The European Financial Reporting Advisory Group (EFRAG) is organising itself internally in anticipation of a possible decision by Europeans on the development of European non-financial reporting standards, should the European Commission ask it to participate in this work.
“Many believe that Europe has decided to have non-financial European standards. We are not there yet”, EFRAG's president of the board told EUROPE on Monday 15 June. He recalled that the Vice-President of the European Commission, Valdis Dombrovskis, would like to see a reflection on the issue.
However, any decision will be taken at the end of the ongoing consultation process on the Directive (2014/95) governing the non-financial information that large European companies of public interest (banks, insurance companies, listed companies) must publish annually (see EUROPE 12430/22).
“In order not to be taken by surprise”, said Jean-Paul Gauzès, EFRAG is setting up “a working group” composed of experts from various backgrounds who will work on the issue for six months, in the event that EFRAG is given the responsibility for the development of European standards. The terms of reference of this working group are being finalised.
EFRAG has already set up a working group on Climate-related Reporting, which had presented the result of its work in February (see EUROPE 12421/13). A third group has just been formed and will work on the opportunities and risks related to ‘business models’.
On a personal note, the former MEP saw “an advantage” in the development of non-financial European standards, as the EU, at the forefront of this field, could play a role as a “catalyst for further international efforts”, even if the development of international accounting standards is “slow in coming”, he acknowledged.
In the event that EFRAG is chosen for the development of European standards, the Advisory Group would have to reorganise itself. Mr. Gauzès imagined a two-pillar structure, one devoted to accounting standards and the other, which would be “autonomous” from the first one, responsible for standard-setting work.
IFRS 17. Furthermore, EFRAG's ability to influence the development of international accounting standards even after they have been issued by the IASB, the organisation responsible for setting accounting standards at the international level, was highlighted.
“Our role is to take a critical view of the proposals made by the IASB and to examine them in light of the general European interest and the economic constraints of the sector. Predictability is needed, but this should not be at the expense of the economic model, as long as it is legitimate”, he said.
He cited the example of IFRS 17 on insurance contracts, for which EFRAG's position was taken, except on the issue of “annual cohorts”. On this point, Italian, French and Spanish insurers fear that if the published standard were to become definitive, high-cost preparatory work would become the norm. (Original version in French by Mathieu Bion)