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IFRS Foundation publishes its comments on the Maystadt Report

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Dec 05, 2013

The IFRS Foundation has posted to its Web site comments on the final report of the special advisor to EU Commissioner Michel Barnier, Mr. Philippe Maystadt, setting out his preliminary recommendations for enhancing the EU’s role in promoting high quality accounting standards.

In its response to the final report, the IFRS Foundation acknowledges the fact that each jurisdiction determines how its contribution is organized and operated. However, the Foundation expresses concerns that the suggested transformation of EFRAG might lead to "the further lengthening of what are already very lengthy procedures." The comment of the IFRS Foundation extends to the participation in the standard-setting process as well as the endorsement of IFRSs for use in the European Union (EU).

The IFRS Foundation is pleased that feedback obtained by Mr. Maystadt shows clear support for the maintenance of a standard-by-standard adoption procedure among European constituents. At the same time, the IFRS Foundation does not believe that additional endorsement criteria regarding financial stability and economic development of a region are needed and comments that "we remain concerned that there continues to be a misunderstanding as to the purpose of general financial reporting, and about its limitations, and how it interacts with financial stability."

The IFRS Foundation does not share the view that the EU's regulatory sovereignty in accounting was "renounced" and also believes that the U.S. influence on the standard-setting process is overstated in the report. Although convergence between IFRSs and U.S. GAAP was a goal pursued under the Norwalk Agreement, the IFRS Foundation states that "the IASB has maintained its independent voice."

In response to the claim in the Maystadt report that the IASB is aiming to "promote international convergence and the search for new members, to the detriment of those [. . .] states that already apply IFRS" in its agenda-setting process, the IFRS Foundation points out that the IASB has determined its agenda with the help of an agenda consultation in 2011 and that going forward the IFRS Foundation's Due Process Handbook requires the IASB to undertake a public consultation on its work program every three years.

Finally, the IFRS Foundation comments that the presentation of the question of whether fair value accounting contributed to the financial crisis seems to be one-sided in the report, since it does not mention that most of the academic evidence available shows the claim that fair value accounting exacerbated the financial crisis appears to be largely unfounded.

Please click for access to the full comments of the IFRS Foundation on the IASB's Web site.

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