European Commission package of measures on long-term financing

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28 Mar 2014

The European Commission has adopted a package of measures to stimulate new and different ways of unlocking long-term financing and support Europe's return to sustainable economic growth. The measures build on the responses to the Commission's Green Paper consultation on the long-term financing of the European economy of March 2013. They include measures in connection with accounting standards.

Much of the debate around the Green Paper had been focused on the question whether fair value accounting leads to short-termism in investor behaviour. Many respondents had pointed at the wide range of factors that contribute to short-termism and stated that fair value accounting principles of themselves do not lead to short-termism in investment behaviour (see comments by IASB, EFRAG, FEE). Respondents had also commented on the significance of the IASB Conceptual Framework for ensuring that future accounting standards are developed in a way that is not damaging to long-term investment. They also pointed to the ongoing work of the IASB to review the accounting of financial instruments.

In the communication describing the package of measures, the European Commission has widened the discussion again including the review of endorsement criteria in connection with the planned reform of EFRAG and the conditions around the continued EU co-financing of the IFRS Foundation and has also included considerations around SME accounting as SMEs are regarded as key contributors to sustainable growth.

The actions the Commission intends to take are the following (reproduced from the communication):

  • In the framework of its endorsement of the revised IFRS 9, the Commission will consider whether the use of fair value in that standard is appropriate, in particular regarding long term investing business models.
  • The Commission will invite the IASB to give due consideration to the effect of its decisions on the investment horizons of investors both in specific relevant projects and in its development of the Conceptual Framework, paying particular attention to the reintroduction of the concept of prudence.
  • The Commission services' evaluation of the IAS Regulation will explore with stakeholders in the course of 2014 the appropriateness of the endorsement criteria, taking account of Europe's long-term financing needs.
  • The Commission services will launch a consultation in 2014 to examine (i) the case for a simplified accounting standard for the consolidated financial statements of listed SMEs, and (ii) the usefulness of a complete self-standing accounting standard for non-listed SMEs to supplement the Accounting Directive.

Please click for the following information on the European Commission website:

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