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In June 2015, the European Commission unveiled its report on the evaluation of the International Accounting Standards (IAS) Regulation, implementing International Financial Reporting Standards (IFRS) in the European Union since 2005. The key findings, based on the views of EU companies, investors and other stakeholders, show broad support for the use of IFRS and that in most cases, their benefits outweighed their costs. The report also identifies room for improvement in some areas, namely regarding the endorsement process and reducing the complexity of IFRS.
Panellists welcomed the evaluation report, praising its fair and balanced approach. They recognised the work done by the Commission and also acknowledged the reform efforts undertaken by EFRAG, following the Maystadt recommendations last year. Some speakers however stressed that shortcomings still exist, not all concerns expressed have been met yet.
Sven Giegold, MEP pointed out: 'In the European Parliament there is a discussion around the role of the EU in international institutions. There is no global Parliament, therefore we have a tension between the principle of democracy and the need for global rules. There is obviously no simple answer to that, but we can do better than we do now. If we look at IASB, the IFRS Foundation and the European voice there, EFRAG delivers input, but European representatives to the IASB board are not democratically elected. As Europeans, we should insist that our representatives should also be at least co-elected by the European Parliament, as it is the case for the president of EFRAG.
'In addition, if one compares the ambition to have one global set of accounting standards and the social and economic background of the decision-makers in IASB and IFRS Foundation, I still have concerns – many people in these institutions come from large businesses, but very few have the SMEs and consumer perspective.'
The debate also revealed that the IASB must increase its focus on looking towards tomorrow - and even today.
Anthony Carey, Leader of the EGIAN Listed Company Audit Market Focus Group, explained: 'Much remains to be done in areas such as accounting for intangibles, non-financial reporting and effective reporting online. In many ways, accounting still focuses too much on physical assets even though they represent the minority of the assets of most businesses today. We must ensure IFRS is fully relevant for the modern economy of the 21st century.'
Theodor Dumitru Stolojan, MEP and permanent rapporteur on the implementation of IFRS in the EU said: 'At the European Parliament we need to understand what is happening, what impact the IFRSs have on businesses, and on the lives of our citizens. We already experienced a big failure of financial markets and we must not forget it. Of course, it is very difficult to find who is guilty for the failure of the markets; but it is very clear who paid for this failure: citizens paid to save the banks.
'The ECON Committee decided to initiate a report to set the position of the European Parliament regarding 10 years of the IFRS implementation and the activities of IFRS Foundation, EFRAG and PIOB. We received letters from different interest groups saying that reporting is not clear enough, stressing the issues of 'True and Fair view', 'prudence' and 'stewardship'. But some of these letters do not disclose the real interest affected by the standards and do not provide any solutions. We do not like such letters, what we need are constructive comments from experts.'
Richard Martin, head of corporate reporting at ACCA, concluded: 'Today’s debate revealed a lot of support for the European Commission’s evaluation of the 10 years of implementation of IFRS. There is a general consensus that the implementation was successful regarding enhancing transparency and comparability, and importantly, in promoting IFRS as global standards. The discussion also revealed that there is still some work to do, and the European Parliament’s own initiative report led by Mr Stolojan will certainly help shed some light on what actions could be taken. We also look forward to the publication of the Capital Markets Union Action Plan, which may take up some of those further actions which have been identified.'