ESMA believes EU should show leadership by reaffirming its commitment to IFRS

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Jul 17, 2018

On July 17, 2018, the European Se­cu­ri­ties and Markets Authority (ESMA) has responded to the European Com­mis­sion’s con­sul­ta­tion document 'Fitness check on the EU framework for public reporting by companies'. ESMA, con­sis­tent with its prior positions, strongly disagrees with the in­tro­duc­tion of the pos­si­bil­ity to modify the content of IFRS as issued by the IASB.

One of the questions in the fitness check relates to whether it is still ap­pro­pri­ate that the IAS Reg­u­la­tion prevents the European Commission (EC) from modifying the content of IFRS as issued by the IASB. ESMA notes that the EC has only recently sought feedback on this question twice (2013 and 2015) and both times the great majority of stake­hold­ers cautioned against in­tro­duc­ing such a pos­si­bil­ity. The ESMA response adds:

In line with its prior positions, ESMA strongly disagrees with this rec­om­men­da­tion, most notably because any Eu­ro­pean-spe­cific ad­just­ments to IFRS would defy one of the key ob­jec­tives of the IAS Reg­u­la­tion, namely that financial reporting standards applied by listed issuers are accepted in­ter­na­tion­ally and are truly global standards. In addition, we believe that mod­i­fi­ca­tions to IFRS at the European level would hinder the capacity of European companies to compete for financial resources on equal terms in global capital markets. In our view, the different levels of com­mit­ment to require IFRS as issued by the IASB around the globe is not a jus­ti­fi­ca­tion for in­tro­duc­ing carve-ins. On the contrary, Europe should show lead­er­ship in reaf­firm­ing its com­mit­ment to IFRS. This in turn would increase its ability to influence the de­vel­op­ment of IFRS, which the EU should continue to actively do as part of the IASB’s due process. 

ESMA also states that the current en­dorse­ment criteria should not be changed as the current en­dorse­ment process already provides the necessary safe­guards to the European public good, by providing the pos­si­bil­ity for the non-en­dorse­ment of a standard, which is not conducive to European public good.

Please click to access the press release on the ESMA website, which offers a quick overview over ESMA's position as well as access to the letter of response and the completed ques­tion­naire.


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