ifrs accounting standards endorsement procedure

At a Glance
ECONOMIC AND MONETARY AFFAIRS
IFRS Accounting Standards Endorsement Procedure
International Financial Reporting Standards (IFRS) i
are issued by an international private organisation,
the International Accounting Standards Board (IASB).
In order to become binding law in the EU, they must be ‘endorsed’ in a specific procedure
prescribed in Article 3(1) and 6 Regulation No 1606/2002 of the Parliament and of the
Council (consolidated version) and Articles 5a(1)-(4) and Articles 10 and 11 Council
Decision 1999/468/EC (consolidated version), i.e. the ‘Regulatory Procedure with
Scrutiny’ ii (FR ‘PRAC’). All standards and interpretations are adopted as Commission
Regulations (Regulations to amend an annex to Commission Regulation No 1126/2008,
consolidated) to have directly binding effect without the need for national implementation.
Development of the standard: The IASB’s due process iii
selection of
stakeholder
IASB
establishing
consultative
group
selection of stakeholder
& interested public
interested public
IASB publishing
working paper
public debate of
proposal
IASB publishing
exposure draft
IASB outreach activities
public hearings
and/or field
studies
IASB publishing
final IFRS
nonmandatory
steps
mandatory
steps
National Standard Setters
EU Endorsement of IASB issued standards iv - best case scenario
EFRAG & COM effect study
Impact Assessment
EFRAG advice
Commission
proposal
stakeholder consultation
Author: Doris KOLASSA
Editorial Assistant: Irene VERNACOTOLA
Policy Department A: Economy and Scientific Policy
European Parliament
PE 569.995
EFRAG European Financial Reporting Advisory Group
ARC
Accounting Regulatory Committee
ARC vote
Council and
Parliament
scrutiny
endorsement
decision
possible opposition by ARC, Council/EP,
see next page
EN
Policy Department A: Economic and Scientific Policy
Possibilities for EU Endorsement of IASB issued standards
requests EFRAG opinion on IFRS standard
endorsement advice within 2
months: positive if consensus,
QM or simple majority, stating
dissenting views
European Commission
Accounting
Regulatory
Committee
(ARC)°
negative or no
ARC opinion
positive ARC
opinion (QM)
Commission submits proposal to Council
and forwards it to EP
Commission submits proposal for scrutiny
to Council and EP
no Council/EP
opposition
within 3
months from
referral date
Regulation
is adopted by COM
Council (QM)
or EP (AM)
oppose^
within 3
months
Council (QM)
opposes^
within 2
months
i) Council
envisages adoption
and submits to EP
ii) Council does not
act within 2
months: COM
submits to EP
EP does not
oppose or
react within
4* (resp. 2)
months
Regulation
cannot be
adopted by
COM
but: Commission may submit ‘amendedi’ (e.g.
carve-out) or ‘new’ (or old unchanged) proposal to ARC
Legend:
QM = qualified majority; AM = absolute majority (of component members)
Regulation
is adopted by COM
°ARC delivers opinion with time limit set by its chair, voting with QM, but may refrain from an opinion
^opposition must be justified and can be based only on (i) an excess of implementing powers, (ii) noncompatibility with basic act, or (iii) disrespect for subsidiarity/proportionality
*period calculated from the initial forwarding date (as Council has two months)
i
ii
iii
iv
IFRS are issued by the IASB. The EU has to endorse IFRS 'as they are' in order to be fully compliant,
i.e. no changes can be made. Non-endorsement or carve-outs are of course possible, but then they
become ‘EU-FRS’, and EU firms have still to comply with the full IFRS if they want to benefit from
IFRS acceptance, e.g. in the US.
The Commission has currently no proposal to align the pre-Lisbon-Treaty PRAC to the new
delegated/implementing acts procedure according to Articles 290 and 291 TFEU.
Source: Botzem, The EU’s Role in International Fora: Paper 7-The IASB, 2015, p. 24.
Source: Botzem, p. 27, based on http://www.iasplus.com/en/resources/ifrs-topics/europe.
DISCLAIMER
The content of this document is the sole responsibility of the author and any opinions expressed therein do not necessarily
represent the official position of the European Parliament. It is addressed to Members and staff of the EP for their parliamentary
work. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the
European Parliament is given prior notice and sent a copy.
This document is available at: www.europarl.europa.eu/studies
Contact: [email protected]
Manuscript completed in May 2016
© European Union
Internal ref.: ECON-2015-14
ISBN: 978-92-823-8677-4 (paper)
ISBN: 978-92-823-8678-1 (pdf)
CATALOGUE: QA-01-16-089-EN-C
CATALOGUE: QA-01-16-089-EN-N
doi: 10.2861/836729 (paper)
doi: 10.2861/58642 (pdf)