The hyperlinks below will take you to the notes from the different parts of the programme or you can continue reading to be taken through the afternoon's discussions in chronological order:

• Welcome speech by Andrew Watchman, EFRAG TEG Chairman
• Keynote speech by Matthew Baldwin, Head of the Cabinet of Commissioner Jonathan Hill
• Contribution “Testing your knowledge of EFRAG after the Maystadt reform” by Françoise Flores, former EFRAG (TEG) Chairman
• Round-table “Developing effect analyses for IFRS”
• Conversation with EFRAG TEG Chairman Andrew Watchman, Stig Enevoldsen, EFRAG Board member and former EFRAG Chairman, and Peter Walton, Emeritus Professor of Accounting at the Open University
• Round-table “Financial Reporting by Small Listed Companies”
• Closing speech by Jean-Paul Gauzès, EFRAG Board President

Welcome speech

In his welcome address, Mr Watchman, who became EFRAG TEG Chairman only three months ago, gave a brief overview of the history of EFRAG and most recent developments. He introduced the programme for the afternoon with the theme ‘EFRAG moving forward’ and indicated that the topics chosen for the round-tables would give a hint as to where EFRAG might be active in the future. The effect analysis round-table reflected that while for most of EFRAG’s history endorsement advice was based mainly on a technical assessments it would now take a much broader perspective with EFRAG expressing a view on whether a new standard is conducive to the European public good. The second round-table would consider the financial reporting needs of smaller listed companies, an important issue in Europe and beyond that has arisen in the context of the EU’s Capital Market’s Union programme. Concluding his introduction, Mr Watchman commented on EFRAG relationship with the IASB. He stated:

I’d also like to comment briefly on how EFRAG seeks to influence the development of IFRSs. In my early days at EFRAG I have particularly enjoyed meeting many of our stakeholders, and some have asked whether I expect EFRAG to take a more aggressive relationship with the IASB. Let me tell you that I don’t see it that way at all. […] EFRAG has demonstrated that we can and will exercise robust influence when an issue is a pressing concern to Europe. […] But EFRAG’s influence comes mostly from our continuous, constructive participation in the debate: our comment letters, our proactive work and our day-to-day interactions with the IASB.

Keynote speech

Given the outcome of the recent EU referendum in the UK and Commissioner Lord Hill’s announcement of stepping down from his post, the key note speech on behalf of the EU Commission was delivered by Matthew Baldwin, Head of the Cabinet of the Commissioner. Mr Baldwin also looked backed over the history and noted with pride that the 2002 decision to adopt IFRSs for all listed companies listed in regulated EU markets has made the EU a leader of the IFRS movement. He called the experience a good one and pointed to the IAS evaluation of the Commission that had concluded that IFRSs were indeed conducive to the public good. Looking to the future, Mr Baldwin noted that the Commission has now expressly asked EFRAG to include effect analyses of new standards or amendments to standards into their endorsement considerations with IFRS 16 Leases being the pilot case. He also stated that he wished for better representation of some EU member states on EFRAG – especially from the East and South.

"Testing your knowledge of EFRAG after the Maystadt reform"

In a more entertaining yet nonetheless serious contribution to the event, former EFRAG (TEG) Chair Françoise Flores tested the knowledge of the audience regarding the effects of the Maystadt reform on EFRAG bodies and activities. Topics were the objective of the Maystadt reform, the key changes that were implemented, the consensus-based model, and the role of EFRAG TEG. The last question Ms Flores put to the audience was not a question with a right or wrong answer, but a question of what the audience thought EFRAG should see as priority for structural reform next. The possible answers were:

• EFRAG should extend its membership to achieve better geographical and stakeholder representation. 29% of the audience believed that this was the most important option.
• EFRAG should increase the visibility of the organisation and its actions. 33% of the audience saw this as the highest priority.
• EFRAG should do more to increase the gender balance (only 2 of the 17 EFRAG Board members are currently women, EFRAG TEG has no female members). 12% of the audience believed this should be the highest priority.
• EFRAG should expand the scope of its work to wider corporate reporting and/or SMEs. 26% voted for this as the highest priority.

Round-table “Developing effect analyses for IFRS”

The round-table discussion on the focus, merits and challenges of effect analyses was led by Claes Norberg, Acting Vice-President of the EFRAG Board. Panel members were Hans Hoogervorst, Chairman of the IASB, Erik Nooteboom, Acting Director Investment and Company reporting, DG FISMA, Kris Peach, Chair & CEO of the Australian standard-setter AASB, Patrick de Cambourg, EFRAG Board member and President of the French standard-setter ANC, and Joachim Gassen, Professor at Humboldt-Universität zu Berlin. They discussed how important effect analyses are in the standard-setting process and at what level they should be done, how costs and benefits can be assessed, as well as other aspects of the issue. Mr Hoogervorst pointed out how important it was to begin analysing problems and possible solutions right at the very beginning, substantiated by as much data as available, to avoid taking impossible projects onto the agenda, to avoid getting stranded on a project and to avoid running off into too many directions at the same time. He agreed with Mr Nooteboom that effect analyses must be an ongoing process to keep projects on track and that impact assessments after finalising a standard (the post-implementation reviews of the IASB) are indispensable. Mr Nooteboom stated that IASB options as a consequence of effect analyses that also include changing certain aspects of a project are not available as a result of effect analyses at EU level where the only options are to endorse or not to endorse. Ms Peach agreed and commented that in Australia non-adoption of a single standard is considered the “nuclear option” as standards are not stand-alone products but always part of the larger framework called IFRS. And while she clearly stated that IFRS does not meet unfettered love in Australia, she maintained that there simply is no alternative available. She pleaded for contributing to the IASB’s work further upstream to make sure that the product that one ends up with is one one can accept. Mr Gassen brought the discussion back to a scientific level, clearly distinguishing between effect analysis and impact assessment, and also making clear that implementation cost as the cost side of the argument could be measured, to a degree, at a rather early point of time while transparency and comparability as the benefits would be very difficult to quantify and would become visible only much later. He also added that the question of whether effects and impacts should be measured at standard level or at the level of the package as a whole depended on what you wanted to measure. “Public good” could not be measured at standard-level while individual aspects (eg. effects of IFRS 16 on the business models in the leasing industry) could well be measured at standard-level.

Conversation reflecting on EFRAG’s past, present and future

In the conversation with Stig Enevoldsen, first Chairman of EFRAG, and Andrew Watchman, newly appointed EFRAG TEG Chairman, Peter Walton asked them about the good things that had been achieved in EFRAG’s past and the good things that are yet to come. Mr Enevoldsen stressed as one past achievement the invention of the EFRAG draft comment letters that have helped to make EFRAG an influential voice in the world of international accounting by offering thorough technical analysis early in the IASB’s consultation periods. He also pointed at EFRAG’s pro-active work, the increased budget and funding that has helped EFRAG to grow from an initial set of four members without staff, and the Maystadt reform that had helped to achieve a better balance between regional and national interests. Mr Watchman saw a better mix of geographical background and better gender balance as one of his goals. He also stressed the already launched closer cooperation with other standard-setters beyond the EU and mentioned projects with the FASB and ASBJ and first exchanges with the KASB as examples. He also hoped to cooperate even more closely with the European national standard-setters and to integrate them even more into the EFRAG work.

Round-table “Financial Reporting by Small Listed Companies”

The round-table discussion on the merits and challenges of IFRS financial statements for small listed companies was led by Olivier Boutellis-Taft, CEO of the Federation of European Accountants. Panel members were Michel Prada, Chairman of the Trustees IFRS Foundation, Valérie Kinon, Associate Partner with Clairfield Benelux, Roger Marshall, former acting EFRAG Board President and Chairman of the FRC AC, Peter Malmqvist, Chairman of the Swedish Society of Financial Analysts, and Andrew Watchman, EFRAG TEG Chairman. The discussion of whether smaller listed companies should apply simplified financial reporting standards compared to larger ones (i.e. not full IFRS) came off to a rather slow start with panel members explaining their experience with small company financial statements from different viewpoints: consultant, analysts, standard-setter. They all agreed that greater harmonisation would make their lives easier, but whether this harmonisation should be voluntary, how far it should go or whether full IFRSs should be common framework was left open. However, an interjection from the audience turned the discussion very lively with almost emotional contributions both from the panel and the audience. Most impressive was Mr Prada’s fervent statement in favour of IFRSs. His, several times repeated, argument was it was not IFRSs that were complex, it was business models that made accounting complex. A simple business model would make the application of complex accounting solutions unnecessary. Full IFRSs would strip themselves of all complexity with reduced size of a company and reduced complexity of its business model. He also did not believe that there was such a thing as a company not internationally active in a Capital Market Union. Sooner or later, Mr Prada stated, even smaller companies would attract foreign investment, so a harmonised system of accounting standards should be chosen from the beginning and “the best ones are IFRSs”. He also warned against blaming IFRSs for investments gone wrong: “Accounting does not provide all the information that is needed to make an investment decision.” There was little to say after such fervent statements. Panel members agreed that IFRSs were “the Rolls Royce of accounting standards” and in a last round of comments from panel members offered the hope that digital developments might make application of full IFRSs easier form smaller companies by somehow stripping the red, blue or green volumes of provisions not needed by them, and Mr Marshall conceded that despite the UK having moved to local accounting standards based on the IFRS form SMEs might end up with full IFRSs in the end.

Closing speech

Mr Gauzès, who was appointed EFRAG president just five days ago, concluded the meeting. His main technical comments regarded the effect analyses EFRAG is going to include into its endorsement advice process and the importance of considering financial stability and economic growth. On his plans for the future of EFRAG he first of all admitted that he was very young to his new role and that he still had to learn a lot about EFRAG's functioning and its activities. However, he also offered that he has something to contribute EFRAG’s work - good relations to the European Parliament and especially ECON:

You will not be surprised that one of my first initiatives will be to enhance the relationships with my former colleagues in the European Parliament. […] I envisage a regular dialogue with them. This dialogue will give EFRAG the possibility to give more consideration to the European Parliament views, earlier in the process.

And as the main message he stated: “It is important that EFRAG makes sure the European voice heard – loud and clear – at the IASB.”

We thank the EFRAG Secretariat for inviting IAS Plus observers to the event.