Without being a direct response to the European Commission's questionnaire seeking respondents' views on the impact of International Financial Reporting Standards (IFRS) in the European Union, the timing and content of a booklet The future of IFRSs in Europe published today shows that not all European voices criticise and question the application of full and unaltered IFRSs in Europe.
The booklet claims that the debate on appropriate accounting reveals fears and worries that prove to be unwarranted on closer scrutiny. It therefore provides a detailed overview of how an IFRS is developed and becomes applicable law in Europe. The booklet concedes that the process for developing IFRSs is "unlike the conventional legislative process we are familiar with in Europe", but it also notes that the IASB's standard-setting process has been continuously improved over the past ten years to strengthen transparency and participation and the setting-up of a Monitoring Board in 2009 has established a direct link to the major regulators around the world.
Therefore, the German private banks view recent international developments (first in the US, where the FASB turned away from some convergence projects, and now in Europe, where politicians call for more of a European influence and maybe a European version of IFRSs) critical:
We take a critical view of these developments. So that it can continue to perform its job as an independent global standard-setter, the IASB should not be allowed to become a plaything of diverging national interests. Purely national interests inevitably have to take a back seat in efforts to develop an internationally accepted financial reporting convention. The IASB’s work as a standard-setter should therefore be kept largely free of political influence in the future as well. This is the only way to ensure high-quality standards and uphold the IASB's good reputation in the long term.
The banks also believe that any tinkering with the European endorsement process would be harmful:
Any European go-it-alone approach must be avoided, however. The non-recognition of individual IFRSs in Europe (carve-out) or the establishment of European accounting rules would be at odds with the target of uniform international accounting standards. The comparability of financial information would be impaired; the result would be a competitive handicap for internationally operating companies based in Europe.
In the press release accompanying the publication of the booklet, the German banks even express the hope that the endorsement process of IFRS 9 Financial Instruments, which is currently postponed in the EU, would be taken up soon and concluded speedily.
The booklet also states that a strict and efficient enforcement is needed to reap the benefits of using international standards. However, similar to the points made above, the banks maintain that European Securities and Markets Authority (ESMA) must avoid interfering with international processes:
We support ESMA's activities as long as there is a strict separation between standard-setting and enforcement. On the other hand, setting actual accounting and valuation rules is not ESMA's job in our view, but should be left to the IASB and the IFRS Interpretations Committee.
Please click for the following information on the website of the Association of German Banks:
- Access to the booklet The future of IFRSs in Europe(it can either be downloaded or ordered as printed copy free of charge):
- Press release (German language only)