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The adoption of IFRS in the EU was designed to improve the efficiency of EU capital markets by increasing the transparency and comparability of financial statements. IFRS are international accounting standards developed by a private organisation (the IFRS Foundation) and used by companies in more than 100 countries to prepare their financial statements.
The EC's evaluation of the IAS Regulation assesses whether:
- the Regulation achieved its objective in an efficient and effective manner;
- the criteria that all new IFRS should meet to become EU law are appropriate and whether the process for adoption of standards works properly;
- the governance structure of the bodies developing the standards and advising the EC is appropriate.
The evaluation attracted a high level of interest from a variety of stakeholders and their input provided useful evidence for the EC.
The key findings showed that IFRS was successful in creating a common accounting language for capital markets. Companies were mostly positive about their experience of using IFRS and in most cases, benefits outweighed costs. Investors also largely supported IFRS for improving the transparency and comparability of financial statements. Most stakeholders considered that the process through which IFRS become part of EU law works well. Importantly, the recent reform of the EFRAG, which is the technical advisor to the EC in this field, will strengthen the EU voice in the international standard-setting process.
The report identifies room for improvement in some areas. The collaboration between actors in the endorsement process could be enhanced to improve timeliness and to allow for a more holistic consideration of standards with other aspects of EU law. IFRS issued by the IASB need to be endorsed by the EC. An endorsement process remains necessary to ensure that the standards developed by a private body meet certain criteria and are fit for the European economy before becoming part of EU law. Procedures could also be simplified in order to reduce their complexity for companies.