A commentary on issues relating to the enforcement of International Financial Reporting Standards in the EU

TLDR

IFRS adoption is widely supported for improving financial reporting quality and comparability, but its benefits depend on regulatory oversight, prompting the EU to mandate enforcement bodies by 2005. The paper reviews pre‑2005 enforcement developments in France, Germany, the Netherlands, and the UK, and discusses challenges to uniform enforcement. The authors assess these developments against FEE guidelines and compile perspectives from IASB, FEE, and EFRAG stakeholders. The study informs enforcement body developers and capital market participants about the implications of differing regulatory regimes.

Abstract

Abstract The adoption of International Financial Reporting Standards (IFRS) is supported in many countries because it may improve the quality and international comparability of financial reporting. However, these goals are less likely to be achieved without regulatory oversight that promotes rigorous and consistent use of IFRS. Consequently the European Union (EU) is requiring all member states to introduce enforcement bodies by 2005, the date of IFRS adoption in the consolidated financial statements of all EU listed companies. We review ongoing activities in France, Germany, the Netherlands and the UK in setting up and modifying enforcement bodies before 2005. We test current developments against the Fédération des Experts Comptables Européens (FEE) (2002 April 2002. "Discussion paper on enforcement of IFRS within Europe". In Fédération des Experts Comptables Européens (FEE) April, Available at: www.fee.be/publications/main.htm [Google Scholar]) recommendations and against the principles for effective enforcement proposed in CESR Standard No. 1 on Financial Information. We present the views of people involved in financial reporting standard setting and enforcement from these countries, as well as the IASB, FEE and EFRAG, about the challenges of achieving effective uniform enforcement. Our paper will be of interest to people developing or participating in enforcement bodies, and to capital market participants who will be subject to the various regulatory regimes.