EFFAS CFR and CMC Commission Submissions: January 2025 Updates

With 2025 just beginning, two of our commissions have already been hard at work during January, submitting two comment letters, one press statement and one consultation.

On January 24, the EFFAS Capital Markets Commission (CMC), with input from Fritz Mostböck, submitted its response to ESMA’s consultation on MiFID II research provisions amendments, following changes from the Listing Act. Three days later, the CMC issued a press statement outlining their position, which is yet to appear on ESMA’s website. In the statement, EFFAS strongly supported the reinstatement of bundling research and execution payments, consistent with their long-standing recommendations. They pointed the negative effects of unbundling provisions, like reduced research coverage for small and mid-cap issuers and higher costs. They called for regulatory flexibility, warning that excessive micro-regulation could stifle innovation.

On 16 January, the Financial Reporting Commission (CFR) submitted its comments on IASB’s ED Equity Method of Accounting 28 Investments in Associates and Joint Ventures. In the comment letter, the Commission supports the ED’s improvements, such as reducing diversity in practice, providing more comparable information, and changes to measuring the cost of associates. They also endorse clearer ownership change presentations, enhanced disclosures, and improved impairment testing. However, they question applying the equity method to subsidiaries in separate financial statements and the retrospective recognition of full gains or losses. The Commission also raised concerns about the ED’s complexity, costs, and the cost-benefit balance for preparers.

On 6 January, the EFFAS CFR submitted its comments on EFRAG’s Draft Comment Letter regarding the Equity Method of Accounting under IAS 28. The Commission’s comment letter expresses overall support for the draft’s objectives, emphasizing the need for clarity and simplicity. It agrees with proposals on measuring associates and transaction costs but calls for further clarification on some points. The letter supports the guidance on ownership changes and recognizing investor losses but raises concerns about the wording of impairment testing and consistency in applying the equity method. It also suggests reconsidering the cost-benefit balance and questions the relevance of retrospective disclosures.