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FEE advocates "proportionally applying IFRS to all companies listed on pan-European funding and trading platforms"

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

21 May 2015

The Federation of European Accountants (Fédération des Experts-comptables Européens, FEE) has responded to the European Commission's public consultation 'Building a Capital Markets Union' and the question whether there is value in developing a common EU level accounting standard for small and medium-sized companies. FEE believes that "using a common accounting framework would provide significant value for SMEs that intend to access pan-European funding and trading platforms" and also states that "the current patchwork of accounting frameworks based on the EU Accounting Directive cannot serve as the basis for such a single framework".

FEE argues that the lack of a common framework reduces comparability between financial statements and thereby hinders potential investors (both within and outside the EU) in making decisions about cross border investments. Therefore, FEE claims, the EU needs a high quality reporting framework that can be understood by investors from across the EU and from third countries. FEE advocates proportionate application of IFRS to all companies listed on pan-European trading platforms and intending to access cross border capital investment extending also to the individual financial statements of all listed entities including those which are not required to produce consolidated accounts.

In its assessment, FEE considered four alternatives:

    1. proportionate application of IFRS to all companies listed on pan-European trading platforms and intending to access cross border capital investment;
    2. maintenance of the status quo (no common framework);
    3. development of an EU specific common accounting standard; and
    4. using the IFRS for SMEs.

FEE concluded that 2. would not be an option as it hinders potential investors in making decisions about cross border investment, 3. would take too long and would lead to the inclusion of too many member state options and would also isolate the European market, and 4. expressly states that it is not suitable for listed companies and also differs in some key aspectss from full IFRSs. Therefore, FEE believes that 1. is the best option available. The comment letter states:

We envisage that this could be achieved through ongoing simplification of recognition and measurement requirements of IFRS, and reduced disclosures through the completion of the Disclosure Initiative project of the IASB. [...] However, it should be noted that, at present, it is not clear whether the benefits of such a framework would outweigh the costs for SMEs. Therefore a thorough impact assessment should be conducted.

Please click to access the full response on the FEE website.

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