Financial Reporting in Europe: Future Challenges

Abstract

A roundtable at the 11th workshop of the European Financial Reporting Research Group (EUFIN) on Friday 4 September 2015 in Paris brought together leading participants in the development and enforcement of International Financial Reporting Standards (IFRS) and the use of IFRS financial statements to debate the future challenges in European financial reporting. The panellists were Philippe Danjou, a board member of the International Accounting Standards Board (IASB), Roxana Damianov, team leader for corporate reporting at the European Securities and Markets Authority (ESMA) and Jacques de Greling, senior equity analyst at Natixis, vice-chairman of the European Federation of Financial Analysts Societies (EFFAS) financial accounting commission, member of the IASB's capital markets advisory group and member of the user panel of the European Financial Reporting Advisory Group (EFRAG). The panel was chaired by David Cairns. None of the panellists presented formal papers but instead spoke and debated freely about a range of current and future challenges. Not surprisingly, they focussed on the challenges arising from the use of IFRS in the consolidated financial statements by EU companies listed on EU regulated markets rather than the challenges that might arise from the use of EU or national requirements in non-IFRS financial statements.

This paper provides a synthesis of the panel discussions in the context of the European Commission's evaluation of the International Accounting Standards (IAS) Regulation, the International Financial Reporting Standards Foundation's (IFRSF) review of its own and the IASB's structure and effectiveness, and the ongoing work of the IASB and ESMA.

Keywords:

• IFRS
• IASB
• EFRAG
• ESMA
• European Union

Acknowledgements

I am grateful to Philippe Danjou, Roxana Damianov and Jacques de Greling for participating in the EUFIN roundtable and reviewing a draft of this paper. I am also grateful to Paul André (editor, Accounting in Europe) for commissioning the paper and commenting on an earlier draft.

Disclosure Statement

No potential conflict of interest was reported by the author.

ORCID

David Cairns http://orcid.org/0000-0001-7457-8364

Notes

1 The IAS Regulation refers to International Accounting Standards (IAS) rather than International Financial Reporting Standards (IFRS) but article 2 defines IAS as meaning IAS, IFRS and related interpretations issued or adopted by the IASB. The IASB and current practice uses IFRS as the collective term for these pronouncements. This paper follows current practice unless the context requires otherwise.

2 According to Pacter (2015), 12 of the remaining jurisdictions permit the use of IFRS for domestic listed companies and financial institutions, two require the use of IFRS for financial institutions and two are in the process of either adopting IFRS or converging with IFRS. The USA and seven other jurisdictions require the use of national standards for all or most domestic listed companies and financial institutions. One hundred and twenty-eight of the 138 jurisdictions have made a public commitment to supporting a single set of high-quality accounting standards.

3 For more information including the current status of these efforts, see http://www.imf.org/external/np/exr/facts/sc.htm (retrieved October 3, 2015) and http://www.worldbank.org/ifa/ifa_more.html (retrieved October 3, 2015).

4 See, e.g. ESMA (2014b), pp. 2–3.

5 Walton (2015) explores these issues in more detail and implies that, at least for the time, being, the arguments will focus on the endorsement criteria rather than the status of the IASB.

6 Further thoughts on the IASB's need for research to support its evidence-based approach to standard setting can be found on the IFRS research centre pages of the IASB's website, see http://www.ifrs.org/IFRS-Research/Pages/IFRS-Research-Centre.aspx (retrieved October 21, 2015).

7 Walton (2015) explores the reasons for the IASB's change in thinking and its relevance to Europe.