Our Ref.: C/FRSCSent electronically through the IASB Website (www.ifrs.org)
17 April 2015Mr Hans HoogervorstInternational Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited KingdomDear Hans,IASB Exposure Draft ED/2014/6 Disclosure Initiative(Proposed amendments to IAS 7)
The Hong Kong Institute of Certified Public Accountants is the only body authorised bylaw to promulgate financial reporting, auditing and ethical standards for professionalaccountants in Hong Kong. We are grateful for the opportunity to provide you with ourcomments on this Exposure Draft (ED).We appreciate the IASB's work undertaken as part of the Disclosure Initiative, particularlythe effort to improve the effectiveness of disclosures in financial statements. We thereforesupport the IASB's proposal to improve disclosures relating to an entity's liquidity.However, we have significant concerns about the proposal to require a reconciliation ofcash flows that have been or would be classified as 'financing activities' in the statementof cash flows, except for equity items, and accordingly are compelled not to support thisproposal.Our responses to the questions raised in the ED are explained in more detail in theAppendix.If you have any questions regarding the matters raised in this letter, please contact me orKatherine Leung, our Manager in Standard Setting, at katherineleung@hkicpa.org.hk.Yours sincerely,Christina NgHead of Financial ReportingCN/KLEncl.Page 2 of 4Detailed comments on IASB ED/2014/6 Disclosure Initiative (proposedamendments to IAS 7)
Question 1- Disclosure Initiative amendmentsThis Exposure Draft of proposed amendments to IAS 7 forms part of theDisclosure Initiative. Its objectives are to improve:
(a) information provided to users of financial statements about an entity'sfinancing activities, excluding equity items; and(b) disclosures that help users of financial statements to understand theliquidity of an entity.Do you agree with the proposed amendments (see paragraphs 44A and 50A)? Doyou have any concerns about, or alternative suggestions for, any of theproposed amendments?Proposed amendments in paragraph 44A of the EDWe have significant concerns about the proposal to require a reconciliation of cashflows that have been, or would be, classified as 'financing activities' in the statement ofcash flows, except for equity items.We consider that there is a lack of principle for requiring a reconciliation on 'financingactivities' and it is not clear why a reconciliation only on 'financing items' would beuseful. We suggest that the IASB should develop a principle as part of its DisclosureInitiative project for why and when reconciliations should be required.We note in paragraph BC4 of the ED that investors would be interested in an entity'ssources of financing (which we believe should include equity as well as debt), howthose funds are deployed over time and the risks associated with thosefinancing. Given this interest, it is not clear why the proposals would require cash flowmovementsfromfinancingactivitiesthataredebtinnatureandnotequity. Furthermore, we are aware that some entities would not necessarily classifyitems that are debt in nature, such as borrowings, derivatives and debt-factoringarrangements, as a 'financing activity' as defined in IAS 7 because it may be moreappropriately classified as an 'operating item'. If these items were classified asoperating items due to, for example, the nature of the business, the aim of theproposed reconciliation would not be met.We also note in paragraph BC5 of the ED that the IASB has not defined 'debt' on thebasis that 'finding a commonly agreed definition of debt would be difficult and thatattempts to find a definition could delay the project'. Because investors havehighlighted the need for improved information about an entity's debt [as mentioned inparagraph BC2 of the ED] but there is no clear definition of what constitutes 'debt', weare concerned that entities would develop their own interpretation of the proposedrequirement, which may ultimately lead to diversity in practice.We think that instead of finding a commonly agreed definition of debt, the IASB couldput the onus on entities to define what constitutes sources of financing. We note thatPage 3 of 4IAS 1 Presentation of Financial Statements already requires to some extentdisclosures about an entity's capital management, e.g.:
paragraph 134 of IAS 1 requires information that enables users to evaluate theentity's objectives, policies and processes for managing capital;
paragraph 135(b) of IAS 1 requires a summary quantitative data about what theentity manages as capital and explains that some entities regard some form ofdebt as part of capital; andparagraph 135(c) of IAS 1 requires changes in the summary quantitative datafrom the previous period.In this regard, we think that these existing IAS 1 disclosures could be expanded ormodified to include an entity's broad sources of financing to meet the needs ofinvestors, and the IASB could consider whether an entity should disclose what itmanages as sources of financing.In view of our concerns highlighted above, we consider that any benefit from requiringthe reconciliation as proposed in the ED would be outweighed by the costs forproviding the reconciliation.Proposed amendments in paragraph 50A of the EDWe support the IASB's objective to improve disclosures relating to an entity's liquidity.However, we recommend that the IASB provide more examples on what restrictionswould affect an entity's decision to use cash and cash equivalent balances.Question 2 - Transition provisionsDo you agree with the proposed transition provisions for the amendments to IAS7 as described in this Exposure Draft (see paragraph 59)?If not, why and what alternative do you propose?If the IASB proceeds to finalise the proposals in this ED, including the proposedamendments in paragraph 44A, we would support applying the proposed amendmentsprospectively and permitting early application.Question 3 - IFRS TaxonomyDo the proposed IFRS Taxonomy changes appropriately reflect the disclosuresthat are set out in the proposed amendments to IAS 7 and the accompanyingillustrative example? In particular:
(a) are the amendments reflected at a sufficient level of detail?(b) should any line items or members be added or removed?(c) do the proposed labels of elements faithfully represent their meaning?Page 4 of 4(d) do you agree that the proposed list of elements to be added to the IFRSTaxonomy should be limited to information required by the proposedamendments to IAS 7 or presented in the illustrative examples in IAS 7?IFRS Taxonomy is not mandatorily required for use in Hong Kong and therefore we donot have direct responses to Question 3.Question 4 - IFRS Taxonomy due processAs referenced in paragraph BC20, the IASB is holding a trial of a proposal tochange the IFRS Taxonomy due process. Although not constituting a formalpublic consultation of the IFRS Taxonomy due process, views are sought on thefollowing:
(a) do you agree with the publication of the proposed IFRS Taxonomy Updateat the same time that an Exposure Draft is issued?(b) do you find the form and content of the proposed IFRS Taxonomy Updateuseful? If not, why and what alternative or changes do you propose?Regarding Question 4(a), we would not support the publication of proposedamendments to IFRS Taxonomy at the same time of an ED if the inclusion of anytaxonomy proposals or requirements were to slow down the principal standard-settingprocess.
Institute comments on IASB Exposure Draft ED/2014/6 Disclosure Initiative (Proposed amendments to IAS 7)
下载原件Our Ref.: C/FRSCSent electronically through the IASB Website (www.ifrs.org)
17 April 2015Mr Hans HoogervorstInternational Accounting Standards Board30 Cannon StreetLondon EC4M 6XHUnited KingdomDear Hans,IASB Exposure Draft ED/2014/6 Disclosure Initiative(Proposed amendments to IAS 7)
The Hong Kong Institute of Certified Public Accountants is the only body authorised bylaw to promulgate financial reporting, auditing and ethical standards for professionalaccountants in Hong Kong. We are grateful for the opportunity to provide you with ourcomments on this Exposure Draft (ED).We appreciate the IASB's work undertaken as part of the Disclosure Initiative, particularlythe effort to improve the effectiveness of disclosures in financial statements. We thereforesupport the IASB's proposal to improve disclosures relating to an entity's liquidity.However, we have significant concerns about the proposal to require a reconciliation ofcash flows that have been or would be classified as 'financing activities' in the statementof cash flows, except for equity items, and accordingly are compelled not to support thisproposal.Our responses to the questions raised in the ED are explained in more detail in theAppendix.If you have any questions regarding the matters raised in this letter, please contact me orKatherine Leung, our Manager in Standard Setting, at katherineleung@hkicpa.org.hk.Yours sincerely,Christina NgHead of Financial ReportingCN/KLEncl.Page 2 of 4Detailed comments on IASB ED/2014/6 Disclosure Initiative (proposedamendments to IAS 7)
Question 1- Disclosure Initiative amendmentsThis Exposure Draft of proposed amendments to IAS 7 forms part of theDisclosure Initiative. Its objectives are to improve:
(a) information provided to users of financial statements about an entity'sfinancing activities, excluding equity items; and(b) disclosures that help users of financial statements to understand theliquidity of an entity.Do you agree with the proposed amendments (see paragraphs 44A and 50A)? Doyou have any concerns about, or alternative suggestions for, any of theproposed amendments?Proposed amendments in paragraph 44A of the EDWe have significant concerns about the proposal to require a reconciliation of cashflows that have been, or would be, classified as 'financing activities' in the statement ofcash flows, except for equity items.We consider that there is a lack of principle for requiring a reconciliation on 'financingactivities' and it is not clear why a reconciliation only on 'financing items' would beuseful. We suggest that the IASB should develop a principle as part of its DisclosureInitiative project for why and when reconciliations should be required.We note in paragraph BC4 of the ED that investors would be interested in an entity'ssources of financing (which we believe should include equity as well as debt), howthose funds are deployed over time and the risks associated with thosefinancing. Given this interest, it is not clear why the proposals would require cash flowmovementsfromfinancingactivitiesthataredebtinnatureandnotequity. Furthermore, we are aware that some entities would not necessarily classifyitems that are debt in nature, such as borrowings, derivatives and debt-factoringarrangements, as a 'financing activity' as defined in IAS 7 because it may be moreappropriately classified as an 'operating item'. If these items were classified asoperating items due to, for example, the nature of the business, the aim of theproposed reconciliation would not be met.We also note in paragraph BC5 of the ED that the IASB has not defined 'debt' on thebasis that 'finding a commonly agreed definition of debt would be difficult and thatattempts to find a definition could delay the project'. Because investors havehighlighted the need for improved information about an entity's debt [as mentioned inparagraph BC2 of the ED] but there is no clear definition of what constitutes 'debt', weare concerned that entities would develop their own interpretation of the proposedrequirement, which may ultimately lead to diversity in practice.We think that instead of finding a commonly agreed definition of debt, the IASB couldput the onus on entities to define what constitutes sources of financing. We note thatPage 3 of 4IAS 1 Presentation of Financial Statements already requires to some extentdisclosures about an entity's capital management, e.g.:
paragraph 134 of IAS 1 requires information that enables users to evaluate theentity's objectives, policies and processes for managing capital;
paragraph 135(b) of IAS 1 requires a summary quantitative data about what theentity manages as capital and explains that some entities regard some form ofdebt as part of capital; andparagraph 135(c) of IAS 1 requires changes in the summary quantitative datafrom the previous period.In this regard, we think that these existing IAS 1 disclosures could be expanded ormodified to include an entity's broad sources of financing to meet the needs ofinvestors, and the IASB could consider whether an entity should disclose what itmanages as sources of financing.In view of our concerns highlighted above, we consider that any benefit from requiringthe reconciliation as proposed in the ED would be outweighed by the costs forproviding the reconciliation.Proposed amendments in paragraph 50A of the EDWe support the IASB's objective to improve disclosures relating to an entity's liquidity.However, we recommend that the IASB provide more examples on what restrictionswould affect an entity's decision to use cash and cash equivalent balances.Question 2 - Transition provisionsDo you agree with the proposed transition provisions for the amendments to IAS7 as described in this Exposure Draft (see paragraph 59)?If not, why and what alternative do you propose?If the IASB proceeds to finalise the proposals in this ED, including the proposedamendments in paragraph 44A, we would support applying the proposed amendmentsprospectively and permitting early application.Question 3 - IFRS TaxonomyDo the proposed IFRS Taxonomy changes appropriately reflect the disclosuresthat are set out in the proposed amendments to IAS 7 and the accompanyingillustrative example? In particular:
(a) are the amendments reflected at a sufficient level of detail?(b) should any line items or members be added or removed?(c) do the proposed labels of elements faithfully represent their meaning?Page 4 of 4(d) do you agree that the proposed list of elements to be added to the IFRSTaxonomy should be limited to information required by the proposedamendments to IAS 7 or presented in the illustrative examples in IAS 7?IFRS Taxonomy is not mandatorily required for use in Hong Kong and therefore we donot have direct responses to Question 3.Question 4 - IFRS Taxonomy due processAs referenced in paragraph BC20, the IASB is holding a trial of a proposal tochange the IFRS Taxonomy due process. Although not constituting a formalpublic consultation of the IFRS Taxonomy due process, views are sought on thefollowing:
(a) do you agree with the publication of the proposed IFRS Taxonomy Updateat the same time that an Exposure Draft is issued?(b) do you find the form and content of the proposed IFRS Taxonomy Updateuseful? If not, why and what alternative or changes do you propose?Regarding Question 4(a), we would not support the publication of proposedamendments to IFRS Taxonomy at the same time of an ED if the inclusion of anytaxonomy proposals or requirements were to slow down the principal standard-settingprocess.