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FEE reminds EP members that Europe benefits from IFRSs

  • FEE (Federation of European Accountants - Fédération des Experts-comptables Européens) (lt green) Image
  • European Union Image

05 Sep 2013

In a sharply formulated letter to the rapporteur of a draft report and proposed amendments on the Union programme to support specific activities in the field of financial reporting and auditing for the period of 2014 – 2020, the Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) reminds the members of the European Parliament (EP) that the current debate about financial reporting not only has a technical quality aspect but also a public interest perspective.

In December 2012, the European Commission (EC) published a Proposal for a Regulation of the European Parliament and of the Council on establishing a Union programme to support specific activities in the field of financial reporting and auditing for the period of 2014-2020. In March 2013, this was followed by a draft report to the Committee on Economic and Monetary Affairs (ECON), which again was followed by suggested amendments to the draft report submitted by various members of ECON. In a letter to the ECON rapporteur, FEE has not only reacted to the report and individual suggested amendments but to the debate as a whole.

FEE’s letter is structured around six strong statements:

  • The strategic dimension of global financial reporting standards should be taken into account – FEE stresses that global standards are critical to enhance transparency and reduce cost to all market participants and that from an EU standpoint, globally accepted standards contribute significantly to attracting foreign investment at a time it is most needed. Having specific EU financial reporting standards or different EU interpretations of IFRS would be detrimental to Europe.
  • The debate should be objective and duly informed – FEE bemoans that “it is highly regrettable that the debate on global financial reporting standards and the body that Europe has entrusted to set these standards (the IASB) is often compromised by matters that are only loosely related to the issue or are based on ill-informed and unsubstantiated arguments, promoted by a small but vocal minority”. FEE claims that while founded criticism is healthy, criticism based on misunderstandings or misinterpretation will undermine Europe’s credibility on the world stage.
  • It is counterproductive to undermine the IASB – According to FEE anybody criticizing the IASB as a whole should also reflect on the available alternatives. Currently, the IASB is the only body that has the global credibility and expertise to set high quality standards. Tinkering with its independence, which is essential to investors’ confidence, would result in a loss of credibility.
  • Europe should not move backwards – FEE reminds EP members that a European standard setter producing European standards would not only be costly but it would isolate Europe on the world stage, which would not contribute to Europe’s economic recovery. In addition, FEE points out that the EU has a poor record in harmonising accounting rules as shown by the recent debate on the accounting directives.
  • IFRS have improved financial reporting and enhance transparency – FEE reiterates that there is no credible objective evidence that IFRS have contributed to the financial crisis. On the contrary, the use of fair value and comprehensive disclosures has helped to identify the problems that were building up in the financial system.
  • The Parliament should provide legal certainty – FEE stresses that bodies committed to working in the public interest need clarity and visibility on their financing over a sufficient period of time. Also, their independence is an essential foundation of their value. Therefore, FEE claims, it would be highly inappropriate to make their funding conditional on them taking specific actions on the technical front, as this would severely compromise their independence.

FEE requests that EP members take these principles into consideration when discussing the issue further and concludes: “Financial reporting should not be used as a scapegoat for other problems.”

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