Financial Reporting Policy IFRS in the EU Task Force IPSAS Second meeting, 26 April 2012 Liliana Zugo Financial Reporting Policy DG MARKT

Outline of presentation The EU approach in an international context Consistent use of IFRS in the EU and worldwide The EU experience: endorsement process and lessons learned The role of the different institutions

The EU approach in an international context The EU supports worldwide use of IFRS: Several regulatory dialogues and technical assistance mechanisms already in place - special focus on Accession Candidates and Neighbourhood Policy Countries Constant dialogue with countries already recognised as equivalent (USA, Japan) Equivalence decisions due by 31st December 2011 for China, India, South Korea, Canada

The EU approach in an international context IFRS has speeded up accounting reforms in other jurisdictions Most conceptual work in accounting strongly influenced by work in the IASB Challenge: make accounting solutions work in jurisdictions with different legal traditions

Consistent application of IFRS Transparency and comparability of financial information are very important to maintain trust and confidence in financial markets General view that consistency of IFRSs application in the EU has been improved IFRSs have been the driving motor towards comparability of financial information accross Europe But … still room for improvement

Consistent application of IFRS Risk …: Due to the different approaches to adopt IFRSs (EU endorsement, transposition into national GAAPs…) Exacerbated by: IFRSs are principle-based standards => enforcers as safeguards to abusive interpretations

The EU experience - The endorsement process IASB European Commission European Parliament EFRAG Council ARC Accounting Regulatory Committee Interest groups

The IAS Regulation Regulation 1606/2002: From 2005 all listed companies in the EU use IFRS for hteir consolidated accounts Options for Member States Endorsement criteria No additions or modifications to the standards

Comitology Procedure with Scrutiny 1. IASB issues a standard 2. EFRAG holds consultations 3. EFRAG's endorsement advice + effect study 4. Commission draft endorsement Regulation (translations) 5. Accounting Regulatory Committee vote 6. European Parliament and Council scrutiny period 7. Commission adoption and publication in the OJ Approximately 8 months

The EU experience - Lessons learned Impact assessments/Effect Studies Commission has agreed with Parliament to do Effect Studies for all standards and interpretations Collaboration Commission – EFRAG As early as possible in the standard-setting process Strong field testing ex-ante

The role of the institutions Enforcement Interpretation Regulation n°1095/2010 IFRIC European Union ESMA Regulation n°1606/2002 EU endorsement IFRICs endorsement National market regulator National market regulator National market regulator National market regulator EFRAG advice

The role of the institutions The IASB: Standard setter Request from stakeholders for ex-ante field-testing and post-implementation reviews (EC letter to IASB agenda consultation) IFRIC: Interpretation committee (higher level of activity expected)

The role of the institutions ESMA: Coordinating consistent application and enforcement of IFRS in the EU But the ultimate responsibility for the enforcement of IFRS financial statements rests with the national competent authorities According to Regulation 1095/2010, ESMA to provide guidelines, recommendations and opinions on how to apply the existing IFRS standards EFRAG: Provides technical advice to the European Commission (endorsement of IFRSs / IFRICs, …)

(32-2) 296.13.56  (32-2) 292 17 49  liliana.zugo@ec.europa.eu Contact Liliana Zugo Financial Reporting (32-2) 296.13.56  (32-2) 292 17 49  liliana.zugo@ec.europa.eu http://ec.europa.eu/internal_market/accounting/index_en.htm