identifies some
circumstances when those criteria might not
be met including:
 some cases when it is uncertain whether
an asset or liability exists;
Chapter 5—Recognition and derecognition
Recognition
The Discussion Paper suggested that an entity
should recognise all its assets and liabilities,
unless the IASB decides when developing
Standards that an entity need not, or should
not, recognise an asset or a liability because:
 recognising the asset (or the liability)
would provide users of financial
statements with information that is not
relevant or is not sufficiently relevant to
justify the cost; or
 no measure of the asset (or the liability)
would result in a faithful representation of
both the asset (or the liability) and the
changes in the asset (or the liability), even
if all necessary descriptions and
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Suggestion in 2013 Discussion Paper
explanations are disclosed.
Feedback received
How the IASB responded
measurement as explicit recognition criteria.


some cases when the asset or liability is
unlikely to result in future flows of
economic benefits; and
some cases when the level of
measurement uncertainty is so high that
the measurement has little relevance and
no other relevant measure is available or
can be obtained.
In response to the feedback received, the
Exposure Draft no longer proposes that
decisions about recognition should be
restricted to the IASB.
Derecognition
The Discussion Paper suggested that an entity
should derecognise an asset or a liability when
it no longer meets the recognition criteria.
However, for cases in which an entity retains a
component of an asset or a liability, the IASB
should determine, when developing or revising
particular Standards how the entity would best
portray the changes that resulted from the
transaction.
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Respondents were split on the approach to be
used for derecognition. Some suggested a
control-based approach to recognition. Others
suggested an approach based on an assessment
of risks and rewards.
The Exposure Draft describes the approaches
available and the factors to consider, in
deciding at a Standards level how to
represent faithfully both:
 the assets and liabilities (if any) retained
after the transaction that led to the
derecognition; and
 the change in the entity’s assets and
liabilities as a result of the transaction.
Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Although many respondents agreed with the
overall approach to measurement suggested in
the Discussion Paper some respondents
suggested that the measurement section of the
Discussion Paper:
 was underdeveloped. Consequently, the
IASB should delay issuing any proposals on
measurement and undertake additional
research; and
 included too much Standards-level detail.
Because the lack of guidance on
measurement is a serious gap in the existing
Conceptual Framework, the IASB proposes
not to delay issuing its proposals on
measurement.
Chapter 6—Measurement
Approach
The Discussion Paper discussed:
 how the objective of financial reporting
and the qualitative characteristics of useful
financial information influence decisions
about measurement;
 three categories of measurement bases;
and
 how to identify an appropriate
measurement basis and the implications of
the suggested approach for particular
types of assets and liabilities.
The Exposure Draft focuses on:
 measurement bases, the information that
they provide and their advantages and
disadvantages; and
 the factors to consider when selecting a
measurement basis.
The IASB agreed with those respondents who
suggested that the measurement section
contained too much Standards-level detail.
Hence, the IASB has removed some of the
detailed guidance included in the Discussion
Paper on implications for particular types of
assets and liabilities.
Mixed measurement
The Discussion Paper suggested that a single
measurement basis for all assets and liabilities
may not provide the most relevant information
for users of financial statements.
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Although a few respondents to the Discussion
Paper suggested that the Conceptual
Framework should advocate the use of a single
measurement basis, nearly all of those who
Consistently with the feedback received, the
Exposure Draft does not advocate a single
measurement basis for all assets and
liabilities. It states that consideration of the
Suggestion in 2013 Discussion Paper
Measurement bases
The Discussion Paper grouped measures into
three categories:
 Cost-based measures;
 Current market prices including fair values;
and
 Other cash-flow-based measures.
Feedback received
How the IASB responded
commented on this issue agreed that a single
measurement basis for all assets and liabilities
may not provide the most relevant information
for users of financial statements.
objective of financial reporting, of the
qualitative characteristics of useful
information and of the cost-benefit constraint
is likely to result in the selection of different
measurement bases for different assets,
liabilities and items of income and expense.
A few respondents stated that they found the
discussion of three different categories of
measures confusing. Others stated that the
Conceptual Framework should identify only two
measurement categories: cost-based measures
and current measures.
The IASB agreed with those respondents who
suggested that the discussion of three
different categories of measures was
confusing. Hence, the Exposure Draft
describes the following measurement bases:
 historical cost measurement bases; and
 current value measurement bases
including fair value, value in use and
fulfilment value.
Cash-flow-based measurements are
described as measurement techniques used
to estimate measurements made on one of
the measurement bases described.
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Suggestion in 2013 Discussion Paper
Factors to consider when selecting a
measurement basis
The Discussion Paper suggested that:
 when selecting which measurement basis
to use for a particular item, the IASB should
consider what information that
measurement basis will produce in both
the statement of financial position and the
statement(s) of profit or loss and OCI.
 the relevance of a particular measure will
depend on how investors, creditors and
other lenders are likely to assess how an
asset or a liability of that type will
contribute to future cash flows.
Consequently, the selection of a
measurement basis:
o for a particular asset, should depend
on how that asset contributes to
future cash flows; and
o for a particular liability, should
depend on how the entity will settle
or fulfil that liability.
 the number of different measurement
bases used should be the smallest number
necessary to provide relevant information.
Unnecessary measurement changes should
be avoided and necessary measurement
changes should be explained.
 the benefits of a particular measurement
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Feedback received
How the IASB responded
Many respondents to the Discussion Paper:
 agreed with the guidance on selection of a
measurement basis; and
 suggested that consideration of the
business model concept could help in
selecting a measurement basis.
The Exposure Draft develops the suggestions
in the Discussion Paper. It discusses how the
qualitative characteristics of useful financial
information affect the selection of a
measurement basis. In particular, the
Exposure Draft proposes that:
 when selecting a measurement basis it is
important to consider the information
that measurement basis will produce in
both the statement of financial position
and the statement(s) of financial
performance;
 information provided by the financial
statements can be made more relevant by
considering:
o how that asset or liability contributes
to future cash flows. This will
depend in part on the nature of the
business activities conducted by the
entity; and
o the characteristics of the asset or
liability.
 the level of measurement uncertainty
associated with a measurement basis is
one of the factors that affects the
relevance of the information provided by
that measurement basis.
Some respondents to the Discussion Paper
disagreed with the suggestion that the number
of different measurement bases used should be
the smallest number necessary to provide
relevant information. They stated that there
should not be an artificial limit on the number
of measurement bases used.
Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded

basis to users of financial statements need
to be sufficient to justify the cost.
as with all other areas of financial
reporting, the cost constraint affects the
selection of a measurement basis.
The Exposure Draft no longer states that the
number of different measurement bases used
should be the smallest number necessary to
provide useful information. Instead it states
that, in general, the greater the number of
measurement bases used in a set of financial
statements, the more complex (and hence,
less understandable) the resulting
information will be.
Chapter 7—Presentation and disclosure (General guidance)
Objectives
The Discussion Paper suggested that:
 the objective of primary financial
statements is to provide summarised
information about recognised assets,
liabilities, equity, income, expenses,
changes in equity, and cash flows that have
been classified and aggregated in a manner
that is useful to users of financial
statements in making decisions about
providing resources to the entity.
 the objective of the notes to the financial
statements is to supplement the primary
18 | P a g e
Most respondents expressed broad support for
these suggestions. However, some questioned
whether it is necessary to have separate
objectives of the primary financial statements
and the notes.
The Exposure Draft does not identify primary
financial statements, nor does it propose
separate objectives for particular parts of the
financial statements (other than to describe
the purpose of the statement of profit or
loss). The IASB considers that such definitions
and objectives are best considered in
Standards-level projects (eg the Disclosure
Initiative).
However, the IASB considers that setting an
objective for the financial statements as a
Suggestion in 2013 Discussion Paper
Feedback received
financial statements by providing
additional useful information about:
o the assets, liabilities, equity, income,
expenses, changes in equity, and cash
flows of the entity; and
o how efficiently and effectively the
entity’s management and governing
board have discharged their
responsibilities to use the entity’s
resources.
Scope
The Discussion Paper suggested that:
 forward-looking information should be
required in financial statements only if it
provides relevant information about the
assets and liabilities that existed at the end
of, or during, the reporting period.
 financial statement should include
information about the risks arising from an
entity’s recognised and unrecognised
assets and liabilities.
19 | P a g e
How the IASB responded
whole would clarify their scope and, hence,
the Exposure Draft proposes the following
objective for the financial statements:
To provide information about an entity’s
assets, liabilities, equity, income and expenses
that is useful to users of financial statements
in assessing the prospects for future net cash
inflows to the entity and assessing
management’s stewardship of the entity’s
resources.
Some respondents to the Discussion Paper:
 stated that the suggested description of
forward-looking information is too narrow
and could result in useful information being
excluded from the financial statements (for
example, information about non-adjusting
post-balance sheet events). Others stated
that the description would be too broad.
 expressed a concern that a requirement to
provide information about risks could be
understood to include almost any type of
information, including information that
would be best placed outside the financial
statements.
The Exposure Draft proposes to retain the
description of forward-looking information
that should be included in financial
statements. In response to concerns raised, it
clarifies that information about non-adjusting
post-balance sheet events is not
forward-looking information and is included
in the financial statements if such information
is necessary to meet the proposed objective
of financial statements.
The Exposure Draft retains the Discussion
Paper’s suggestion that financial statements
should include information about the risks
arising from an entity’s recognised and
unrecognised assets and liabilities because
Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
the IASB believes that such information
contributes to meeting the proposed
objective of financial statements.
Presentation and disclosure as communication
tools
The Discussion Paper discussed:
 classification, aggregation and offsetting in
financial statements;
 presentation and disclosure objectives in
Standards; and
 communication principles that the IASB
should consider when it sets presentation
and disclosure requirements in Standards.
Although there was broad support for the
suggestions in the Discussion Paper, many
respondents expressed the view that it included
too much Standards-level detail.
The IASB agreed with the feedback received
and, hence, the proposals in the Exposure
Draft focus on high-level principles instead of
Standards-level guidance. The Exposure Draft
proposes guidance on:
 how presentation and disclosure can be
used as communication tools;
 classification and aggregation of amounts
included in the financial statements; and
 using presentation and disclosure
principles to promote the effective and
efficient communication of information.
Chapter 7—Presentation and disclosure (Information about financial performance)
Overall approach
 The Discussion Paper reviewed approaches
to reporting income and expenses in the
statement of profit or loss and other
comprehensive income (OCI).
Some respondents expressed the view that the
discussion of financial performance and the
reporting of income or expenses in OCI:
 requires more thought and analysis;
 simply codified existing practice;
 is a Standards-level topic.
The IASB believes that conceptual guidance
on reporting financial performance (including
the use of OCI) is urgently needed. The
proposals in the Exposure Draft build on the
suggestions in the Discussion Paper.
In developing those proposals, the IASB has
20 | P a g e
Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
considered the use of OCI in existing
Standards. However, it has not sought to
justify existing practice.
Describing the statement of profit or loss
The Discussion Paper suggested:
 that the Conceptual Framework should
require a total or subtotal for the
statement of profit or loss;
 that the statement of profit or loss should
be treated as a default location for income
and expense; and
 how to decide which items of income or
expense should be reported in the
statement of profit or loss and which
should be reported in other
comprehensive income (OCI).
21 | P a g e
Many respondents:
 argued that profit or loss is the primary
measure of performance and should be
given prominence in the Conceptual
Framework;
 agreed that profit or loss should be
presented as a total or subtotal; and
 stated that profit or loss (and/or financial
performance) should be defined or
described. However, there were few
suggestions, and no consensus, about how
this should be done.
The IASB’s previous work on presentation and
disclosure has lead it to conclude that it is not
possible to define or precisely describe in the
Conceptual Framework when an item of
income or expense should be included in the
statement of profit or loss. Hence, instead of
defining profit or loss the Exposure Draft:
 states that income or expenses included
in the statement of profit or loss are the
primary, but not the only, source of
information about an entity’s financial
performance for the period;
 proposes a presumption that all income
and expenses will be included in the
statement of profit or loss; but
 states that in some circumstances the
relevance of the information in profit or
loss could be enhanced if income or
expenses arising from a remeasurement
of an asset or liability is reported outside
the statement of profit or loss (in OCI).
Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Recycling
The Discussion Paper suggested that the
Conceptual Framework should permit or
require at least some OCI items to be
reclassified subsequently (‘recycled’) into the
statement of profit or loss.
Many respondents to the Discussion Paper
supported recycling for some or all items
included in OCI. However, there was no
consensus about which items to recycle and
when.
The Exposure Draft proposes a rebuttable
presumption that income or expenses
included in OCI would subsequently be
recycled to profit or loss. This is consistent
with the idea that the statement of profit or
loss is the primary source of information
about an entity’s performance for the period.
Most respondents agreed with the suggested
approach to capital and capital maintenance.
The IASB proposes to leave the existing
descriptions and discussion of capital and
capital maintenance in the Conceptual
Framework largely unchanged.
Chapter 8—Capital and capital maintenance
The IASB suggested keeping the existing
descriptions and discussion of capital and
capital maintenance in the Conceptual
Framework largely unchanged until it
undertakes a project on accounting for high
inflation.
22 | P a g e
Suggestion in 2013 Discussion Paper
Feedback received
How the IASB responded
Many respondents:
 agreed that the business model has a role
to play in financial statements. However,
there were mixed views on whether it is
fundamental to financial reporting or
should play a more limited role; and
 suggested the IASB should define or
provide additional guidance on the
business model. However, others noted
that other parties have defined the
business model, for different purposes.
They suggested that the IASB would cause
confusion if it adopted a different
definition, tailored to be suitable for
accounting.
To avoid confusion with how the term
‘business model’ is used by other parties, the
Exposure Draft does not use that term. It
refers instead to ‘how an entity conducts its
business activities’.
Other issues
Business model
The Discussion Paper did not define the
business model concept. However, the IASB
suggested that financial statements can be
made more relevant if the IASB considers how
an entity conducts its business activities when
developing new Standards.
A few respondents suggested that the IASB
should identify long-term investment as a
particular type of business activity (or business
model), and develop specific measurement and
presentation requirements for entities
conducting that business activity
23 | P a g e
The IASB believes that the nature of an
entity’s business activities affects different
aspects of financial reporting differently.
Thus, the Exposure Draft discusses the effect
of an entity’s business activities separately for
each area affected, rather than providing a
single over-arching description of those
effects.
The IASB believes that:
 the Exposure Draft contains sufficient
discussion of the effect of an entity’s
business activities for the IASB to reach
appropriate standard-setting decisions for
any kind of business activity, including
long-term investment; and
 there is no need for the Conceptual
Framework to contain specific decisions
on any particular type of business activity.
Suggestion in 2013 Discussion Paper
Transition and effective date
The Discussion Paper stated that once the IASB
finalises the revised Conceptual Framework, it
will start using it immediately. The Discussion
Paper did not suggest any other guidance on
transition and effective date.
Effects analysis
The Discussion Paper stated that a revised
Conceptual Framework will not necessarily
lead to changes to existing IFRSs. Any proposal
to change an existing Standard or
24 | P a g e
Feedback received
How the IASB responded
Some respondents stated that the Conceptual
Framework should include transition guidance,
particularly for those preparers who use the
Conceptual Framework to develop and select
accounting policies when no specific Standard
applies.
The IASB agreed with those respondents who
suggested that the Conceptual Framework
should include transition guidance. Hence,
the Exposure Draft proposes that:
 the IASB and the IFRS Interpretations
Committee should apply the revised
Conceptual Framework immediately after
its publication;
 a transition period of approximately 18
months should be allowed for entities
that use the Conceptual Framework to
develop and select accounting policies
when no specific Standard applies. Early
application should be permitted; and
 no additional guidance on transition
should be provided in the revised
Conceptual Framework. Consequently,
IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors would
govern any changes in accounting policy
arising from an application of the revised
Conceptual Framework.
Some respondents to the Discussion Paper
stated that the IASB should analyse the
potential effect of a revised Conceptual
Framework on existing Standards. In particular,
The Basis for Conclusions accompanying the
Exposure Draft:
 explains that the Conceptual Framework
Suggestion in 2013 Discussion Paper
Feedback received
Interpretation would need to go through the
IASB’s normal due process (including a formal
decision to add the project to the IASB’s
agenda).
the IASB should identify any inconsistencies
between the revised Conceptual Framework
and the Standards.
How the IASB responded


Timetable
The Discussion Paper stated that the
Conceptual Framework should be revised
without delay. Setting a tight but achievable
deadline means that the IASB will focus on
those changes that will provide clear and
significant improvements to the existing
Conceptual Framework.
25 | P a g e
Some respondents to the Discussion Paper
supported the IASB’s decision to set a tight
timetable for the project. However, many of
those who commented expressed the view that
the IASB should spend more time developing
robust concepts.
does not override existing Standards or
Interpretations;
explains the implications of the proposed
changes to the Conceptual Framework
including the fact that the IASB will not
necessarily change existing Standards or
Interpretations as a result of changes that
it makes to the Conceptual Framework;
and
describes possible inconsistencies
between the existing Standards and the
Conceptual Framework Exposure Draft.
The IASB will not finalise the revised
Conceptual Framework until it is satisfied that
enough work has been done and that its due
process has provided sufficient input.
Nevertheless, the IASB continues to believe
that significant improvements to the existing
Conceptual Framework can and should be
made on a timely basis. Hence the IASB aims
to complete its revisions to the Conceptual
Framework in 2016.