ESMA publishes report on 2012 enforcement activities

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23 Jul 2013

The European Securities and Markets Authority (ESMA) has published a report providing an overview of the financial information supervision and enforcement activities carried out during the year ended 31 December 2012 in the European Union. Impairment of goodwill was a clear focus of attention in 2012.

In 2012, European enforcers performed full reviews of around 1,050 interim and annual accounts covering around 17 % of listed entities accounts in Europe. In addition, 1,200 accounts were subject to partial review, representing a coverage of 20% of the population of listed entities.

ESMA noted that there is still room for improvement in the quality of financial reporting. Examples of areas requiring additional effort from issuers in order to comply with IFRS include:

  • application of the classification criteria for assets held for sale,
  • determination of the discount rate for the calculation of defined benefit obligations,
  • classification and measurement of financial instruments,
  • assessment of goodwill impairment,
  • distinction between a change in an accounting policy and an accounting estimate and
  • disclosures about the risks and uncertainties or judgments and estimates used in preparation of IFRS financial statements.

A separate targeted review of goodwill impairment, where the results were already published in January 2013, was conducted in 2012 and illustrated "that goodwill impairment losses recognised in 2011 were limited to a handful of issuers and concentrated in a very limited number of industries" and in many cases the related disclosures "were of a boiler-plate nature and not sufficiently entity-specific".

As the enforcers feel that this means that, in many cases, the users of the financial statements are not able to evaluate the reliability of the assumptions used from the disclosures given, ESMA and European enforcers decided to monitor this area in 2013 and included this topic in the common enforcement priorities defined for the 2012 annual financial statements.

In an additional effort to strengthen enforcement, the ESMA has launched a consultation on guidelines on the enforcement of financial information published by listed entities in the European Union. The proposed guidelines are the result of a review of Standards No. 1 and 2 on the enforcement of financial information developed by the Committee of European Securities Regulators (CESR), ESMA's predecessor, in April 2003 and April 2004 respectively.

Please click for the Activity Report of the IFRS Enforcement activities in Europe in 2012 on the ESMA website.

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