18 November 2013

Responses to Philippe Maystadt's draft report "Should IFRS standards be more European?": EBA, EIOPA, ESMA, IFRS Foundation

EBA

EBA considers that some of the aspects discussed in the report would benefit from a more detailed analysis. In this regard, it has the following comments which should help ensure the appropriate governance of the body that will provide advice to the European Commission on the endorsement of the IFRS standards.

Endorsement advice

EBA believes that the report should further analyse the question of who must advise the Commission on the adoption of the standards. The endorsement advice should be provided with the objective to respect the public interest according to the IAS Regulation and, therefore, the body entrusted with this mission should serve the needs of the public interest.

EBA has some reservations to have a body as the report proposes under option 1 (transformation of EFRAG) where the decisions are taken by a Supervisory Board composed of members representing public and private interest. In particular, it has some concerns of how a body with this mix will be able to make decisions on a consensus basis. It would also be concerned if in that body a situation could arise where the public authorities are outvoted by the private interest.

It therefore prefers either a modification of this option by having a body with a Supervisory Board composed of members representing public and private interest in which the decisions of the endorsement advice are taken by the public authorities represented in the body taking into consideration the input of the members representing the private interest; or a separate independent body responsible for providing the endorsement advice (public authority).

Member states and stakeholders

The body representing the EU voice should have the capacity to encompass all Member States’ interest and should also be able to consider the view of all stakeholders with an interest in financial reporting.

Independence

Finally, the report mentions current concerns about the experts’ independence. EBA believes that to have the appropriate legitimacy, the independence of the members of this body should be ensured.

Full response

EIOPA

In light of EIOPA's high interest and its significant obligation toward its stakeholders to be active in the field of international accounting standards, EIOPA stands ready to strengthen the endorsement procedure of IFRSs in Europe, and stresses the critical importance for EIOPA to be involved in the endorsement process as well as to be represented in the proposed new supervisory board of EFRAG.

Full response

ESMA

As a general comment, ESMA believes that the draft report addresses the main subjects affecting the future of IFRSs in Europe, but the draft report could have benefited from a more detailed analysis, including advantages and disadvantages for each of the options mentioned in the report or an analysis of the factors considered for providing recommendations and an assessment of the long-term effects of the new European structures in the global context of IFRSs. ESMA believes that, in light of the importance of the likely consequences of the recommendations, providing a more detailed analysis would enable the ECOFIN to take an even better informed decision about the future of IFRSs in Europe. 

ESMA would like to stress that while it acknowledges that the recommended option 1 would bring some improvements to the current system, ESMA believes that it does not satisfactorily address the fundamental problems and that the overall objective of strengthening the European voice and providing the needed credibility might not be achieved through the proposed changes. A more structural revamping of the process and set-up to provide technical advice on endorsement of IFRSs should be explored with the goal that technical advice regarding financial reporting, a crucial part of financial market regulation, should be firmly based on public interest considerations.

Full response

IFRS Foundation

The IFRS Foundation:

• fully acknowledges and respects the fact that it is for the European authorities to determine how the EU’s contribution is organised and operated, but highlights concerns that the selected option of “Transforming EFRAG” might result in the further lengthening of what are already very lengthy procedures;
• welcomes the fact that Mr Maystadt’s report emphasises the support for the maintenance of a “standard-by-standard” adoption procedure and warns of the risks of Europe introducing an endorsement mechanism that has the potential to introduce changes to European accounting standards that deviate from international norms; and
• emphasises the IFRS Foundation’s support for the goals of financial stability and economic growth and belief that IFRSs make a contribution to both by providing transparency to the capital markets.

Michel Prada, Chairman of the IFRS Foundation Trustees, said: “We welcome many of the conclusions of Mr Maystadt’s report, in particular his clear commitment to global accounting standards and his desire to ensure that Europe remains a full and committed member of the IFRS family.  At the same time, our previous feedback has noted various strategic and operational concerns that have the potential to undermine this commitment.  We look forward to working in close co-operation with European institutions in the implementation of these recommendations”.

Hans Hoogervorst, Chairman of the IASB, said: “Europe is an important constituent for the IASB.  We sincerely hope that the proposals in the report are implemented in a way that will enable Europe to participate in an effective and timely fashion throughout the standard-setting process as well as in the endorsement of IFRSs”.

Press release

IFRS-Foundation comments

Original report text, October 2013

Press release, 12.11.13