Ref: COMMENTS TO THE EXPOSURE DRAFT ED/2015/3 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING

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1 13 th October 2015 IASB 30 Cannon Street London United Kingdom EC4M 6XH Ref: COMMENTS TO THE EXPOSURE DRAFT ED/2015/3 CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING Dear Sir / Madam, On behalf of the ERICA (European Records of IFRS Consolidated Accounts) Working Group (ERICA WG hereinafter) of the European Committee of CBSO 1, I am pleased to submit this comment letter 2 as an answer to the Exposure Draft ED/2015/3 Conceptual Framework for Financial Reporting, issued by the IASB in May This letter provides the opinion of the ERICA WG derived from our experience working with European IFRS-compliant financial statements. On that, we welcome the general target defined in the mentioned Exposure Draft (ED) and the diffusion at the same time of a separate ED Updating References to the Conceptual Framework, helping preparers to better understand the material impact of this revised Conceptual Framework in standards. We offer our specific answers to the questions 2, 11, 12 and 16 to the former Exposure Draft. Question 2: Description and boundary of a reporting entity. Do you agree with? a) The proposed description of a reporting entity in paragraphs ; and We agree with the definition provided in paragraphs of a reporting entity as it allows to include a wide range of different national regulatory definitions in the aforementioned description. b) The discussion of the boundary of a reporting entity in paragraphs ? Why or why not? Paragraph 3.15 establishes the connection between the name or nature of financial statements (consolidated / unconsolidated) with the boundary of the reporting entity based in something called direct control / direct and indirect control. We consider inadequate this approach selected by IASB, because this may lead to confusion in some regulatory fields, since it may diverge from (or even collide with) already defined concepts: the boundary of the consolidation 1 CBSO is the acronym of Central Balance Sheet Data Office. Annex 1 briefly introduces the European Committee of Central Balance Sheet Data Offices and its working groups. 2 This document is co-authored by members, not observers, of the ERICA WG (Annex 1 contains a list of members of the ERICA WG). Please note that these opinions do not necessary reflect the viewpoint of the central banks or institutions to which members of the ERICA WG belong.

2 (subsidiaries included in the consolidated accounts) depends, among other things, on the direct/indirect control of the capital of the companies, that is, with a different meaning of the terms direct/indirect control used in the ED. On the other hand, unconsolidated financial statements of single units of reporting entities would be better defined without the need of the concept defined by IASB as direct control. Therefore, we suggest the rewriting of these paragraphs. We disagree with the generalization expressed in paragraph 3.23, considering unconsolidated financial statements less useful to users than the consolidated ones. As an example, the European Central Balance Sheet Data Offices created databases of unconsolidated financial statements since 70 s/80 s, whereas the creation and use of consolidated financial statements databases began in the late 90 s. Moreover, the main part of our products has being created with unconsolidated financial statements. We also disagree with paragraph 3.24, where the ED indicates consolidated financial statements of the parent are not intended to provide information to users of subsidiary s financial statements. According to our experience in risk assessment, both, individual financial statements of the subsidiary under scrutiny, as well as the consolidated accounts of the group where the company belongs to, are crucial to develop an adequate risk assessment analysis. Question 11: Objective and scope of financial statement and communication Do you have any comments on the discussion of the objective and scope of financial statements, and on the use of presentation and disclosure as communication tools? With regard to paragraph 7.7 (comparable information about preceding periods) we totally agree with the need of such information in the financial statements, but we consider important to determine the minimum level of details of the primary financial statements (statement of financial position, that is the balance, and statement of financial performance, that is the profit or loss account) that should provide this comparable figures of two consecutive years. Moreover, in paragraphs 7.8, 7.14 and 7.17 (presentation and disclosure as communication tools) we consider vital providing and, structuring a balanced level of detail for every item in primary financial statements so as to gather all the necessary information that allows identifying and assessing changes and trends. Hence, we think that, regardless of the sector, a maximum level of item aggregation (minimum of item detail) should be established in the primary financial statements. Due to the aggregation process in primary financial statements, the level of detail needed to gather sufficient information provided in the annex, should be ideally well and undoubtedly connected: the employment of cross-references tags or labels between primary financial statements and notes, would turn into a feasible task that could be achieved using XBRL (Extensible Business Reporting Language) technology or others with the same purpose. Question 12: Description of the statement of profit or loss Do you support the proposed description of the statement of profit or loss? Why or why not? If you think that the Conceptual Framework should provide a definition of profit or loss, please, explain why it is necessary and provide your suggestion for that definition. Yes, we support the idea to divide the different incomes and expenses and the other comprehensive incomes in two different financial statements. But we consider necessary to

3 better identify the content of both. We consider that clear definitions must be made in order to establish what income and expenses must be classified into each statement. For this purpose, it could be helpful to look into the solutions that had been adopted in other accounting frameworks, as the SNA (System of National Accounts), which classifies income and expenses into three different categories: current accounts, revaluation account and other changes in the volume of assets account. Although it will be in depth commented in the answer to Question 16, assuming that we are users of accounting information with statistical purposes, a strict definition of every item included in the Profit or Losses Account (and as previously stated, in OCI) would be desired, avoiding classification according to business activities of the entity, thus, leading to an increased harmonization that eases one of our main tasks: National Accounting. Finally, regarding paragraph 7.26, in the design of the Profit or Losses Account model it is important nor mixing neither duplicating expenses or incomes incurred during the year, from those generated during preceding periods that were included in the OCI statement and that are recycled (reclassified) into the statement of Profit or Loss this year. Therefore, the recycled incomes and expenses during the year from OCI to P&L, should be well isolated and identified in the financial statements. Some illustrative examples or application guides with the more common recycling cases would help the harmonization. Question 16: Business Activities Do you agree with the proposed approach to business activities? Why or why not? As statistician, we have to disagree with the presentation on primary financial statements (profit or losses account, other comprehensive income and balance sheet) according to business activities (paragraphs BCIN 28-BCIN 34). Although it may be more useful for management purposes of a group, according to BCIN 30 and BCIN 34, and contrary to what is stated in paragraph BCIN 32, it is desired a more objective basis to achieve faithful representation and comparability with other reporting entities; as it not only is the base for the process of aggregation in the development of statistics, but also for the consolidation process itself. Please do not hesitate to contact me (by phone at , or by at manuel.ortega@bde.es), in case you need further information on this comment letter. Yours faithfully, Manuel Ortega Chairman ERICA (European Records of IFRS Consolidated Accounts) WG of the ECCBSO Head of CBSO at Banco de España Cc: João Cadete de Matos, Chairman of ECCBSO Juan Peñalosa, Head of Statistics Department, Banco de España Members of the ERICA (European Records of IFRS Consolidated Accounts) WG

4 ANNEX 1 PRESENTATION OF THE EUROPEAN COMMITTEE OF CENTRAL BALANCE SHEET DATA OFFICES (ECCBSO) The European Committee of Central Balance Sheet Data Offices was set up in November 1987 on the initiative of several European central banks and the European Commission. Its aim is to contribute to improving the analysis of information on non-financial corporations, to exchange information and to undertake joint work. The members of the committee are the central balance sheet data offices of the central banks of Austria, Belgium, Bulgaria, Check Republic, Denmark, France, Finland, Germany, Greece, Hungary, Ireland, Italy, Luxemburg, Malta, Montenegro, Poland, Portugal, Republic of Macedonia, Romania, Turkey, Serbia, Slovakia, Slovenia, Spain and United Kingdom and similar units from the statistical offices of Denmark, Finland, Luxemburg, Netherlands and Sweden. All this central balance sheet data offices belongs to different departments (statistics, operation, research, others) in the central bank, what affects the general aim of the Committee, broadening its targets. As regards Ireland and the United Kingdom, these countries' participation is merely as listeners, since in practice they do not have a central balance sheet office. The European Central Bank also participates in the ECCBSO meetings as well as in some of its Working Groups, been an active member of some of them. IASB (IFRS-XBRL working team) and Bank of International Settlements (BIS) are observers of ECCBSO. Finally the European Commission is a permanent observer of ECCBSO. The chairmanship is on a rotating basis and is for a term of three years. Banco de Portugal is holding the chair until November Committee working groups Risk assessment working group. The Risk Assessment Working Group was set up in 1987 in order to draw up the so called White Paper on corporate analysis in Europe and to draft reports on the analysis of stocks and flows conducted in the various central balance-sheet data offices. The group then expanded its project and, since 1999, its members have been working in cooperation with the related divisions of the European Central Bank, homogenizing the risk analysis carried out by Central Banks. These analyses mainly concern the corporations whose liabilities have been taken as collateral in monetary policy operations. The group has also carried out research on default prediction models and, jointly with the ECAF Task Force, has developed studies on technical details of the future ECAF (European Credit Assessment Framework). BACH Working Group. BACH WG is responsible for the management of the BACH database, which contains aggregated and relatively harmonized accounting related data of non-financial incorporated enterprises for European countries. In particular, the WG is devoted to the maintenance, update and promotion of BACH, as well as to the development of related products. The WG must actively participate in the discussion about the importance and the economic and financial situation of European companies. For free access to the BACH database: For more details regarding the BACH database: BACH Brochure ( ERICA (European Records of IFRS Consolidated Accounts) WG (formerly called WG on IFRS impact and CBSO databases). The Working Group primarily focuses on the impact of the International Financial Reporting Standards (IFRS), issued by the IASB, on the accountancy of non financial corporations and their effects on the European central balance sheet data offices databases and questionnaires, trying to assess both potential opportunities and risks. To that end, the group has developed IFRS-compliant standard formats (using for that purpose the IFRS Taxonomy defined by the IASB-XBRL Team) and created the ERICA (European Records of IFRS Consolidated Accounts)

5 database. This database includes around non-financial groups listed of the participating countries (Austria, Belgium, France, Italy, Germany, Greece, Portugal and Spain). Financial Statements Analysis Working Group. The scope of the Financial Statement Analysis Working Group is common microeconomic research on specific topics of the economic and financial situation of non-financial entities in an international setting. Such research can include any field of financial statement analysis like profitability, equity endowment, liability structure or asset composition. Structural, crosssectional and time-series analyses are mainly applied. When producing cross-country figures, the working group also investigates whether accounting or institutional characteristics can explain differences in the results. Currently, the group is conducting research on trade credits. Among others, the distributions of the commonly used financial ratios Days Sales Outstanding, Days Payable Outstanding and Trade Credit Balance are investigated in more detail. Members for this research are representatives from Austria, Belgium, France, Germany, Italy, Poland, Portugal, Spain and Turkey. The working group has produced four studies altogether in the past. The last research paper, "Profitability, Equity Capitalization and Net Worth at Risk - How resilient are non-financial corporations in a crisis environment?", was published in January 2013 (under the old name Study Group of the ECCBSO) and dealt with companies reaction to the financial crisis in main financial key ratios. Members of the ERICA (European Records of IFRS Consolidated Accounts) WG Manuel Ortega manuel.ortega@bde. riccardo.renzi@banc Banco de España Riccardo Renzi (chairman) es aditalia.it Pilar Saura pilar.saura@bde.es Banco de España Matthias Lörch Matthias.loerch@bu ndesbank.de Ana Bárbara Pinto apinto@bportugal.pt Banco de Portugal Lena Leontyeva olena.leontyeva@bu ndesbank.de Claire Mangin Claire.MANGIN- Sabine.Wukovits@o SOUBRET@banque Banque de France Sabine Wukovits enb.at -france.fr Laurent Carlino Laurent.CARLINO Olga olimperopoulou@ba Banque de Lymperopoulou nkofgreece.gr Saskia Vennix saskia.vennix@nbb. Banque Nationale de Sébastien Pérez- Sebastien.Perez_Dua be Belgique Duarte rte@ecb.int Ilse Rubbrecht Vincenzo Favale Ilse.Rubbrecht@nbb. be v.favale@cerved.co m Banque Nationale de Belgique Cerved Group Bartek Czajka (observer) bczajka@ifrs.org Banca d Italia Deutsche Bundesbank Deutsche Bundesbank Oesterreichische Nationalbank Bank of Greece European Central Bank IASB