1 Room for interpretation in IFRS: The Kiss of Death or Road to Success for IFRS? Prof. Dr. S. J. Maijoor (AFM)

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Presentation transcript:

1 Room for interpretation in IFRS: The Kiss of Death or Road to Success for IFRS? Prof. Dr. S. J. Maijoor (AFM)

2 Room for Interpretation in IFRS; CESR’s Response & Role in the New Accounting Era. Two main topics: 1.CESR Co-ordination mechanism 2.Is there a need for a European IFRS interpretation mechanism?

3 Room for Interpretation in IFRS; CESR’s Response & Role in the New Accounting Era. 1.CESR Co-ordination mechanism

4 1. CESR Co-ordination system A. Key actors in the process of getting and applying IFRS in the EU B. Some specific elements of the IFRS framework C.The description of the CESR co-ordination mechanism

5 A.Key actors in the process of setting and applying IFRS in the EU: Standard setting process EU Court of Justice -Interpretation Of EU Law EU Commission And Parliament -Endorsement decision -Publication in OJ ARC EFRAG IASB - IFRIC National Standard Setters Academics, Audit Firms (tech.dep.) -Endorsement opinion -Endorsement advise -Standards and Interpretations -Technical corrections -Local interpretations -Accounting doctrine Standard application process CESR-EECS-Enforcement decisions -Database -Co-operation with SEC -Endorsement National courts-Case settlement Competent authorities -National ex-post enforcement -National ex-ante enforcement Market participants -Users of inform. -Market discipline Auditors-Audit opinion Issuers-Preparation of Fin. statements

6 1. CESR Co-ordination system 1.Formal IASB Standards and IFRIC Interpretations B.The European financial reporting framework and the role of some specific elements of the IFRS framework

7 1. CESR Co-ordination system 1.Formal IASB Standards and IFRIC Interpretations 2.Technical corrections B.The European financial reporting framework and the role of some specific elements of the IFRS framework

8 1. CESR Co-ordination system B.The European financial reporting framework and the role of some specific elements of the IFRS framework 1.Formal IASB Standards and IFRIC Interpretations 2.Technical corrections 3.Local (national) interpretations

9 1. CESR Co-ordination system B.The European financial reporting framework and the role of some specific elements of the IFRS framework 1.Formal IASB Standards and IFRIC Interpretations 2.Technical corrections 3.Local (national) interpretations 4.Clarifications of standards-interpretations

10 1. CESR Co-ordination system B.The European financial reporting framework and the role of some specific elements of the IFRS framework 1.Formal IASB Standards and IFRIC Interpretations 2.Technical corrections 3.Local (national) interpretations 4.Clarifications of standards-interpretations 5.Auditors' opinions

11 1. CESR Co-ordination system B.The European financial reporting framework and the role of some specific elements of the IFRS framework 1.Formal IASB Standards and IFRIC Interpretations 2.Technical corrections 3.Local (national) interpretations 4.Clarifications of standards-interpretations 5.Auditors' opinions 6.Enforcement decisions

12 1. CESR Co-ordination system B.The European financial reporting framework and the role of some specific elements of the IFRS framework 1.Formal IASB Standards and IFRIC Interpretations 2.Technical corrections 3.Local (national) interpretations 4.Clarifications of standards-interpretations 5.Auditors' opinions 6.Enforcement decisions 7.Market discipline

13 Standards application Issuers Auditor EU National enforcers CESR - EECS IFRIC clarifications IFRIC interpretations Standard setting (endorsement) IASB IFRIC EFRAG (advise to EC) EU- Comm. EU- Parliament Endorsed Standards And Interpre- tations (EU Law) ARC

14 1. CESR Co-ordination system Issuers Auditors EU National enforcers CESR - EECS IFRIC IFRIC Clarifications IFRIC interpretations

15 1. CESR Co-ordination system The description of the CESR co-ordination mechanism C. The description of the CESR co-ordination mechanism Key principles of the mechanism: Discussion of enforcement decisions and experiences within a formal structure Discussion of enforcement decisions and experiences within a formal structure All supervisory bodies take into account the existing decisions taken by EU National Enforcers All supervisory bodies take into account the existing decisions taken by EU National Enforcers Development of a database as practical reference tool (not a book of rules!) Development of a database as practical reference tool (not a book of rules!)

16 1. CESR Co-ordination system The description of the CESR co-ordination mechanism C. The description of the CESR co-ordination mechanism Current thoughts on enhancement of the co-ordination process: Particular issues caused by the transition to IFRS Particular issues caused by the transition to IFRS Interactions with other EU stakeholders Interactions with other EU stakeholders Operational co-operation with third countries securities regulators Operational co-operation with third countries securities regulators

17 1. CESR Co-ordination system The description of the CESR co-ordination mechanism C. The description of the CESR co-ordination mechanism EECS: The European Enforcers' Coordination Sessions: Include all enforcers on financial information in EU (also non-CESR members) Include all enforcers on financial information in EU (also non-CESR members) Bimonthly meetings with persons representing 27 countries Bimonthly meetings with persons representing 27 countries Discussing the decisions taken or to be taken by local enforcers Discussing the decisions taken or to be taken by local enforcers Agenda committee EECS Agenda committee EECS EECS Database EECS Database

18 1. CESR Co-ordination system The description of the CESR co-ordination mechanism C. The description of the CESR co-ordination mechanism EECS Database: Database of enforcement decisions. Collection of all relevant European enforcement decisions Collection of all relevant European enforcement decisions Both action and non-action decisions of enforcement Both action and non-action decisions of enforcement Both ex-ante and ex-post decisions included Both ex-ante and ex-post decisions included Not a rule book of interpretations!! Not a rule book of interpretations!!

19 1. CESR Co-ordination system The description of the CESR co-ordination mechanism C. The description of the CESR co-ordination mechanism EECS Database, member obligations Timely input of new decisions Timely input of new decisions Consultation of database on taking a decision Consultation of database on taking a decision Take into account existing decisions Take into account existing decisions Consult peers in cases of apparently contradicting decisions Consult peers in cases of apparently contradicting decisions

20 Room for Interpretation in IFRS; CESR’s Response & Role in the New Accounting Era. 2.Is there a need for a European IFRS interpretation mechanism?

21 2. Is there a need for a European IFRS interpretation mechanism? Some of CESR initial views: Reaching appropriate level of consistency is of high importanceReaching appropriate level of consistency is of high importance Already existing complex landscape in EU Already existing complex landscape in EU Gaining experience with new reporting environment in due time Gaining experience with new reporting environment in due time No need for additional institute in absence of convincing needs No need for additional institute in absence of convincing needs Balancing of the cost and benefits of a new mechanism Balancing of the cost and benefits of a new mechanism

22 2. Is there a need for a European IFRS interpretation mechanism? Important elements to keep in mind: Important elements to keep in mind: 1.The importance of preserving fundamental characteristics of IFRS - international - principle based 2.Desire to provide EU players with more guidance for application - what is the level of consistency required? 3.What is the role of third country issuers going to be on enforcement and interpretations of IFRS?

23 Room for interpretation in IFRS: The Kiss of Death?

24 Room for interpretation in IFRS Or: Road to Success?