Report on IFRS enforcement in 2013: Extensive enforcement of compliance with standards on financial instruments
Nearly two thirds of the listed companies have been subject to comprehensive IFRS enforcement in 2005–2013. Application of IFRS standards has developed, but there is still room for improvement in the financial statements. The quality of reporting also varies between companies.
The notes to the financial statements represent a key development area of IFRS financial statements. According to Financial Supervisory Authority (FIN-FSA) observations, notes disclosed are not as extensive as they should be. The notes often contain copied boilerplate phrases with no company-specific contents. If there are too few significant notes or the notes have not been clearly presented, investors do not necessarily receive all material information.
In 2013, FIN-FSA enforcement observations not only covered information to be disclosed in the financial statements but also to a significant extent valuation issues. In a few enforcement cases, companies decided to reassess the valuation of their balance sheet items based on FIN-FSA enforcement observations. The cases in question concerned deferred tax assets and goodwill.
In 2013, IFRS enforcement focused on the following topics:
- Financial Instruments: Enforcement focused on information on financial risk, application of hedge accounting, and impairment of loans provided by financial institutions. The largest proportion of the 2013 enforcement observations were made in enforcement of compliance with standards on financial instruments.
- Related party disclosures: Development is required as regards identification of related parties, collection of information on related party transactions, and financial statement information on related parties.
- Interim reports: According to FIN-FSA's assessment, the detail and extent of interim reports should be developed.
- Goodwill: In particular, the management assumptions on the level and growth rate used in cash flow projections were challenged as well as how the management has examined the causes of differences between past cash flow projections and actual cash flows.
Further information on the 2013 IFRS enforcement will be provided in the IFRS report.
For more information, please contact:
- Tiina Visakorpi, Head of Division, tel. +358 10 831 5383
Annex
The report on IFRS enforcement was published in English on 14 April 2014.