Seven lessons learned from the IFRS adoption in the EU

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28 May 2015

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a report setting out some practical insights and recommendations for policy makers, regulators, standard-setters and other interested parties in jurisdictions that have recently adopted IFRS or are considering doing so.

The insights were gleaned while preparing the ICAEW's response to the European Commission's public consultation on the impact of International Financial Reporting Standards (IFRSs) in the EU, which built on a consultation among ICAEW members and was supplemented by a report reviewing 170 academic research papers (the report has recently been updated).

As the results of the ICAEW's consultation and review exercises indicated among other things that lessons might be learned by jurisdictions outside Europe contemplating or in the early stages of IFRS adoption from the experience of the UK and other EU member states, the lessons have now been published in a succinct and accessible report that places them in a global context.

The lessons are:

  • The benefits of IFRS outweigh the costs as in a relatively short time there were improvements in transparency, comparability, cost of capital and market liquidity.
  • Companies listed on regulated markets should be required to use IFRS as the report finds that the EU's decision not to extend the use of IFRS to listed entities that are not groups and other public interest entities is "questionable".
  • Local variants of IFRS should be kept to a minimum as the full benefits of IFRS can only be reaped if the standards are adopted in full.
  • Sometimes complexity is unavoidable as a complex world and complex business transactions can necessitate complex accounting.
  • National standard-setters and regional groupings are important as they have a central role to play in undertaking coordinated research, field testing and outreach activities.
  • Strong national enforcement is critical and experience in Europe has also demonstrated the vital importance of mechanisms for sharing and co-ordinating enforcement decisions.
  • Endorsement underpins legitimacy and has proved a critical means of establishing the political legitimacy of IFRS in Europe.

The lessons presented in the report are supplemented by three appendices: The future of IFRS – perspectives and progress; IFRS and the global financial crisis; and US GAAP – looking ahead.

Please click to access the report on the ICAEW website - this page offers you access to a short video introducing the report, the full report itself and executive summaries of the lessons.

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