ESMA announces financial statements' enforcement priorities for 2013

11 November 2013

ESMA has published its European Common Enforcement Priorities for 2013. These Priorities are to be used by EEA national authorities in their assessment of listed companies' 2013 financial statements.

ESMA has defined these Priorities in order to promote the consistent application of IFRS across the EEA. Listed companies and their auditors should take account of the areas set out in the Priorities when preparing and auditing the IFRS financial statements for the year ending 31 December 2013.

The Priorities identified refer to the application of IFRS in relation to:

• Impairment of non-financial assets: ESMA has included the topic of impairment of non-financial assets in the European common enforcement priorities for 2013 financial statements, with a view to focus on some specific areas: cash-flow projections; key assumptions; sensitivity analysis;
• Measurement and disclosure of post-employment benefit obligations;
• Fair value measurement and disclosure: ESMA draws issuers’ attention to the following specific elements related to fair value measurement:
  • non-performance risk;
  • unit of account;
  • disclosures;
• Disclosures related to significant accounting policies, judgements and estimates; and
• Measurement of financial instruments and disclosure of related risks: ESMA believes that the following aspects are particularly relevant to financial statements for the year ending 31 December 2013:
  • general disclosures;
  • impairment of financial assets, forbearance practices and credit risk;
  • liquidity risk.

Steven Maijoor, ESMA Chair, said: “ESMA, in setting out these enforcement priorities for listed companies financial statements, aims to ensure that the IFRS recognition, measurement and disclosure principles are consistently applied across the EEA.

“Consistent application of accounting standards is a key factor in ensuring the transparency and accuracy of the financial information which investors rely upon, and ultimately contributes to the proper functioning of Europe’s capital markets.

“Finally, considering the focus on asset quality in the financial sector, listed financial institutions and their auditors should pay particular attention to properly measuring financial instruments and the accurate disclosure of related risks.”

ESMA and the national competent authorities will monitor the application of the IFRS requirements outlined in the Priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate.

In addition to these Priorities, national authorities may also focus on other locally relevant areas as part of their review. Therefore, national enforcement processes may not be limited to the specific issues contained in this statement.

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