Companies and investors in the European Union mostly support IFRS, according to a report adopted Friday by the European Commission, but the report also identifies room to improve IFRS in some areas.
The report evaluated whether the IAS Regulation, which mandated that IFRS would apply for the consolidated accounts of listed companies in the EU, is achieving its objectives. The evaluation is part of the Commission’s broader review of existing regulation that is designed to reduce regulatory costs and make EU law simpler.
The evaluation included public consultation and a review of literature, including an October 2013 report to the European Commission by former European Investment Bank president Philippe Maystadt that asked whether IFRS should be “more European”.
Key findings included:
- Companies were mostly positive about their experience with IFRS and said that, in most cases, benefits outweighed costs.
- Investors largely supported IFRS for improving the transparency and comparability of financial statements.
- Most stakeholders said the process through which IFRS become part of EU law works well.
- The recent reforms of the European Financial Reporting Advisory Group, the technical adviser to the European Commission on accounting standards, are expected to strengthen the voice of the EU in the standard-setting process for IFRS.
Areas identified for improvement included:
- Enhanced collaboration between organisations involved in endorsement of IFRS, which could improve timeliness and allow for a more holistic consideration of standards with other aspects of EU law.
- Simplifying accounting procedures to reduce their complexity for companies.
The results of the evaluation will be presented at a conference in Latvia on Thursday.
Michel Prada, chairman of the IFRS Foundation trustees, said in a statement that the trustees will study the assessment in detail and look forward to discussing it at the conference.
“The Trustees appreciate this thorough assessment of the use of IFRS in the European Union and welcome the positive and constructive conclusions of the provisional report,” Prada said.
—Ken Tysiac (email@example.com) is a CGMA Magazine editorial director.