FEE comments on ESMA's enforcement consultation paper

  • FEE (Federation of European Accountants - Fédération des Experts-comptables Européens) (lt green) Image
  • ESMA (European Securities and Markets Authority) (dark gray) Image

18 Oct, 2013

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has commented on the European Securities and Markets Authority (ESMA) consultation on guidelines on the enforcement of financial information published by listed entities in the European Union. FEE generally supports promoting a common European enforcement approach but highlights several points where the ESMA proposals seem to be going too far.

The proposed guidelines are the result of a review of Standards No. 1 and 2 on the enforcement of financial information developed by the Committee of European Securities Regulators (CESR), ESMA's predecessor, and were published in July 2013. FEE believes that some of the proposals seem to suggest that ESMA is assuming responsibilities that lie with other parties.

FEE points out that although a common approach to enforcement is to be supported, the European Transparency Directive states that the final responsibility for supervising compliance with the provisions of the Transparency Directive remains with the designated central competent authorities of the relevant Member State. ESMA has no legislative powers regarding the enforcement of financial information. In this context FEE also comments that the guidelines should not pose any additional requirements to those stated in the Transparency Directive and ESMA should be careful not to overstep the boundaries of the Transparency Directive. Also, common enforcement priorities should leave sufficient flexibility for the national competent enforcement authorities to add domestic priorities, taking into account their specific circumstances.

FEE also highlights that ESMA should not try to become a standard-setter. In connection with the discussion of materiality, FEE supports ESMA's view that improvement is needed in this area but warns that the responsibility for determining this should remain with the IASB. FEE welcomes the announcement of the IASB to start a project on materiality in the context of revising IAS 1 Presentation of Financial Statements. FEE also sees the danger of ESMA assuming unintentionally a standard-setting role in connection with issuing reports that contain statements on specific accounting treatments, especially the ESMA enforcement decision reports.

FEE also believes that ESMA should also not assume an interpretative role. ESMA can use statements and/or opinions to explain the concepts underpinning their enforcement and the methods they use in their operation, however, ESMA should stay away from anything that can be interpreted as IFRS application guidance, as the IFRS Interpretations Committee remains the sole source of interpretation of IFRSs. As ESMA itself had proposed in the guidelines that "ESMA and enforcers do not issue any general IFRS application guidance to issuers", FEE's point in this case is simply to strongly support this statement.

Please click for access to the full comment letter on the FEE website.

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