Endorsement and enforcement of IFRS in the European Union

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Endorsement and enforcement of IFRS in the
European Union

• Ago Vilu
• Head of PwC Financial Reporting Group for
  Russia/CIS
• Member of the Accounting Regulatory Committee of
  the EU
• Chairman of the Estonian Accounting Standards
  Board

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IFRS in Europe
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IFRS endorsement in the EU

• In July 2002 the European Parliament adopted
  regulation on the application of international
  accounting standards (IAS Regulation)
• all EU listed companies have to apply IFRS in
  their consolidated accounts starting from
  1.01.2005.
• Member states may permit or require IFRS also in
  respect of non-listed companies and
  non-consolidated financial statements.

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IFRS endorsement in the EU
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(No Transcript)
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IFRS endorsement mechanism in the EU

• All IFRS standards have to be endorsed in the EU
  before they become effective, because
• it is not possible politically, or legally, to
  delegate accounting standard setting to a private
  organisation (IASB) over which the EU has no
  control
• important to create legal certainty
• ensure that there are no EU public policy
  concerns.
• IAS standards can only be endorsed in the EU, if
• they are not contrary to the true and fair
  principle and
• they meet the criteria of understandability,
  relevance, reliability and comparability

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IFRS endorsement mechanism in the EU

• Two level endorsement mechanism
• Expert level European Financial Reporting
  Advisory Group (EFRAG)
• Group of accounting experts giving technical
  advice to ARC
• Regulatory level - Accounting Regulatory
  Committee (ARC)
• Representatives from all member states voting for
  endorsment of standards
• Because of the endorsement mechanism, IFRS
  endorsed in the EU may differ from normal IFRS
• Potential timing differences
• Potential non-endorsement of certain standards
  (currently the only difference relates to
  certain paragraphs in IAS 39 portfolio
  hedging)

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IFRS endorsement in the EU member
statesEstonian example
pwc
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Thank you for your attention!