12 May 2015

IASB: IFRS Foundation responds to the EC’s public consultation on Building a Capital Markets Union

The Foundation believes that the use of a single set of financial reporting requirements is important to the successful achievement of a Capital Markets Union (CMU). The introduction of IFRS in the EU has been beneficial for those companies whose securities are admitted to trading on a regulated market and the Foundation believes that those benefits will hold true for companies, regardless of size, listed on alternative trading venues such as MTFs.

The Foundation also believes that the success of a CMU also depends on its ability to attract cross boarder investment and compete internationally. To achieve that there is a need to take into account the global context and that it is important that the financial reporting requirements are internationally – as well as EU-wide – comparable.

The Foundation’s view is that, by admitting their securities to trading, even on nonregulated markets, companies (including SMEs) take on public accountability. That public accountability requires those companies to prepare and publish financial information that is compiled in accordance with financial reporting standards that are viewed by market participants as being credible, authoritative, comparable and familiar to investors and needs to ensure an effective level of investor protection (in particular where companies are seeking to raise funds outside their home Member State). IFRS meets these requirements.

While the Foundation acknowledges differential reporting for SMEs, it does so on the basis of public accountability. The IFRS for SMEs has specifically been designed for nonpublicly accountable SMEs and the users of those entities’ financial statements. The

IASB’s experience in developing ‘full’ IFRS and the IFRS for SMEs, together with its international constituent base, puts the IASB in a unique position to appreciate the financial reporting standard requirements for entities of different types and sizes;

The Foundation notes that many entities which seek to have their securities listed on nonregulated markets do so in the expectation that they may eventually seek a listing on a regulated market. These entities often seek to compete for investment funds with entities which are listed on regulated markets. The Foundation notes that investors often invest in both regulated and unregulated markets, and seek to compare their investment performance across both platforms. Consequently, it is the view of the Foundation that there is benefit to be sought in applying the same financial accounting framework to entities on both regulated and unregulated markets, or having a similar framework that minimises any differences. This facilitates both comparability and mobility.

Press release

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