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ESMA publishes IFRS enforcement report

23 May 2014

The European Securities and Markets Authority (ESMA) has published to its website a report on 'Activities of the IFRS Enforcers in Europe in 2013'. The report provides a description of the existing enforcement system in Europe, the main activities that were coordinated at European level during 2013, information on enforcement activities and ESMA's contribution to the standard-setting process.

ESMA discharges of the responsibility of monitoring of compliance of financial information with International Financial Reporting Standards (IFRS) and taking of appropriate enforcement action mainly through the European Enforcers Co-ordination Sessions (EECS) which co-ordinate the enforcement activities of Member States in order to increase convergence amongst European enforcer’s activities. The EECS also provide feedback to the International Accounting Standard Board (IASB) on issues related to the application of IFRSs identified as part of the enforcement process.

In 2013, European enforcers performed full reviews of around 1050 interim and annual IFRS financial statements covering around 14 % of listed entities accounts in Europe. In addition, around 850 financial statements were subject to partial review, representing coverage of 11 % of the population of listed entities.

During 2013, ESMA also considered the application of the 2012 European Common Enforcement Priorities in the 2012 annual IFRS financial statements. In order to ensure a relevant assessment at European level, ESMA selected a sample of 185 issuers from 25 European countries for review by national enforcers. The 2012 priorities related to recognition, measurement and disclosure of impairment of non-financial assets, measurement of defined benefit obligations, and disclosures related to provisions for non-financial liabilities. (An analysis of issues related to financial instruments was performed separately as part of ESMA's review of accounting practices of financial institutions and resulted in the publication a separate report in November 2013.)

As a result of review of the sample of 185 financial statements, national enforcers took 46 enforcement actions (either required public corrective notes or a different form of public announcement or required corrections in future financial statements). 43% of those enforcement actions related to the disclosure of operational assumptions, growth and discount rates (IAS 36), 20% to sensitivity analyses (IAS 36), and 13% to provisions (IAS 37). Nevertheless, ESMA and the national enforcers identified improvement in the quality of elements of disclosure in 2012 IFRS financial statements in comparison with the results of their enforcement activities in the prior year.

Please click for access to the full report on the ESMA website.

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