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FRC responds to the European Commission consultation on the impact of IFRS in the EU

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07 Nov 2014

The Financial Reporting Council (FRC) has published its response to the European Commission (EC) consultation on the impact of IFRS in the EU. The FRC welcomes the EC review of the IAS regulation and considers that the objectives of the IAS regulation have been broadly achieved.

In its response to the EC questionnaire, the FRC agrees that the objectives of the IAS regulation are still valid and that it has furthered the move towards establishing a set of globally accepted high-quality standards.  It also believes that the IAS regulation has led to a significant increase in the transparency of the consolidated financial statements of EU companies listed on regulated markets and in the comparability of companies' financial statements.  This in turn has significantly increased the effectiveness of capital markets, making it easier and cheaper for companies to access capital and improving protection for investors.

The FRC believes that the current EU endorsement process for IFRSs remains appropriate.  In response to the recommendations of the Maystadt report, the FRC considers that assessment of whether accounting standards adopted endanger the financial stability or hinder the economic development of the EU could be undertaken as part of the existing requirement that IFRS adopted in the EU “are conducive to the European public good” and that accordingly the existing endorsement criteria do not need to be modified.  In addition, the FRC recommends that the assessment of public good should take into account factors such as:

  • the benefit to EU companies from access to global capital markets; and
  • acknowledgement that the objectives of prudential and capital market regulation can run contrary to one another.

The FRC also strongly believes that the current limitation in the IAS regulation on the EC's freedom to modify the content of IFRSs is appropriate and do not consider that this should be altered.  In its view, to allow the EC more leeway in this area is likely to seriously undermine progress towards high-quality global accounting standards.

The FRC's full response to the consultation can be downloaded from their website.

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