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Europe 10 years after IFRS first- adoption Françoise Flores – EFRAG TEG Chairman Ramon Aceres Foundation –Madrid– 17 February 2015.

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Presentation on theme: "Europe 10 years after IFRS first- adoption Françoise Flores – EFRAG TEG Chairman Ramon Aceres Foundation –Madrid– 17 February 2015."— Presentation transcript:

1 Europe 10 years after IFRS first- adoption Françoise Flores – EFRAG TEG Chairman Ramon Aceres Foundation –Madrid– 17 February 2015

2 EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February : « IAS Regulation » 2005: First-time adoption

3 Progress towards global standards 2001: No major economies use international standards. 2012: 100+ countries require or permit IFRSs 2/3rds of G20 now require IFRS Source: IASPlus / Deloitte 3 G20 Members requiring use of IFRS Adoption year Turkey2005 U.K.2005 France2005 Germany2005 Italy2005 South Africa2005 Australia2007 Brazil2010 Canada2011 Korea2011 Mexico2012 Argentina2012 Russia : IFRS without reconciliation for US foreign issuers EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

4 In the last 15 years… IASB was refounded and EFRAG was created EFRAG has developed from an endorsement advice mechanism into a strong international player All Europeans – and many outside Europe - speak IFRS Strong involvement of all European stakeholders and National Standard Setters in a fully developed due process Concrete effects of European influence Fully converged standards seem out of reach at present EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

5 Towards fully converged standards… 2006: convergence agreement reached between the IASB, the FASB, the SEC et the European Commission = joint projects : the decision by the SEC is expected… however will not be made EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

6 Numerous joint projects… Concrete output: Revenue Recognition Similar standards: Leases (?), Consolidation Bitter disappointment: Financial Instruments Projets that have been stopped: Debt /Equity, Financial Statement Presentation, Employee benefits, Derecognition, Insurance, Conceptual Framework EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

7 Latest contributions in the IFRS standard setting EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

8 Convergence PAFA GLASS ASAF: Technical discussion forum with the IASB A F S B Canada UKGermanySpain Australia Japan China

9 Multilateral Discussion Forum Creation of the l’Accounting Standard Advisory Forum end of participants, regional groups and national standard setters –3 seats for Europe, EFRAG+2 (Germany, Spain) –3 seats for the Americas (US, Canada, Latin America) –3 seats for Asia-Oceania (AOSSG, Japan, China) –1 seat for Africa (PAFA represented by South Africa) –2 seats at large (UK, Australia) EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

10 EFRAG’s field work policy Effect studies/Field tests = IFRS quality control –Intended outcomes –Clarity of requirements –Operationality EFRAG (and National Standard Setters) should be participants in an IASB quality control process EFRAG has taken the initiative to ensure proper quality control for Europe EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

11 Keeping the debate open: Leases EFRAG and NSS supplementary round of consultation over summer with preparers and users – Concerns about arrangements scoped into the lease proposals although they are service contracts –Preference for IASB or FASB model –Half of the preparers surveyed prefer IAS September; EFRAG Roundtable ASAF: discussion on boundary between leases and services relaunched EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

12 EFRAG Early Stage Proactive activities Either on conceptual issues… Bulletins on the Conceptual Framework (with 4 NSS): –Prudence, Stewardship, Business Model, Asset/Liability approach,Reliability, Complexity… DP on Classification of Claims –To help structure the Debt/Equity distinction EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 With the distinct objective of easing participation of all stakeholders in those more conceptual discussions

13 EFRAG Early Stage Proactive Activities …Or on more practical issues… DP on IFRS in Separate Financial Statements (with ICAC, RJ and OIC) EFRAG Short Discussion Series –Levies: what would have to be changed in IFRS for a different accounting outcome –Presentation of the reversal of acquisition ‘Step Ups’ –Equity method: one line consolidation or measurement basis? EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

14 We want more influence!

15 EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 EFRAG reform was announced late 2012 …Today EFRAG has become a body which is globally recognised for its technical expertise, but the expectations of European constituents have also evolved. Time has may be come to beef up EFRAG to include all public policy considerations in the endorsement process… Extract from speech by Olivier Guersent Head of Cabinet of Commissioner Barnier IFRS Foundation – EFRAG joint event – 11 October 2012

16 Europe’s reform in 2013 Initiated by the EC in 2012, involvement of the ECOFIN and the EP Final Maystadt report October 2013: Should IFRS be more «European »? Objectives: –To ensure that European views are presented in a coherent, convincing and timely manner –To make IFRS accepted by European constituents, i.e. have them endorsed –To test whether change is needed in the European endorsement process Finance Regulation EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

17 Main recommendations in the Maystadt report Confirm EU IFRS policy Retain the current endorsement process, standard by standard, on an adopt or reject basis Formalise that IFRS should not hinder economic growth or financial stability, should be prudent Transform EFRAG to widen its mandate and make it a fully representative all inclusive institution (private stakeholders, national standard setters, European regulators) Adopt a consensus based decision making process for EFRAG Improve interaction of EFRAG with the ARC and the EP EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

18 European IFRS endorsement process Regulation (EC) 1606/2002 Preamble (10) An accounting technical committee should provide support and expertise to the Commission in the assessment of international accounting standards Article 6 The Commission shall be assisted by an accounting regulatory committee EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 ARC

19 EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 Before the Maystadt reform True and fair view principle Conducive to the European public good The European Commission assisted by An accounting technical Committee An accounting regulatory Committee

20 EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 Before the Maystadt reform True and fair view principle The European Commission assisted by An accounting technical Committee EFRAG TECHNICAL STAFF EFRAG TECHNICAL EXPERT GROUP: Defines all EFRAG’s technical positions EFRAG TECHNICAL EXPERT GROUP: Defines all EFRAG’s technical positions SUPERVISORY BOARD IASB

21 EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 After the Maystadt reform True and fair view principle Conducive to the European public good The European Commission assisted by An accounting Regulatory Committee Provides advice on both technical and economical aspects An accounting technical Committee

22 EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 Structure after the Maystadt reform True and fair view principle EFRAG Board Determines all EFRAG positions EFRAG Board Determines all EFRAG positions The European Commission assisted by European public good Financial stability Economic growth European public good Financial stability Economic growth EFRAG TECHNICAL EXPERT GROUP: Provides technical advice to the EFRAG Board EFRAG TECHNICAL EXPERT GROUP: Provides technical advice to the EFRAG Board EFRAG TECHNICAL STAFF Field work Field work Field work Field work IASB

23 Composition of the Board of EFRAG The EFRAG Board is composed of 17 members: –8 representatives of European organisations (Preparers, Auditors, Users) –8 representatives of NSS (France, Germany, Italy, the UK + four others) –1 President nominated by the European Commission European regulators are observers Funding EFRAG has become a condition for nominating representatives EFRAG TEG becomes an advisor to the EFRAG Board EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

24 Roger Marshall, Chairman FRC AC (UK) – Acting President Chairman ANC (until the appointment: Michel Barbet-Massin) (France) Hans Buysse, nominated by EFFAS Angelo Caso, Chairman OIC (Italy) Stig Enevoldsen, Member DASC (Denmark) Gérard Gil, nominated by EBF, ESBG, EACB Jorge Gil Lozano, nominated by EBF, ESBG, EACB Benoît Jaspar, nominated by Insurance Europe Liesel Knorr, Chairman ASCG (Germany) Erlend Kvaal, Chairman NASB (Norway), Patrice Marteau, nominated by BUSINESSEUROPE Claes Norberg, nominated by BUSINESSEUROPE Laurence Rivat, nominated by FEE Peter Sampers, Incoming Chairman DASB (Netherlands) Anders Ullberg, Chairman SFRB (Sweden) Mark Vaessen, nominated by FEE

25 EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 Is this no more than another reform?

26 How has EFRAG’s governance evolved over time? No fundamental change took place from 2001 to 2014: –The EFRAG Supervisory Board was responsible for oversight and funding –A Technical Expert Group determining all of EFRAG’s positions, deriving its legitimacy from the independence and expertise of its members and of EFRAG’s due process –Working groups to provide specific expertise –Strong involvement of National Standard Setters –Transparency of proceedings EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

27 How has the EFRAG’s governance evolved over time? 4 reforms in 13 years: –2003, 2008, 2012, 2014 Seeking more influence for Europe and more cohesiveness Two major drivers: –Increased interaction with National Standard Setters –Increased funding EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

28 This reform of EFRAG is: More than an evolution, rather an institutional overhaul… Implemented with a lot of continuity… EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

29 31st October 2014 Reform entered into force

30 EFRAG today and tomorrow A private association created 13 years ago to assist the EU IFRS policy Serving the European public interest Acknowledged as independent technical advisor to the European Commission Participation of all European stakeholders, with National Standard Setters playing a prominent role Funded 50 % privately, 50% by the European Commission EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

31 EFRAG’s main activities Expressing the European view in the IFRS standard setting process Facilitating participation of all European stakeholders: –Draft comment letters –Outreach events/ surveys –Field tests –Proactive work EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

32 Europe speaking with one voice EFRAG

33 EFRAG’s main activities (2) Providing the European Commission with endorsement advice –Whether IFRS meet ALL endorsement criteria of the IAS Regulation EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

34 Agenda of the new EFRAG Board Endorsement IFRS 15 Revenue Recognition Endorsement IFRS 9 Financial Instruments Commenting on Rate-regulated Activities Discussion Paper Commenting on the Conceptual Framework Exposure Draft Monitoring finalisation of : –Insurance Project –Leases Project Contributing to future steps in the Macro hedging project Launching new proactive activities EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

35 What has been accomplished so far?

36 New approach to endorsement Recommendation whether to endorse a newly published IFRS –Cover letter, summarising the main conclusions and supporting arguments –Appendix 1: Understanding the main changes –Appendix 2: Assessing the new IFRS against the technical criteria of the IAS Regulation –Appendix 3: Assessing whether the new IFRS is conducive to the European public good –Appendix 4: Responding to specific requests of the European Commission EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 NEW ALREADY DONE

37 What does the IAS Regulation say? Explicit objective of the Regulation was: to ensure a high degree of transparency and comparability to support an efficient functioning of capital markets (Art 1, Aim) EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 This in itself is conducive to the European public good

38 Is an IFRS conducive to the European public good? Is the IFRS improving financial reporting, increasing transparency, investor protection? Are benefits outweighting the costs? Would there be negative side-effects? –Competitive disadvantages for European companies? –Impact on investor and issuer behaviours that would be negative to the European economy? –Any impediment to economic growth or financial stability? EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

39 IFRS 15 Revenue Recognition IASB published IFRS 15 in May 2014 ARC discussion in June: –No supplementary field test needed –EFRAG to seek input on the effective date of 1 January 2017 EFRAG Final Endorsement advice: February 2015 –Positive endorsement advice, with effective date as mandated by the IASB –No adverse effect on the European public good identified EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

40 IFRS 9 endorsement advice IFRS 9 issued in July 2014 Draft endorsement advice expected to be issued end of April, final endorsement advice end of July 2015 Specific assessments expected from ESMA, EBA, EIOPA, ECB to assess: –Investor protection –Potential effects on financial stability EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

41 IFRS 9: endorsement advice Detailed endorsement advice request received from the European Commission: –Interrelationships between IFRS 4 (Insurance) and IFRS 9, relevance for long- term investment activities –Use of fair values –Reliability and potential effects of the impairment model –Continuity of the European carve-out EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

42 Other projects Former EFRAG’s positions on Leases and Insurance Contracts confirmed (November and December 2014) Final comment letter on Rate-Regulated Activities approved as proposed by EFRAG TEG (January 2014) Conceptual framework: support for issues identified/comments by EFRAG TEG (February 2014) Review of ASAF: should continue, has worked out well EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

43 Approach to EFRAG’s strategy The EFRAG Board will determine in particular: –How to better pool resources in Europe? –How to conduct effect analyses? Scope? Resources? –How to make Europe’s influence stronger? –How to ensure EFRAG’s representativeness? –How to ensure greater cohesiveness? –What strategy towards the US? EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

44 EFRAG receives financial support of the European Union-DG Internal Market and Services. The contents of this presentation is the sole responsibility of EFRAG and can under no circumstances be regarded as reflecting the position of the European Union. EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015 Thank you for your attention!


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