IFRS regulatory framework
Global accounting standards for listed companies, known as International Financial Reporting Standards (IFRSs), are developed by an international organisation under civil law, IFRS Foundation, and its two bodies, the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRS IC). The financial reporting regulatory framework is incorporated into EU legislation via a separate committee procedure. IFRSs adopted by the European Commission are binding on listed companies.
Key actors in the approval of IFRSs at European level are the European Financial Reporting Advisory Group (EFRAG) and the Accounting Regulatory Committee (ARC).
EFRAG assists the European Commission in deciding whether a standard issued by the IASB or an interpretation given by the IFRS IC can be approved as EU legislation. Subsequently, the ARC, consisting of representatives of Member States’ ministries, proposes approval or rejection of the standard or interpretation to the Commission.
The European Securities Markets Authority (ESMA) has observer status in both EFRAG and ARC, whereas the European Banking Authority (EBA) only participates in the latter as an observer. Both supervisory authorities (ESMA and EBA) seek to influence regulations and interpretations concerning financial reporting, particularly when IASB or IFRS IC submits a proposal for a new standard or interpretation or proposes amendments to those issued earlier.
The FIN-FSA participates regularly in both ESMA’s and EBA’s working groups that draft comments to IFRSs. Even though the working groups emphasise the supervisory aspect in their comments, they also discuss financial reporting-related issues raised by companies.