Steven Maijoor, ESMA chair, said: ‘The convergence of supervision of IFRS financial statements continues to be an important area of activity for ESMA and European enforcers, and the 2017 activity report shows their commitment to the harmonisation of the application and enforcement of financial information in Europe.

‘Whilst the peer review carried out in 2017 highlighted some areas for improvement, it also helped identify good practices across different European jurisdictions. It confirmed that since their publication in 2014, the guidelines have significantly contributed to strengthening supervisory convergence.’

The peer review looked at the application of ESMA’s guidelines of enforcement of financial information by the national competent authorities (NCAs). In addition, ESMA published a separate fact-finding exercise on the transitional disclosures regarding the new standards IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.

ESMA reported that over the course of 2017, national enforcers reviewed the financial statements of about 1,100 issuers (approximately 19% of issuers of securities listed on EU regulated markets), which led to action against 328 (32%) of the issuers examined.

Among those, for the purpose of assessing compliance with the 2016 European common enforcement priorities, EU enforcers scrutinised the financial statements of 204 listed issuers. The examinations resulted in enforcement actions against 56 issuers (27%) related to the enforcement priorities assessed.

The other areas where most infringements were identified by European enforcers remained the same comparing with 2016 and 2015, and related mainly to presentation of financial statements, accounting for financial instruments and impairment of non-financial assets.

In 2018 ESMA says accounting enforcers will focus on the disclosure of the expected impact of the implementation of the new standards IFRS 9 and IFRS 15 in the period of their initial application.

Maijoor said: ‘ESMA and NCAs are focusing now on the new standards that came into force this year, and which introduced significant changes to financial statements. It is of fundamental importance that issuers ensure high-quality implementation of IFRS 9 and IFRS 15, and provide relevant and comprehensive information on the expected impacts on the financial position and performance of the entity.’

In addition, in light of the emphasis on transitioning to a sustainable financial system in the EU and the new requirements regarding the disclosure of non-financial information, ESMA will coordinate the enforcement activities related to both non-financial and corporate governance information.

ESMA report Enforcement and Regulatory Activities of Accounting Enforcers in 2017 is here.

Report by Pat Sweet