This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

IFASS meeting with exchange of views on EU fitness check

  • IFASS (International Forum of Accounting Standard Setters) (dark green) Image
  • European Union Image

03 Oct 2018

The meeting of the International Forum of Accounting Standard Setters (IFASS) currently held in London saw a lively discussion on the European Commission (EC) consultation document 'Fitness Check on the EU Framework for Public Reporting by Companies'.

The topic was introduced by Peter Sampers, Chairman of the Dutch Accounting Standards Board (DASB). Mr Sampers coordinated the response of eleven smaller European standard-setters to the consultation and is also familiar with developments at the European oversight bodies ESMA, EIOPA, EBA, and ECB.

Mr Sampers introduced the topic to the wider standard-setter community by explaining the history of the fitness check beginning with the EU IAS Regulation over the Maystadt report, the evaluation of the IAS Regulation, the report of the HLEG on sustainable finance to the EC action plan on sustainable finance thus summarising what he called the European "love-hate relationship" with IFRSs. (Mr Sampers has kindly given us permission to make his presentation slides available on IAS Plus, they are available here.)

Mr Sampers then turned to the fitness check itself, especially to question 19 of the consultation: "Given the different levels of commitment to require IFRS as issued by the IASB around the globe, is it still appropriate that the IAS Regulation prevents the Commission from modifying the content of IFRS?" After a short comment on the lack of neutrality of the consultation language and format, which was later echoed by an irate FRC representative, Mr Sampers gave a balanced overview of pros and cons and shared consultation results that saw only the French standard-setter in favour of possible carve-ins and carve-outs while the other standard-setters and the oversight bodies all came down in favour of no changes. He also shared first results that had been presented by EC representatives at the meeting of EFRAG's Consultative Forum of Standard Setters in September (an official report on the consultation outcomes is expected in October 2018):

  • 338 responses were received.
  • Most responses came from accounting organisations.
  • 60% came from 5 member states.
  • The IFRS questions were addressed by approx. 70% of the respondents.

According to Mr Sampers, the EC representatives at the CFSS meeting also noted the following overall conclusions from the consultation: "IFRS is essentially fine" and "some think nothing should be done".

When the discussion was opened to the floor, the following main comments were made:

  • The wording of the HLEG in its final report seemed to indicate that there is equality between sustainability and long-term investment, which is not the case.
  • France's position is not pro carve-ins and carve-outs per se, it is for such a possibility as a last resort.
  • Canada has theoretically the possibility to change IASB pronouncements but has never done so yet. If there ever would be changes, it would be the standard-setter's decision and not a political one. Political decisions in other parts of the world that would have an effect on the international accounting community would be viewed with great concern.
  • It was noted that the question was connected with sovereignty issues but it was also noted by others that sovereignty issues have been on the table since adoption in the EU. The binary adoption decision was built into the endorsement process intentionally to keep the possibility of political influence to a minimum.
  • Next steps in the process will not necessarily be coming soon as Parliamentary elections are coming up in the EU, which could mean a standstill of developments in 2019.
  • The EU is not a bubble, "we are trading with the rest of the world and the rest of the world is trading with us". (Australia, Canada, and Hong Kong have in fact also responded to the EU consultation for exactly this reason.)
  • By trying to make accounting bring about long-termism, governments are ducking out of their jobs of addressing things directly themselves.

The last comment from the audience was from IASB Chairman Hans Hoogervorst. He thought the European thinking of giving the EU more power by being able to "threaten" the IASB with carve-ins and carve-outs was completely wrong. Mr Hoogervorst explained that the IASB is listening very carefully to concerns brought to its attention and many adjustments are made during the process of development of a standard. Why, he asked, should the IASB continue to listen to European concerns if in the end the EU would change the final standards during endorsement according to their own wishes anyway?

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.