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ACCA roundtable on 'Evaluating the impact of IFRS in the EU'

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  • ACCA (UK Association of Chartered Certified Accountants) (lt green) Image

28 Sep 2014

On 25 September, the Association of Chartered Certified Accountants (ACCA) organised a high level conference in order to both present and discuss the recently published consultation on the evaluation of the IAS Regulation and the potential ways forward. The event was hosted by Theodor Dumitru Stolojan, MEP, at the European Parliament.

MEP Stolojan opened the event. He noted that the Commission's report following the consultation should send signals regarding the Conceptual Framework project and that the progress with respect to IFRSs to date was encouraging.

Didier Millerot, Head of the Financial Reporting and Accounting Unit in the Internal Market and Services Directorate General, gave an overview of the Commission's consultation. He noted the need to ensure regulation delivers and is meeting objectives, pointed out that the report will not necessarily lead to legislative proposals and mentioned that certain MEPs are 'passionate' about IFRSs, which makes discussion difficult.

The speakers at the conference discussed various topics in the EC's questionnaire:

Quality

  • Speakers noted that IFRSs meet investors' expectations but that there are areas for improvement. However, they stressed that this is not unique to IFRSs and for example also the case with US GAAP.
  • They pointed at some 'avoidable complexity' for example regarding hedge accounting and suggested that the presentation of some matters could be improved.
  • Some speakers noted limited comparability, but stressed that this might also be a question of enforcement.
  • One speaker noted a lot of 'noise' in financial statements which would make for challenges.
  • It was also suggested that the business model could be used as a 'filter'.
  • Speakers underlined the benefits of a 'common vocabulary'.

Cost

  • It was pointed out that any system has costs and they have to be balanced with the efficiencies gained. It was noted that it is difficult to really identify the costs, which the EC should be mindful of. It was also pointed out that it is hard to compare local GAAPs with IFRSs as the former would have evolved in last decade too - it is not sure that the maintenance costs would have differed much. The same would hold true for implementation costs from changes ahead.
  • It was noted that IFRSs are very helpful from a competitiveness point of view for Europe.

Enforcement

  • Speakers stressed that tremendous improvements have been made in national enforcement and that the 'different accents' in the 'single language' are slowly fading.
  • ESMA's common enforcement priorities were considered helpful. However, speakers also stated that they were wary of 'standard setting via the back door'. It was suggested that ESMA should focus on disclosures.
  • It was also pointed out that there is a need for a level playing field but also for some flexibility in member states.
  • Concerns voiced mainly regarded the question of how to interpret IFRSs with respect to materiality.

Scope

  • Some speakers saw a possible benefit in group and subsidiaries' accounts alignment and also suggested that the use of IFRSs by small listed companies would help attract investment.
  • Other speakers confessed they were 'nervous' and mentioned that there was a need to draw boundaries based on the simplicity of the business model.

Endorsement mechanism

  • Speakers showed themselves pleased with the conclusion that more flexibility was not endorsed - they didn't want to lose the benefits of global standards. They questioned whether it was necessary to more criteria for endorsement when considering the primary purpose of IFRSs.
  • Others mentioned that the process must be 'European' while making sure at the same time that the Commission's advice is stemming from technical expertise.
  • Speakers placed hope in the new EFRAG structure and stressed that lengthy legislative processes should be avoided.
  • It was also pointed out that standards should be endorsed before the IASB's effective date.

After some questions from the audience, Olivier Boutellis-Taft of the Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) closed with a spirited summary statement.  He noted:

Today our panel of experts struggled a bit to clearly identify the costs – but they were very clear in saying that the benefits outweigh the costs. It was also outlined that some of these costs are not related to IFRS but indeed to other sources such as local regulation. However it seems that this does not prevent a few people to blame IFRS. [...] I fail to understand why the IFRS debate often becomes so emotional. It should be dispassionate, objective and factual; it should not be hijacked to pursue objectives that are not related to improving transparency and quality of companies' financial information. It is good to consult on this matter but feedback will have to be interpreted with caution. Although the panel today was very consensual, there is a risk of over-representation of "unhappy customers" which should not lead to frustrating the silent majority – silent majority that expressed itself loudly today.

He also warned against flexible endorsement: "Some are calling for a "more specific version of IFRS (EFRS)": the result will be sub-global standards i.e. sub-optimal standards. It means less consistency, less comparability, less transparency and more cost e.g. reconciliation cost."

Please click for a transcript of Mr Boutellis-Taft's concluding remarks on the FEE website.

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