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The Future of Accounting: Standard Setting and Globalisation Developments

Explore the role of EFRAG in professional accounting standard setting and the future of the accounting profession. Discusses topics such as financial reporting strategy, IAS or US GAAP, principle-based standards, and the responsibility of management. Highlights the importance of careful judgment and the development of reporting in relation to business risks. Examines the challenges and goals of EFRAG in supporting and influencing the IASB and providing technical expertise to the Commission and Member States.

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The Future of Accounting: Standard Setting and Globalisation Developments

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  1. 2nd FCM ConferenceAthens, 22 April 2002A View on the Future of the Profession: Standard Setting and GlobalisationDevelopments in Professional Accounting Standard Setting – with focus on EFRAG and the accountancy professionby Göran TidströmChairman EFRAG Supervisory BoardPresident of FEE

  2. History • FEE Discussion Paper on a Financial Reporting Strategy within Europe (1999) • IAS or US GAAP • Principle based standards • Emphasis responsibility of management • Require application of careful judgement • Permits development of reporting in relation to business risks • Keep focus on what is important • 2000 Commission Communication EU Financial Reporting Strategy: the Way Forward • 2001 proposed IAS Regulation

  3. EFRAG – Some Facts • Publicly announced 20 March 2001 • Full support and participation of all European organisations: • Preparers: UNICE (+ ERT), EBF, CEA, ESBG, GEBC • SMEs: UEAPME, EFAA • Users: FESE, EFFAS • Accountancy profession: FEE (+ ECG) • Support of national standard setters • Appointments to the Technical Expert Group on 26 June 2001 • Appointment Secretary General end of October 2001 EFRAG is fully operational !

  4. EFRAG – Joint Proposals Main functions: • Proactive contribution to the work of IASB and IFRIC: contribute to and influence IASB standard setting process BEFORE a standard is issued • Technical assessment of IAS/IFRS and SIC/IFRIC interpretation AFTER they are issued (endorsement advice to the Commission) • Advising on changes to the EU Accounting Directives • Implementation guidance (forum to discuss and to coordinate)

  5. EFRAG - Organisation Two levels: • Technical Expert Group (TEG) • Independent experts, no representation • Work in European interest • Transparent work process – due process observed • At present 9 members • Insurance Subcommittee • Supervisory Board

  6. EFRAG – Supervisory Board • Supervisory Board: • 24 members from 14 countries • Chaired by Göran Tidström (FEE President – Sweden) • Guarantee representation of the full European interest • Representation of 10 founding organisations • Legitimacy • Proper geographical spread • Funding EFRAG • Monitoring EFRAG • Separate statement in case of negative advice

  7. EFRAG - TEG • Monthly two days meetings • EFRAG Consultative Forum of Standard Setters • Subjects addressed include: • Due process • Modernisation of the Accounting Directives • Formats • First time application of IFRS • IASB improvements project • Accounting for share based payment • Business combinations • ED preface to International Financial Reporting Standards • ED Amendment to IAS 19 • Endorsement advice on existing IFRS/IAS, SIC/IFRIC interpretations

  8. Nearby Challenges of EFRAG • Endorsement advice • Financial instruments • Share based payment • Insurance (standard 2005 ?)

  9. The New Europe – New challenges • EFRAG is there: • Need to succeed in supporting and influencing IASB • Balanced dialogue with US • Enabling one single set of financial statements for global use • Providing Commission and Member States with unique technical expertise

  10. IFSR by 2005 ! But also • All audits to be conducted in accordance with ISA – audit reports consistents across the EU and follow ISA • Enforcement of IFSR by 2005: FEE Discussed Paper on Enforcement of IFRS within Europe

  11. FEE Discussion Paper on Enforcement – Key Messages • Effective enforcement to be in place by 2005 • Enforcement to be built on effective national enforcement bodies: • No enforcement body  FRRP (review panel) • EU Member States to review arrangements for enforcement • European coordination on enforcement involving all enforcement bodies (securities regulators and review panels) • Enforcement should not result in standard setting Auditors are NOT the first line of defence: it is the responsibility of management to prepare proper financial statements and other information

  12. Next Steps in Addition to Enforcement and Auditing • Corporate governance • Public oversight of the accountancy profession • Auditor independence and objectivity • SMEs

  13. 2nd FCM ConferenceAthens, 22 April 2002A View on the Future of the Profession: Standard Setting and GlobalisationDevelopments in Professional Accounting Standard Setting – with focus on EFRAG and the accountancy professionby Göran TidströmChairman EFRAG Supervisory BoardPresident of FEE

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