Report on IFRS enforcement published by ESMA
The activity report on the enforcement of International Financial Reporting Standards (IFRS) in the European economic zone in 2011 was published by the European Securities and Markets Aurthority (ESMA). The major driver of enforcement of several IFRS was the Euro crisis.
The ESMA was responsible for monitoring the compliance of financial statements with the IRFS and taking suitable actions through European Enforcers Coordination Sessions (EECS) for the enforcement of IFRS. The enforcement activities of the European states were coordinated by EECS to increase the convergence of enforcers’ activities. It was also responsible for providing feedback to the International Accounting Standards Board (IASB) on any issues related to the implementation of IFRSs.
ESMA was paid special attention to the new sovereign debt developments and the increased interest of market in these developments. It closely monitored the impact of these developments on the accounting practices of public listed companies and financial institutions. ESMA published two public statements that stressed upon the importance of transparency in relation to risks regarding sovereign debt. It also emphasized to consistently apply the IFRS’s principles of recognition and measurement.
The European enforcers feel that the quality of financial statements that comply with the IRFS is improving with each passing year. This shows the improved capacity of the issuers to apply principles of IFRS to their business. However the issuers have also identified the areas in which more work needs to be done. Following are some of the examples of these areas:
- Disclosures about the assumptions used for impairment tests
- Presentation of risks and uncertainties that have impact on assumption of going concern
- Disclosures regarding the hierarchy of fair value of financial instruments
- Different aspects related to the consolidation of financial statements