In March 2013, EU Commissioner for Internal Market and Services Michel Barnier appointed Mr Philippe Maystadt as Special Adviser to evaluate whether the EU’s International Financial Reporting Standards (IFRS) adoption system was effective and enabled the EU to play its full role in the debate.
After presenting his final recommendations at the ECOFIN Council meeting on 15 November 2013, Mr Maystadt discussed for the first time these recommendations and how they might be progressed with EU stakeholders during an event hosted by Dr Wolf Klinz, MEP, and organised by FEE (the Federation of European Accountants) and ACCA (the Association of Chartered Certified Accountants) at the European Parliament. The roundtable gave rise to a lively discussion. A panel of stakeholders of representatives from EFRAG, national standard setters, the preparers/businesses and investors communities and from the accounting profession - debated issues such as how to reinforce the EU’s contribution to IFRS, and how to improve the governance of the current EU structures in the field of financial reporting and accounting - the European Financial Reporting Advisory Group (EFRAG) and the Accounting Regulatory Committee (ARC).
Wolf Klinz, MEP, host of the event, said: 'Accounting is not only a technical subject, but a highly political one too. It has a tremendous impact on the real economy; the financial crisis has shown that the accounting rules do matter and the question of the right valuation is particularly critical. It is in Europe’s interest to have a homogeneous set of accounting rules to allow for comparability of accounts between different companies and amongst member states.
'Already in 2002, the EU decided to introduce IFRS. Since then, not only the stock market-listed companies are using it, but also other companies that are internationally active. The European Parliament wants the European interest to be taken into account when those standards are being established by IASB, but do not want to have a special set of accounts for Europe; we are, on the contrary, interested in seeing the IFRS developing into a truly global set of rules. It is now time to take a closer look at the EU ‘s endorsement system and see whether it can be made more effective and changed in a way that the EU can really be sure to take care of its interests appropriately.'
Philippe Maystadt, Special Adviser EC said 'When I started the mission assigned by Commissioner Michel Barnier, I had no preconceived ideas about the outcome. I held many meetings with stakeholders, which triggered debates and fed into the drafting of the final report. The objective is clear: to enhance the European Union’s role in promoting high quality accounting standards. And there is a wide support for that from the stakeholders.
'The goal is to put forward recommendations that can be implemented quickly and, where possible, without legislative proposals by the European Commission. We need a quicker and more efficient system as soon as possible, given the major IFRS proposals that will have to be endorsed in the months to come, such as on lease-accounting and IFRS9 and also in light of the upcoming European Parliament elections in May.'
Richard Martin, ACCA Head of Corporate Reporting, who moderated the debate added: 'The Maystadt recommendations are around three main issues: the IFRS endorsement process and criteria, the identification of three options to strengthen the European Union's influence in international accounting standard-setting, and the involvement of EU bodies such as ARC or the European Parliament at an earlier stage with EFRAG. The objective of today’s discussion is to try to see where some of the issues of the implementation of these recommendations might come out and what sort of implications they might have.'
The debate revealed that the Maystadt recommendations are broadly welcome by EU stakeholders. However if strong backing for global standards and the current 'standard-by-standard' adoption procedure was clear, most indicated much less support for flexible endorsement that would allow for 'carve-ins' and 'carve outs', even with the safeguards suggested by Mr Maystadt. These safeguards centre around the need to ensure that any move to introduce greater flexibility should be strictly regulated. Mr Maystadt proposes adding adoption criteria to the Regulation on the application of the IFRS such as not endangering financial stability and not hindering the economic development of the region, and the clarification by the Commission on the interpretation of the criterion specifying that a standard should contribute to the public interest.
At the event, it was stressed that EFRAG needs to be a genuine European organisation with participants that will approach issues from a European perspective, and not to be an aggregate of national interests. It needs an effective cooperation between all stakeholders, public and private. The composition of EFRAG’s board needs to be right in terms of both quantity and quality, and there was a clear demand from some that the number of private sector stakeholders, especially investors, should be increased to get the balance right.
EFRAG should aim to work on the basis of consensus. However concerns were raised that this may not always be possible and that some provision for decision-making in those cases will be needed.
Olivier Boutellis-Taft, CEO of FEE concluded the debate, adding: 'Europe needs global standards because it needs investment, especially foreign investment. Accounting should not be hostage to technicalities, nor to politics, it is a means to an end: bringing trust and transparency to markets participants, especially investors, and I believe the private sector deserves a better representation than what is currently envisaged. Financial reporting also has a key public interest dimension. Therefore it’s all about cooperation – not fight – between the private and public sector.
'Mr Maystadt’s report is a very useful step forward. It is now time for the European Commission to make its intentions clear on how we are going to take this forward. It is time to put national and sectoral divergences aside and unite Europe to make its voice heard on the global stage, otherwise it runs the risk of becoming irrelevant.'