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IFRS Foundation responds to the EC consultation on the impact of IFRS in the EU

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Oct 27, 2014

In a response letter to the European Commission (EC), the IFRS Foundation (IFRSF) has provided its views on how the adoption of IFRSs has brought positive effects to financial reporting in the EU and noted the importance IFRSs in achieving the objectives of the new Commission.

In August 2014, the EC initiated a public consultation in which it asked interested parties to provide their thoughts on the impact of IFRSs in the EU. In particular, the EC looked for views concerning the scope, relevance, and the cost/benefits of the IAS Regulation; the current EU endorsement mechanism and criteria; quality of IFRS financial statements; and enforcement of IFRSs. In its response letter, the IFRSF provides its views on those concerns and emphasizes the following two key points.

First, the IFRSF states that IFRSs should be considered as a “global language” for accounting and that “jurisdictions have made very few modifications to IFRS, and the few that have been made are generally regarded as temporary steps in the jurisdiction’s plans to adopt IFRS. If jurisdictions such as the EU were to make modifications, they would not be adopting IFRS and so would lose the benefits of using the globally-accepted language of IFRS. EU companies would no longer have the benefit of the global financial reporting passport that IFRS provide, including their ability to access international capital markets using their IFRS financial statements, without reconciliation to local standards. Investors would be deprived of comparable accounts and therefore essential information.”

Second, the IFRSF notes that IFRSs are critical in achieving the objectives of the new Commission. The letter states that “[g]iven the global nature of capital markets and the need for comparability within the EU market to mirror internationally-accepted best practice, only IFRS can provide those requirements. The transparent financial reporting provided by companies reporting under IFRS helps participants in capital markets to make more efficient and informed resource allocation and other economic decisions, and makes investment more attractive to capital providers. Having a comparable and familiar financial reporting language is, therefore, a vital feature to encourage the investment that is so necessary for the growth that the Commission seeks for the EU."

The response letter is available on the IASB's Web site.

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