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Room for interpretation in IFRS: The Kiss of Death or Road to Success for IFRS?

Prof. Dr. S. J. Maijoor (AFM). Room for interpretation in IFRS: The Kiss of Death or Road to Success for IFRS?. Room for Interpretation in IFRS; CESR’s Response & Role in the New Accounting Era. Two main topics: CESR Co-ordination mechanism

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Room for interpretation in IFRS: The Kiss of Death or Road to Success for IFRS?

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

  2. Room for Interpretation in IFRS; CESR’s Response & Role in the New Accounting Era. Two main topics: CESR Co-ordination mechanism 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. 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 A. Key actors in the process of setting and applying IFRS in the EU: EU Court of Justice -Interpretation Of EU Law Standard setting process EU Commission And Parliament -Endorsement decision -Publication in OJ ARC -Endorsement opinion EFRAG -Endorsement advise IASB - IFRIC -Standards and Interpretations -Technical corrections National Standard Setters -Local interpretations Academics, Audit Firms (tech.dep.) -Accounting doctrine

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

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

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

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

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

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

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

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

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

  15. 1. CESR Co-ordination system C. The description of the CESR co-ordination mechanism • Key principles of the mechanism: • Discussion of enforcement decisions and experiences within a formal structure • 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!)

  16. 1. CESR Co-ordination system 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 • Interactions with other EU stakeholders • Operational co-operation with third countries securities regulators

  17. 1. CESR Co-ordination system 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) • Bimonthly meetings with persons representing 27 countries • Discussing the decisions taken or to be taken by local enforcers • Agenda committee EECS • EECS Database

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

  19. 1. CESR Co-ordination system C. The description of the CESR co-ordination mechanism • EECS Database, member obligations • Timely input of new decisions • Consultation of database on taking a decision • Take into account existing 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 importance • Already existing complex landscape in EU • Gaining experience with new reporting environment in due time • No need for additional institute in absence of convincing needs • 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: • The importance of preserving fundamental characteristics of IFRS - international - principle based • Desire to provide EU players with more guidance for application - what is the level of consistency required? • 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?

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