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ESMA statement on sovereign debt in IFRS financial statements

Nov 25, 2011

The European Securities and Markets Authority (ESMA) has posted to its website a statement concerning the accounting treatment in relation with sovereign debt exposures in connection with current market developments. Special consideration is given to the accounting treatment of Greek sovereign debt.

In July 2011, ESMA published a public statement on disclosures related to sovereign debt to be included in IFRS financial statements. In the statement, ESMA pointed out the need for enhanced transparency in interim and annual financial statements for European listed issuers using IFRSs.

Since then ESMA conducted a study on the accounting treatment of Greek sovereign debt in the half-year financial statements of financial institutions listed in regulated European markets.

The statement published today is divided into two sections:

  • Section one is directed toward annual financial statments for reporting periods ending 31 December 2011. It contains elements that should be considered by issuers and their auditors in relation to sovereign debt exposures. Recommendations are intended to ensure consistent application of IFRS requirement across Europe; they are informed by findings from the study on the accounting treatment of Greek sovereign debt in the half-year financial statements for reporting periods ending 30 June 2011.
  • Section two details the findings from the study on the accounting treatment of Greek sovereign debt in the half-year financial statements and ESMA's assessment of them. It also lists elements that should have been considered by issuers and their auditors in relation to sovereign debt exposures in those statements. Depending on future economic developments, these should be considered when preparing or auditing the upcoming year-end financial statements.

Please click for the Public Statement: Sovereign Debt in IFRS Financial Statements (PDF, 3.06mb, link to ESMA website).

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