The joint working group of the Association française des entreprises privées (AFEP) and the Mouvement des entreprises de France (MEDEF) sought to develop ideas for enhancing the quality of IFRS development, strengthening the voice and contribution of Europe in the development of IFRSs and giving the ability, if need be, to recover some European sovereignty in standard-setting. The report, which received quite some attention in France, presents the working group's view only and is one of various contributions currently being brought to the debate opened up by the European Commission about the assessment of the use of IFRS in Europe since 2005 and the structures that should be in place in Europe so that Europe contributes more efficiently to the work of the IASB and the development of IFRS.

The working group is not questioning the use of IFRSs, however, it feels that they have weaknesses resulting a) from gaps in the conceptual framework and b) from the structure and governance of the European system used for the adoption of IFRS. The working group acknowledges that  the goal of international convergence of accounting standards remains relevant but also believes that the EU, judged by its economic weight and its level of involvement in the implementation of IFRS, should try to regain some sovereignty to create a level playing field with other major economic areas (such as USA, China, Japan, India) that have given themselves the authority to modify or adapt the IFRS to their economic environment. IFRSs as a whole, the working group claims, would benefit from a more balanced distribution of influence on the development of IFRSs among the major economic areas.

The proposals in the report therefore focus on three complementary pillars:

• reforming the conceptual framework of the IFRS, so that the standards produced better meet the needs of the European economy;
• reforming the structure and governance of the European system for adopting accounting standards;
• revising European regulations in order to give the EU the option of modifying a standard if it deems it necessary.

As regards the framework, the IASB has just published a discussion paper on certain aspects of the framework, however, in doing so it has concentrated on areas that seem problematic in practice and it has also excluded areas that are deemed to have been finalised satisfactorily. The working group suggests extending the consultation to the entire conceptual framework since it feels that the EU cannot be content with some elements that are now regarded as having been definitively adopted by the IASB.

The proposals regarding the reform of the structure and governance of the European system mainly concentrate on reforming the way the European Financial Reporting Advisory Group (EFRAG) is structured. The suggested reforms are far reaching (they are called “ambitious” in the report) and echo some of the ideas that were voiced in connection with the appointment of Philippe Maystadt as Special Adviser to enhance EU’s role in promoting accounting standards.

Reasserting European sovereignty, the working group believes, would be possible by broadening the EU’s choice from only being authorised to adopt or reject IFRSs as a whole to the legal authority to amend or replace a standard that it deems inappropriate to the needs of its economy. The working group claims that this is what most jurisdictions have chosen to do, and the EU could follow suit without jeopardising its commitment to IFRSs.

Please click for the following documents on the MEDEF website:

• press release announcing the report (French only)
• Renforcer le processus d'adoption des normes comptables internationales: un enjeu stratégique pour l'Union européenne
• Strengthening the process for adopting International Accounting Standards: A strategic challenge for the European Union