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©2006 EFRAG EFRAG Moscow 31 Jan 2006 1 EU FINANCIAL REPORTING LATEST DEVELOPMENTS NOFA Francoise Flores, EFRAG TEG 31 Jan 2006.

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Presentation on theme: "©2006 EFRAG EFRAG Moscow 31 Jan 2006 1 EU FINANCIAL REPORTING LATEST DEVELOPMENTS NOFA Francoise Flores, EFRAG TEG 31 Jan 2006."— Presentation transcript:

1 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 1 EU FINANCIAL REPORTING LATEST DEVELOPMENTS NOFA Francoise Flores, EFRAG TEG 31 Jan 2006

2 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 2 FRANCE IASB UK US/FASB JAPAN GERMANY AUS CANADA TOWER OF BABEL SPAIN

3 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 3 IASB US/FASB JAPAN CANADA CONVERGENCE FRANCE UK GERMANY AUS SPAIN

4 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 4 IASB US/FASB JAPAN CANADA CONVERGENCE FRANCE UK GERMANY AUS SPAIN

5 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 5 US GAAP IAS/IFRS GAAP GLOBAL GAAP CONVERGENCE MORE DETAILED ! JAPAN CONVERGENCE

6 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 6 EUROPE AND IFRS

7 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 7 CONVERGENCE EU POLICY: CONVERGENCE A SUCCESS CRITERION FOR THE EU COMMISSION

8 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 8 MAY UNDERMINE EUROPEAN INFLUENCE Europe does not sit at the table Europe is split in its input Many players try to influence the IASB IASB is working closely with FASB CONVERGENCE

9 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 9 EU REGULATION

10 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 10 REGULATION Financial Reporting Strategy of the Commission Objectives:  Integrated financial market in Europe  Harmonisation of financial reporting  Reduce cost of capital  Increase transparency and comparability Endorsement mechanism with two tiers technical level (EFRAG) and political level (ARC) Europe wishes to contribute to the development of IFRS from the earliest stage possible

11 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 11 REGULATION Cornerstones EU companies listed on a regulated market, including banks and insurance companies, to prepare consolidated accounts in accordance with IAS/IFRS Option for Member States to extend to unlisted companies and to the preparation of individual accounts SMEs not scoped in, but option provided to Member States IASB project for SMEs!

12 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 12 REGULATION Cornerstones Accounting Regulatory Committee (ARC) political level chaired by the Commission composed of representatives of Member States decide on endorsement on the basis of Commission proposals EFRAG Accounting technical committee Private-sector initiative (users, preparers, accountants, SS,…) endorsement advice to the Commission participate actively in the standard setting process Accompanied by the Modernisation of the 4 th and 7 th Accounting Directive

13 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 13 REGULATION Need for proper enforcement of IFRS high quality statutory audit strengthened co-ordination among European securities regulators (CESR) establish equivalent, high level enforcement of financial reporting throughout the EU

14 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 14 Endorsed IFRS To be used Not endorsed Not to be used? REGULATION

15 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 15 EU - STRUCTURE EFRAG ACCOUNTING REGULATORY COMMITTEE -ARC EU COMMISSION Advice Approval EU PARLIA MENT COUNCIL OF MINISTERS

16 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 16 IASB approval EFRAG advice EU bureaus EU Comm + ARC endorses EU review EU-Parliament + C o Ministers Endorsed 2 m1,5m2 m+ 1m REGULATION Translate

17 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 17 EU ENDORSEMENT CRITERIA EU ENDORSEMENT CRITERIA TRUE AND FAIR VIEW UNDERSTANDABLE, RELEVANT, RELIABLE AND COMPARABLE EUROPEAN PUBLIC GOOD

18 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 18 EFRAG

19 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 19 EFRAG Objectives Has been assigned main objectives: Proactive contribution to the work of IASB and IFRIC: Contribute to and influence IASB standard setting process BEFORE a standard is issued Endorsement advice to the EU Commission: Technical assessment of IFRS and IFRIC interpretation AFTER they are issued Advise on changes to the EU Accounting Directives Forum to discuss and to coordinate with NSS

20 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 20 EFRAG ADDITIONAL OBJECTIVES: European coordination Stimulate thought leadership Challenge IASB Advising on EU Accounting Directives Memorandum of Understanding with EU Commission

21 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 21 EFRAG - STRUCTURE TECHNICAL EXPERT GROUP - TEG SUPERVISORY BOARD INSURANCE WGSME JWGREV REC WGFIWG VENTURE CAP WGCONCESSION WG EFRAG SECRETARIAT

22 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 22 ED IASB comment period 3 months EFRAG draft letter EFRAG deadline EFRAG comment letter Max 2 months EFRAG Due process EFRAG working groups

23 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 23 Founding Fathers

24 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 24 Business community/preparers : UNICE Accounting profession : FEE Credit sector associations : FBE, ESBG and GEBC Insurance : CEA SMEs : UEAPME and EFAA Stock exchanges : FESE Financial analysts : EFFAS Founding Fathers

25 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 25 EFRAG - Organisation Office in Brussels Permanent staff –Full-time Chairman: Stig Enevoldsen –Technical Director: Paul Ebling –Assistant Technical Director: Reinhard Biebel –3 Project Managers –Secretary Technical Experts Group (TEG) Working groups PAAinE – Pro-active Partnership Accounting in Europe Advisory Forum

26 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 26 –Highly qualified people –Time commitment 30%-50% –Drawn from national standard setters, accountancy profession, preparers and users –Limited in size –Accountable to the Supervisory Board –Commission and CESR observer role –Consultative Forum of Standard Setters –Transparent work process – due process observed EFRAG Organisation - TEG

27 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 27 EFRAG Technical Expert Group (TEG) VOTING MEMBERS AT TEG MEETINGS Stig Enevoldsen, ChairmanDenmarkAuditor Françoise FloresFranceIndustry Catherine GuttmannFranceInsurance Advisor Hans LeeuwerikThe NetherlandsIndustry Ugo MarinelliItalyAuditor / Academic Thomas NaumannGermanyBanker Friedrich SpandlAustriaFinancial Analyst Dominique ThouveninFranceAuditor Mike AshleyUKAuditor, Member of the UK ASB Thomas SeebergGermanyIndustry Mike StarkieUKIndustry NON VOTING MEMBERS AT TEG MEETINGS Chairmen of large National Standard Setters: Harald WiedmannGASB Antoine BracchiCNC Ian MackintoshASB NON VOTING OBSERVERS INVITED AT TEG MEETINGS European Commission CESR

28 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 28 Consultative Forum of Standard Setters To bring European standard setters together to discuss technical issues Standard setters directly related to IASB (France, Germany and UK) and all other European Standard Setters Meetings on a quarterly basis

29 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 29 EFRAG – Working Groups EFRAG has established working groups on: SME Joint Working Group Service Concession Arrangements Revenue Recognition Venture Capital Investments Insurance Accounting Financial Instruments To come: Reporting Performance

30 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 30

31 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 31

32 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 32 EFRAG EFRAG DRAFTS FOR COMMENT NOW: Management Commentary Measurement Objectives ED 8 Operating Segments (soon) STRONGER INPUT FROM RUSSIA We want your comments!

33 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 33 PAAinE Proactive Accounting Activities in Europe

34 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 34 PAAinE Objectives: High quality proactive input to IASB (+FASB) Improve accounting in Europe Create debates in Europe More consistent messages to IASB Involvement in the convergence work Monitor work of IASB & FASB Thought leadership

35 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 35 Revenue Recognition Conceptual Framework Pensions Equity/Liability split Performance Reporting PAAinE

36 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 36 FRANCE Influence! UK EFRAG SWEDEN GERMANY HOLLAND POLAND SPAIN PAAinE

37 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 37 Consistent application Big issue in Europe

38 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 38 ROADMAP Reconciliation Work prog ROADMAP Reconciliation Work prog EC ROADMAP Reconcilation Work programme US SEC IASB CONSISTENT APPLICATION FASB EC US SEC IASB CONSISTENT APPLICATION FASB US SEC

39 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 39 CONSISTENT APPLICATION Accounting standards Agree work programme Implementation / application Use of implicit options Interpretations Enforcement Roadmap

40 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 40 Interpretations

41 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 41 INTERPRETATIONS PERCEIVED NEED IN EUROPE IS THERE REALLY A NEED? HOW DO WE SOLVE IT, IF THERE IS A NEED?

42 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 42 INTERPRETATIONS PRINCIPLES BASED RULE BASED HIGH LEVEL STANDARDS DETAILED STANDARDS FLEXIBILITY ???? NOT APPLICABLE CONSISTENT ???? INTERPRETATIONS?

43 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 43 Interpretation Support Mechanism Should a mechanism be established for Europe? A Forum? A Roundtable?

44 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 44 Forum-Roundtable Discussion: Is there a need? Should a structure be established? Should it just be a discussion Forum? Should it be lead by – NSS? – EC? – CESR? Resources needed? EU Commission proposal...

45 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 45 NIC NIC D NIC F IFRIC NIC EU COORDINATOR ” FORUM” NIC NIC UK NIC DK CESR INTERPRETATION SUPPORT

46 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 46 MANY PROJECTS MANY CHANGES IASB WORK PROGRAM IASB has addressed a number of issues also in the European interest: IFRS 1 First time adoption Improvements project Fair Value Option IFRIC 2 Convergence … A lot has been achieved and EFRAG wants to continue good cooperation with IASB!

47 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 47 ENDORSEMENT Europe has endorsed all existing and new IFRSs Except for: IAS 39 carve outs (one carve-out still remaining) IFRIC 3 Emission Rights (withdrawn by the IASB) EFRAG recommends endorsement on pure technical grounds Fully independent from particular interest EU Commission takes EFRAG views into consideration

48 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 48 WWW. EFRAG. ORG

49 ©2006 EFRAG EFRAG Moscow 31 Jan 2006 49 THANK YOU

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