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International Financial Reporting Standards (IFRS) and the governance of the IASB
Rapporteur: Alexander Radwan (EPP-ED)
- Exchange of views in the presence of Sir David TWEEDIE, Chairman of the
International Accounting Standards Board
Preliminary report
Sir David Tweedie , chairman of the IASB, outlined the work and the structure of the IASB and the trustees and underlined his the Boards intention to intensify the engagement with the European Parliament. He also provided an update of the convergence efforts with the United States and reported on the progress of accounting standards aimed at small and medium-sized entities (SMEs).
Alexander Radwan (EPP, DE) referred to his working document which focuses on how to ensure proper governance of the IASB itself and questions on how the body was funded, how its trustees were appointed and the process of appointing the governing board. Mr Radwan wanted to concentrate in particular on three issues. These are putting into question the standards themselves, particularly those for SMEs, the convergence with US-GAAP, and the role of legislative bodies in rules making.
Mr Radwan also underlined the importance of an intensive dialogue with the IASB and the Trustees. He was particularly interested in the process and procedure of how the rule making is taking place.
Sir Tweedie explained that IASB functioning and funding and lined out that it was now seeking permanent funding, perhaps from listing fees, to guarantee more independence.
On IAS 39 and 32 he noted that a review is under way and both standards are to be replaced by something more simple.
Udo Bullmann (PDE, DE), Pervenche Beres (PES, FR) and Gay Mitchell (EPP, IRL) asked for any impact assessment jet undertaken. Mr Bullmann was also interested in where the mandate came from to make rules for SMEs.
Sir Tweedie particularly underlined that companies from emerging markets called for rulemaking for SMEs. He made clear that the exposure draft issued is open for corrections. Philippe Danjou, board member of the IASB, explained that the application for IFRS is only for listed companies.
Also John Purvis (EPP, UK) asked whether the IFRS are suitable for SMEs. He also asked if the new rules do really lead to simplification and wondered if some kind of a Green Paper might be available from the IASB to clarify the thoughts on IAS 39.
Sir Tweedie explained that IAS 39 has to be simplified. However, “some might not like the answers”, he said.
Ieke van den Burg (PES, NL) emphasized the role of the legislator in the process who has to take account of the more political issues that are not necessarily subject to the IASB. Margarita Starkeviciute (ALDE, LIT) focused on governance issues of the IASB and its funding. Pervenche Beres (PES, FR) was also interested in “vair-value” accounting, the convergence with the US standards reminding the experience of IFRS 8 and asked for a work programme for the future.
Responding to the chair Sir Tweedie explained that consensus is in sight on the ‘fair value’ issue which will likely be a mixed system. He believes that given the pressures on US markets caused by the Sarbanes-Oxley reporting rules, the reconciliation requirement will definitely be removed by 2009.
Speech Sir David Tweedie
Radwan Working Document on International Financial Reporting Standards (IFRS) and the governance of the IASB
Solvency II - State of play: Presentation by the Commission
Rapporteur: Peter Skinner(UK,PSE)
Preliminary report
Karel van Hulle lined out the progress achieved on the Solvency II project. Key features of the project will include sound economic principles and will not allow arbitrary restrictions. The project will follow the Basel II three pillar approach, and supervisors dispose on a number of toolkits.
Solvency II will also introduce two capital requirements which allows supervisors to intervene at an early stage. However, it will and cannot be a zero failure regime.
The Commission will also pay proper attention to the role of SMEs, Mr van Hulle reassured.
The final proposal is planned for July.
Peter Skinner (UK, PSE), rapporteur on the forthcoming Solvency II proposal, asked for early information on the project, particularly with regard to SMEs.
Jonathan Evans (UK, EPP), said that he, as a director of a mutual funds company, strongly calls for equal treatment of the mutual sector the company sector. The Commission should be cautious to exclude the mutual sector from the Solvency II project as they may become more important in near future.
He also recalled the improved risk management techniques in the UK and the increased role and engagement of the FSA as a regulator and wants these to become the standard in all EU member states.
Ieke van den Burg (NL, PSE) asked for the Commissions experience if one can expect further progress on the role of a lead supervisor or if member states reject the idea. With regard to Pension Funds she warned about regulatory arbitrage which can now be experienced in Belgium with regard to the IOPR directive.
Pervenche Beres (F, PSE) supported Mr Evans view on mutuals. As Solvency II will have an impact on the insurance sector it will also influence mutuals, she said. The Commission should take into account the composition of the insurance sector and has to go further in this aspect, she said.
She also questioned the lack of harmonisation within CEIOPS which might become a problem and finally asked the Commission on the special issue of the Health Insurance sector.
Responding to the questions Mr van Hulle noted that the Health Insurance is part of the QIS3.
On the role of CEIOPS and supervision Mr van Hulle acknowledged the CEIOPS work so far and the difficulties within the Committee to come to an agreement. He also noted that change is already under way. However, the Commission intends to go further than CEIOPS members have currently agreed upon. This also includes the concept of a lead supervisor even if some member states don’t like it.
He also assured members that the Commission will take account of the role of mutuals as they might have an advantage.
Pension funds will not be included into the project because of their very complex nature.
Mr van Hulle finally announced a letter from the Commissioner on Solvency to be published in near future.
The ECON Committee will hold an exchange of views with Thomas Steffen, Chair of CEIOPS, on 8 May.