ESMA expresses revised view on IFRS Interpretations Committee agenda rejection statements

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20 Jul 2011

The European Securities and Markets Authority (ESMA) has published a public statement on retrospective adjustments to financial statements following rejection notes published by the IFRS Interpretations Committee (Committee).

The Committee of European Securities Regulators (CESR), the predecessor of ESMA, issued a statement in April 2007 discussing the issue of whether or not rejection notes published by the Committee itself or the explanatory text included in such a rejection note, should result in an accounting change and, if so, whether the change should be regarded as the correction of an error or a change in accounting policy in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

The CESR statement indicated such rejection statements should not lead to a retrospective adjustment in accordance with IAS 8, noting it had been argued by some that the conflicts of views on how IFRSs should be applied were transitional issues and would disappear over time as all stakeholders become more familiar with the interpretation and application of IFRS.

ESMA's statement issued today changes this view, noting the following:

"ESMA believes that, 6 years after the implementation of IFRS, we are no longer in such a transitional period. Rejection notes published by the IFRS Interpretations Committee often provide clarification of the standards. There is an expectation on the part of the stakeholders in IFRS that rejection notes concluding that IFRSs are sufficiently clear will be carefully considered by preparers in determining their accounting policies. In the case of a change in a previous accounting treatment following the issue of a rejection note, an issuer should apply IAS 8 and provide proper and sufficient disclosure on the reasons for the change, having regard to the particular facts and circumstances of the individual case, including reference to the rejection note."

Click for ESMA press release (link to the ESMA website).

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