The European Securities and Markets Authority (ESMA) has published the 2015 annual report on the enforcement and regulatory activities of accounting regulators across the EU28, highlighting the need for more consistency in the application and use of International Financial Reporting Standards (IFRS)
ESMA and national regulators examined the IFRS compliance levels of 189 listed issuers’ across 26 countries, in the areas identified by the 2014 European Common Enforcement Priorities.
Poor compliance resulted in enforcement action against 40 issuers (21%) of the 200 reviewed, with regulators finding shortcomings in the disclosure of assumptions and judgments related to the recognition, measurement and disclosures of deferred tax assets arising from tax losses; the assessment of control over an entity in the absence of majority equity interest or majority shareholding rights; and the classification of joint arrangements.
The report also draws on national regulatory reviews of the interim or annual financial statements of around 1,200 issuers, representing approximately 20% of issuers of securities listed on EU regulated markets. Once again, low standards of compliance with the accounting rules resulted in action against 273 (25%) of those issuers examined.
The main problems related to the presentation of financial statement, impairment of non-financial assets and accounting for financial instruments.
Steven Maijoor, ESMA chair, said: ‘2015 was the first year that ESMA’s guidelines on enforcement of financial information applied in the EU and marked an important milestone in strengthening the supervisory convergence of European accounting enforcement
‘We welcome the efforts issuers and enforcers have made to comply with ESMA’s statements and guidelines. However, we remain committed to further improving the transparency and relevance of financial information published to the market with the overall goal of contributing to market confidence and fostering investor protection.’
Going forward, ESMA set out its priorities for 2016 with a continuing focus on issuers’ compliance with IFRS in line previous years, but it will also take a closer look at the impact of the state of financial markets on the financial statements, the statement of cashflows and related disclosures as well as the fair value measurement of non-financial assets and related disclosures, when investigating and reviewing companies.
ESMA’s report on the enforcement and regulatory activities of accounting enforcers across the EU is here
