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Final Maystadt report available

  • European Union Image

11 Nov 2013

In preparation for a meeting of the European Union's Economic and Financial Affairs Council (ECOFIN) next Friday where the special advisor to EU Commissioner Michel Barnier, Mr Philippe Maystadt, will present his report setting out his preliminary recommendations for enhancing the EU’s role in promoting high quality accounting standards, the report has been made available on the website of the Council of the European Union. The report is at a very high level, and many implementation issues will have to be resolved when and if the proposals are implemented.

As in the draft report released in September 2013 Mr Maystadt proposes three options to consider of which he recommends the first: Transforming EFRAG with the aims of reinforcing its structure and giving it a legitimate voice to represent European positions to the IASB when the IASB's standards are being developed. Details of the recommendations in this connection are:

  • Remit: EFRAG should focus on its remit regarding the IFRS standards, in accordance with the IAS Regulation.
  • Funding: Analyse the legal possibility of establishing a system of compulsory contributions/ levies paid by listed companies that use and benefit from IFRS.
  • Structure:
    • General Assembly: Extend the current General Assembly membership (Business Europe, FEE, Insurance Europe, EBF, ESBG, EACB, EFAA) to include National Funding Mechanisms and other private and/or public organisations that are contributing financially or in kind and invite the European Commission to attend the meetings of the General Assembly.
    • Supervisory Board: Replace the current Supervisory Board with a high-level Board, which would approve the comment letters addressed to the IASB and the endorsement advice letters to the Commission, relying on the work of a technical group.
    • TEG: Change the role of the Technical Experts Group (TEG) to preparing the projects submitted for the approval of the Board while receiving more guidance and feedback from the Board turning it into an advisor to the Board instead of having full authority to determine the positions of EFRAG.

The role and the composition of the high-level board is intended to embed the public policy voice into the decision-making process already before recommendations are made to the Commission. According to Mr Maystadt's recommendations, it would be composed of 16 members belonging to three pillars plus a president:

  • European public institutions (4 members proposed by ESMA, EBA, EIOPA and ECB, respectively),
  • Stakeholders (5 members: industrial and trading companies; financial institutions; accounting professionals; users)
    • Industrial and trading companies: one member proposed by Business Europe.
    • Banks: one member proposed jointly (or, failing that, in turns) by the European Banking Federation, the European Association of Cooperative Banks, the European Group of Savings Banks, the European Association of Public Banks.
    • Insurance companies: one member proposed by Insurance Europe
    • Accounting professionals: one member proposed jointly by the FEE ("Federation of European Accountants") and the EFAA ("European Federation of Accountants and Auditors")
    • Users: one member proposed jointly by the associations representing private investors (“end users") and financial analysts.
  • National Standards Setters (NSS) (7 members, with the implicit agreement that the NSS of the four largest Member States will always be represented, as is also the case for the Executive Board of the ECB or the Management Committee of the EIB).

Besides the internal management functions of the current Supervisory Board, the new Board would approve letters prepared by TEG, in particular, comment letters addressed to the IASB and endorsement advice letters addressed to the Commission. The Board is expected to act by consensus. Mr Maystadt also suggests that the role of President, who would be the public spokesperson of EFRAG, could be separated out from the role of a Chief Executive Officer, who would be responsible for the daily management of the organisation, including the chairmanship of the TEG.

Of note is the also the timescale: "The European Union needs an effective structure, capable of offering the Commission pertinent advice on the endorsement of the important standards that will be finalised in the short term by the IASB, as soon as possible."

Apart from recommending the changes concerning EFRAG, the report states that IFRSs remain the ‘best choice’ at present for financial reporting in public capital markets. It also advises that the current ‘standard-by-standard’ endorsement process remains appropriate. And it cautions that any change to the current binary 'yes/no' endorsement decision must be considered very carefully; Maystadt does not make any recommendation, but makes a strong statement that 'caution is essential' before considering any possibility of 'carve outs' or 'carve ins'.

Please click for access to the full report on the website of the Council of the European Union.

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