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EAPB Comments on CEBS Guidelines on Financial Reporting (CP06 rev) Amendments

Introduction

The European Association of Public Banks (EAPB) represents 25 public banks, funding agencies, and associations across Europe, collectively representing approximately 100 public financial institutions. These institutions manage a combined balance sheet total of about EUR 3,500 billion and employ around 190,000 people, covering a European market share of approximately 15%. EAPB appreciates the opportunity to provide comments on the proposed amendments to the CEBS Guidelines on Financial Reporting (FINREP) and hopes that these comments will be considered in the final decision.

Core Templates Remarks

Template 2: Profit and Loss Account

EAPB raises concerns regarding the proposed extension of the profit and loss account position to include "share of the profit or loss of associates, subsidiaries or loss of associates, subsidiaries and joint ventures accounted for using the equity method."

• Critical Remarks:
  • Under IFRS, shares in subsidiaries are valued either at historic cost or in accordance with IAS 39 (IAS 27.37).
  • The proposed amendment introduces a valuation standard using the equity method for non-consolidated subsidiaries, which is not aligned with IFRS or common accounting practices.
  • This approach may lead to inconsistencies in financial reporting and could be misleading for stakeholders.

Non-Core Templates Remarks

Template 13: Non Current Assets Held for Sale

• Joint Disclosure: EAPB notes that the joint disclosure of shares in associated undertakings and subsidiaries cannot be deducted from the balance sheet.
• Recommendation: They suggest either a joint disclosure of shares in associated undertakings, joint ventures, and subsidiaries or a complete separation of this information for clarity and accuracy.

Disposal Group of Assets

• Valuation Concerns: EAPB reiterates that the valuation of subsidiaries according to the equity method is not adequate, aligning with their comments on Template 2.

Template 33 - Table C: Financial Liabilities from Sale of Assets in Pensions

• Categorization: EAPB states that financial liabilities resulting from the sale of assets in pensions do not need to be compulsorily categorized as "held for trading."
• Reasoning: These liabilities do not alter based on the present value of the sold financial assets (e.g., repurchase agreements).
• Disclosure: They also note that IFRS 7.15(b) does not require the disclosure of liabilities from the sale of pension assets, only the fair value of collaterals that are sold or pledged.

Template 35: Movements in Defined Benefit Plan Obligation for Defined Benefit Plan

• Classification: EAPB believes the classification does not correspond with the requirements under IAS 19.120A(c).
• Actuarial Profits/Losses: The proposal presumes the direct inclusion of actuarial profits and losses in own funds, which limits the discretion provided under IAS 19.
• Terminology: IAS 19 refers to "defined benefit obligations" and "plan assets," not "defined benefit plan obligations," which may lead to misinterpretation.

Conclusion

EAPB emphasizes that the proposed amendments to the CEBS Guidelines on Financial Reporting (FINREP) should be aligned with IFRS standards and common accounting practices. They urge CEBS to take into account the potential inconsistencies and misinterpretations that may arise from the changes, particularly in the treatment of non-consolidated subsidiaries, pension liabilities, and defined benefit plan obligations. EAPB is available to provide further clarification if needed.