Experts have answered the call of Europe’s parliament and proposed a
pan-European accounting standards body for stronger representation of the
Financial Reporting Advisory Group, which advises the European Parliament in
endorsing IFRS, is proposing to beef up its own resources and structures so it
can confer on international standards, on equal terms with the
proposal follows concerns by European finance ministers that the continent’s
interests are not sufficiently represented at the level of the IASB, as well as
a desire to have a say in the agenda of the international standard setter.
EFRAG chairman Stig Enevoldsen said a long-term goal was to ensure that there
is no ‘monopoly’ of accounting issues.
‘No doubt there is concern about the close ties between the US and the IASB.
But it is not only Europe that is concerned but the rest of the world as well,’
EFRAG chairman Stig Enevoldsen said a long-term goals was to ensure that
there is no ‘monopoly’ of accounting issues as it is important for Europe to
provide input into the IASB’s processes and agenda based on Europe’s background
and way of doing transactions.
‘There needs to be a balance in the input to the IASB between the US, Europe
and others. And that is why EFRAG’s needs to be strengthened and we also need to
work closely together in Europe to get a genuine European input.
‘But we also need to ensure the long term proactive thinking on news issues
are not left to the IASB only, but involves European background as well,’ said
Accounting commentator and Bruegel research fellow Nicolas Véron said Europe
currently had a very light infrastructure in so far as implementing IFRS.
‘There is altogether widespread sentiment in the market place that the
infrastructure in Europe is not sufficient to ensure high quality and consistent
implementation of international accounting standards. And EFRAG is sensing this
and purports to address this with its recommendations. It’s also an answer to
the call by the ECOFIN ministers concerned with governance of the IASB,’ said
But Véron doubts EFRAG’s ability to provide a structure equivalent to that
which is present in the form of the US Securities and Exchange Commission.
‘EFRAG remains an issuer-supported business group, which has the recognition
of the European Commission in the sense that its opinions are part of a formal
standards endorsement process. It’s not clear EFRAG can provide the answers to
challenges presented in the market place around IFRS.
‘I think the European policymakers haven’t entirely thought through the
decisions taken in 2002 to adopt IFRS because when these were taken, it was
argued that efficiency in the market place would be improved.
‘But after the controversies, such as that of IAS 39, policy makers have
belatedly realised that there were some political dimensions to this business
and have struggled to get a consistent approach and legitimacy for the process
in Europe… the current decisions about EFRAG are about this struggle,’ said
He described Europe as being ‘obsessed’ by the influence the US has on the
international accounting standard setter.
‘But they fail to recognise the US voice is based on the strong skills and
expertise, especially at the level of the SEC, which plays a very central role
in the US framework.
‘So I think it is naïve to think that to beef up EFRAG could be a way of
countering this force because EFRAG, in terms of market impact, remains a
private sector group with private sector governance and is very different to the
public authority that is the SEC,’ said Véron.
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