©2006 EFRAG EFRAG Moscow 31 Jan 2006 1 EU FINANCIAL REPORTING LATEST DEVELOPMENTS NOFA Francoise...
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Transcript of ©2006 EFRAG EFRAG Moscow 31 Jan 2006 1 EU FINANCIAL REPORTING LATEST DEVELOPMENTS NOFA Francoise...
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
1
EU FINANCIAL REPORTINGLATEST DEVELOPMENTS
NOFAFrancoise Flores, EFRAG TEG
31 Jan 2006
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
2
FRANCE
IASB
UK
US/FASBJAPAN
GERMANY AUS
CANADA
TOWER OF BABEL
SPAIN
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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IASB
US/FASB
JAPAN
CANADA
CONVERGENCE
FRANCEUK
GERMANY AUS
SPAIN
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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IASB
US/FASB
JAPANCANADA
CONVERGENCE
FRANCEUK
GERMANY AUS
SPAIN
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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US GAAP IAS/IFRS GAAP
GLOBAL GAAPGLOBAL GAAP
CONVERGENCE
MORE DETAILED ! JAPAN
CONVERGENCE
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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CONVERGENCECONVERGENCE
EU POLICY: CONVERGENCE
A SUCCESS CRITERION FOR THE
EU COMMISSION
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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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
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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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
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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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!
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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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 4th and 7th Accounting Directive
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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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
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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Endorsed IFRS
To be used
Not endorsed
Not to be used?
REGULATION
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EU - STRUCTURE
EFRAG
ACCOUNTING REGULATORY COMMITTEE -ARC
EU COMMISSION
Advice
Approval
EU
PARLIAMENT
COUNCIL OF MINISTERS
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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IASB
approval
EFRAG
advice
EU bureaus
EU Comm + ARC
endorses
EU review
EU-Parliament
+ C o Ministers
Endorsed
2 m 1,5m 2 m + 1m
REGULATION
Translate
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EU ENDORSEMENT CRITERIAEU ENDORSEMENT CRITERIA
TRUE AND FAIR VIEW
UNDERSTANDABLE, RELEVANT, RELIABLE AND COMPARABLE
EUROPEAN PUBLIC GOOD
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EFRAG ObjectivesEFRAG 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
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EFRAG
ADDITIONAL OBJECTIVES:
•European coordination
•Stimulate thought leadership
•Challenge IASB
•Advising on EU Accounting Directives
Memorandum of Understanding with EU Commission
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EFRAG - STRUCTUREEFRAG - STRUCTURE
TECHNICAL EXPERT
GROUP - TEG
SUPERVISORY BOARD
INSURANCE WG SME JWG REV REC WG FIWG
VENTURE CAP WG CONCESSION WG
EFRAG SECRETARIAT
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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ED
IASB comment period 3 months
EFRAG draft letter
EFRAG deadline
EFRAG comment
letter
Max 2 months
EFRAG Due processEFRAG Due process
EFRAG working groups
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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• 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 FathersFounding Fathers
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EFRAG - OrganisationEFRAG - 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
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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– 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 - TEGEFRAG Organisation - TEG
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EFRAG Technical Expert Group (TEG)EFRAG Technical Expert Group (TEG)VOTING MEMBERS AT TEG MEETINGS• Stig Enevoldsen, Chairman Denmark Auditor• Françoise Flores France Industry• Catherine Guttmann France Insurance Advisor• Hans Leeuwerik The Netherlands Industry• Ugo Marinelli Italy Auditor / Academic• Thomas Naumann Germany Banker• Friedrich Spandl Austria Financial Analyst• Dominique Thouvenin France Auditor• Mike Ashley UK Auditor, Member of the UK ASB• Thomas Seeberg Germany Industry• Mike Starkie UK Industry
NON VOTING MEMBERS AT TEG MEETINGSChairmen of large National Standard Setters:• Harald Wiedmann GASB• Antoine Bracchi CNC• Ian Mackintosh ASB
NON VOTING OBSERVERS INVITED AT TEG MEETINGS• European Commission• CESR
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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Consultative Forum of Standard SettersConsultative 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
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EFRAG – Working GroupsEFRAG – 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
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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EFRAG
EFRAG DRAFTS FOR COMMENT NOW:•Management Commentary •Measurement Objectives•ED 8 Operating Segments (soon)
STRONGER INPUT FROM
RUSSIA
We want your comments!
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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PAAinEPAAinEProactive Accounting Proactive Accounting Activities in EuropeActivities in Europe
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EFRAG Moscow 31 Jan 2006
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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
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EFRAG Moscow 31 Jan 2006
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Revenue Recognition
Conceptual Framework
Pensions
Equity/Liability split
Performance Reporting
PAAinE
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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FRANCE
Influence!
UK
EFRAGSWEDEN
GERMANYHOLLAND
POLAND
SPAIN
PAAinE
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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Consistent applicationConsistent application
Big issue in Europe
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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ROADMAPReconciliation
Work prog
ROADMAPReconciliation
Work prog
EC
ROADMAP Reconcilation Work programme
US SEC
IASB
CONSISTENT APPLICATION
FASB
ECUS SEC
IASB
CONSISTENT APPLICATION
FASB
US SEC
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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CONSISTENT APPLICATION
Accounting standards
Agree work programme
Implementation / application
Use of implicit options
Interpretations
Enforcement
Roadmap
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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INTERPRETATIONS
PERCEIVED NEED IN EUROPE
•IS THERE REALLY A NEED?
HOW DO WE SOLVE IT, IF THERE IS A NEED?
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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INTERPRETATIONS
PRINCIPLES BASED
RULE BASED
HIGH LEVEL STANDARDS DETAILED STANDARDS
FLEXIBILITY ????
NOT APPLICABLE
NOT APPLICABLE
CONSISTENT????
INTERPRETATIONS?
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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Interpretation Support
Mechanism
Should a mechanism be established for Europe? A Forum?
A Roundtable?
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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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...
©2006 EFRAG
EFRAG Moscow 31 Jan 2006
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NIC
NIC D
NIC F
IFRIC
NIC
EU COORDINATOR ”FORUM”
NIC
NIC UK NIC DK
CESR
INTERPRETATION SUPPORT
©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!
©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