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ESMA publishes IFRS enforcement report

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29 Jun 2012

The European Securities and Markets Authority (ESMA) has published to its website an 'Activity Report on IFRS Enforcement in the European Economic Area in 2011'. In 2011, the Euro crisis was one of the major drivers of the various IFRS enforcement activities at EEA and Member State level.

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.

As a result of sovereign debt developments and the increased market interest in this area, ESMA focused its attention on the impact of those developments on the accounting practices of listed companies in Europe, and financial institutions in particular. ESMA issued two public Statements (in July 2011 and November 2011) stressing the importance of consistent application of recognition and measurement principles in IFRSs and the need for enhanced transparency in relation to issuers’ exposure to sovereign debt. ESMA intends to publish in 2012 a review of the accounting practices with respect to exposure to sovereign debt in the 2011 year-end IFRS financial statements.

Overall, European enforcers find that the quality of the IFRS financial statements improves every year reflecting an increased level of issuers’ capacity to apply IFRS principles to their business. However, they have also identified some areas in which additional efforts should be taken. Examples of such areas are: disclosures related to fair value hierarchy of financial instruments, disclosures of assumptions used as part of impairment tests, presentation of risk factors and uncertainties with an impact on going concern assumptions, various aspects related to consolidation of entities.

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

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