IFRS Foundation Responds to the EC Consultation on the Impact of IFRS in the EU
The IFRS Foundation has sent a response letter to EC (European Commission) explaining its understanding on how the application of International Financial Reporting Standards (IFRS) has positively impacted the financial reporting in Europe. The letter also explained the significance of these international standards in obtaining the goals of new EC.
The EC started a public discussion to get the views on the effect of International Financial Reporting Standards in Europe. The EC specifically focused on views relating to relevance, cost and benefit analysis and scope of international accounting standards framework. In addition to these concerns the foundation letter focused on two points.
Firstly IFRS should be viewed as worldwide accounting language. Local authorities around the globe have made very little changes in these standards and these few changes are normally seen as momentary measures in the local authorities plan to apply IFRS. Locations like Europe would miss the advantages of worldwide accepted standards if they do not adopt IFRS and make changes in standards. As a result of not adopting IFRS, the European companies will not be comparable to other companies around the globe and investors will not be able to get vital and comparable information. Further to be able to get access to global capital markets they will have to adjust their financial statements.
Secondly, the IFRS Foundation observed that International Financial Reporting Standards are crucial in obtaining the goals of the new EC. The letter indicated that application of IFRS is important as the capital markets around the globe have become more integrated and there is need of comparability within the European market. The increased transparency in financial statements prepared under IFRS will help the investors in analyzing the information in a better way and assist them in decision making which in turn will entice more investment. Hence having comparable financial information is vital in attracting investments and increasing the economic growth which is one of the main objectives of EC.
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