Thomas OVERSBERG

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IFRS Accounting in Europe
Thomas Oversberg
Project Manager
Brussels - 5. November 2007
1
Agenda
Who is EFRAG?
 How do IFRSs become European law (the
Endorsement Process)?
 Lease Accounting in Europe

2
EFRAG - background
European Financial Reporting Advisory
Group (EFRAG)
 Technical group to advice European
Commission (EC) on IFRS
 Independent, private sector body, founded
in 2001 by European organisations of
preparers and users of financial
statements and auditors, as well as
European standard setters

3
EFRAG‘s role
Proactive contribution to the IASB and
IFRIC – Comment Letters
 EU Commission - Endorsement advice
 Stimulate thought leadership – PAAinE
 European Coordination - CFSS

4
EC – EFRAG Working Arrangement

The Working Arrangement of March 2006
formalised EFRAG‘s role as a technical
advisor to the EC:
"EFRAG will provide advice to the Commission
on all issues in relation to the application of
IFRS in the EU.”

Specifically on:


Endorsement advice
Proactive input to IASB/IFRIC
5
EFRAG‘s structure
Supervisory Board
User Panel
Secretariat
Technical
Expert Group
(TEG)
INSURAN WG
SME JWG
CONCESSION WG
CFSS
Fin Inst WG
JV WG
6
EFRAG‘s due process




Members of the TEG must not consider
themselves as representing sectorial and/or
national interests but shall be guided by the need
to act in the European Interest.
EFRAG has an open and transparent due
process, which allows all European constituents
to provide input for consideration of EFRAG.
All technical discussions held in public meetings.
Invitation to comment on all EFRAG draft
publications.
7
EFRAG‘s due process (cont.)
Publication of basis of conclusion for
EFRAG on endorsement advice.
 Publication of TEG agendas and summary
minutes of its meetings.
 Publication of the final endorsement
advice to the Commission.
 Publication of final comment letters on
IASB consultation documents, and other
EFRAG positions.

8
Endorsement Process
The “original” endorsement process –
Endorsement with supervision
 SARG – Endorsement with supervision and
review of EFRAG’s advice
 The future endorsement process –
Endorsement with scrutiny

9
The Endorsement
Process
Endorsement with Supervision
12
The Endorsement
Process
Endorsement with SARG
SARG
15
The Endorsement
Process
Endorsement with scrutiny
19
Endorsement Situation

Until 2007, Europe has endorsed all IASB
Standards and Interpretations, except:



IAS 39 – Carve Out
IFRIC 3 Emission Rights – Subsequently
withdrawn by IASB
In 2007, the endorsement process was
delayed due to concerns over:


IFRS 8 Operating Segments and
IFRIC 12 Service Concession Arrangements
20
Endorsement Situation (cont.)
As of 16.10.2007
www.efrag.org
21
IFRS 8 – State of play





The IASB published IFRS 8 on November 30, 2006
EFRAG issued its positive endorsement advice on
January 16, 2007
The Accounting Regulatory Committee (ARC)
unanimously supported endorsement in its meeting on
February 2, 2007
The European Parliament (EP) raised some concerns
on IFRS 8.
In April 2007, the EP and the European Commission
(EC) agreed to carry out an impact assessment of
IFRS 8.
22
IFRS 8 – State of play (cont.)


Impact assessment published by the EC in
September 2007.
In October 2007 the ECON committee of the EP
drafted a positive resolution, however requesting:




Review of IFRS 8 implementation in 2011 by the EC
Impact assessment on other standards and
interpretations by the EC
Voting on the resolution expected in the
November 2007 EP session.
Publication in Official Journal soon thereafter.
23
IFRIC 12 – state of play




The IASB / IFRIC published IFRIC 12 on
November 30, 2006
EFRAG submitted – after considerable debate – a
positive endorsement advice to the EC on March
23, 2007.
Meeting between Spain and IASB on that issue.
The ARC discussed IFRIC 12 several times so far,
but has not been asked by the Commission to
vote on it, i.e. the EC has so far not used its right
of initiative.
24
PAAinE


Pro-Active Accounting Activities in Europe
(PAAinE)
OBJECTIVES:








Partnership with National standard setters
High quality proactive input to IASB(+FASB)
More consistent messages to IASB
Create debates in Europe
Involvement in the convergence work
Monitor work of IASB & FASB
Thought leadership
Better utilisation of European resources
25
PAAinE publications so far
Conceptual
Framework
Stewardship
Revenue
Recognition
Performance
Reporting
Future publications:
Performance Reporting II
Conceptual Framework II
Equity / Liability
26
Lease Accounting in Europe




4th Directive does not contain any specific
guidance on lease accounting
European countries developed often tax driven
systems (such as Germany, Belgium…).
IAS 17 increased comparability to a certain
extent, but resulted in interpretation issues on
terms used.
The first standard to apply “substance over form”
concept.
27
Leasing – recent developments
Amendments to leasing standard as part
of the annual improvements project
 Leasing in the SME ED
 The IASB / FASB Leasing Project

28
Annual Improvements Project

IAS 17:
Classification of leases of land and buildings
 Contingent rents
 EFRAG agrees with the proposed
amendments.


IAS 40:
Investment property held under lease
 EFRAG agrees with the proposed amendment.

29
Leasing Project





EFRAG welcomes that the IASB & FASB intents to tackle
lease accounting and its current issues.
EFRAG appreciates that any future solution needs to be
aligned to the framework and the assets / liabilities
definitions.
EFRAG cautions to develop a conceptually perfect solution,
which is not practical to implement for the vast majority of
contracts and companies.
Substance of lease transactions need to be considered.
EFRAG supports convergence, but not for the sake of it, but
rather to get the best accounting solutions.
33
Concluding remarks


Speaking with one voice and submitting good
and thoughtful arguments towards the IASB has
proven to be of utmost importance.
Providing input and comments to EFRAG
ensuring that EFRAG is aware of issues and
positions and able to fulfil its role European role
is paramount and should be a high priority for
users, preparers, standard setters and other
constituents, in short: YOU.
34

EFRAG
Avenue des Arts 13-14
 1210 Brussels
 Belgium
 [email protected]

35
www.efrag.org
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