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European Commission launches review of IFRS

29th January 2014

MGI World The European Commission has commissioned a review of the effect of IFRS on Europe

The European Commission has launched a review investigating the effects of using IFRS within the EU. However, there are concerns this move could add fuel to the EU’s already difficult relationship with the international organisation that sets global accounting standards. 

Mazars and ICAEW have been commissioned to conduct the review, which is aiming to find out whether switching to IFRS has achieved the benefits the EU was hoping for. The project will run until autumn 2014. 

Robert Hodgkinson, ICAEW executive director, commented: "The task of Mazars and ICAEW is to take stock after eight years of IFRS reporting in the EU and assess the impact of the switch to IFRS on the comparability and transparency of the financial reports of European companies.”

This review comes as tension mounts between policymakers in the EU and the IASB. European policymakers believe that the organisation’s project on lease accounting favours US interests, and as a result have heaped criticism on changes to the conceptual framework surrounding the creation of accounting standards.

This follows a suggestion by European parliament last year that its contributions to the IASB could be determined by whether the IASB updated its approach to setting international reporting standards. This could have seen the organisation potentially lose around a third of its funding.

However, since then its stance on the issue appears to have mellowed, and it is unlikely there would be such a move now. 

The IASB has also come under pressure from the UK reporting watchdog, which is calling for it to reintroduce prudence into its conceptual framework. 

Responding to an IASB discussion paper, the FRC said the organisation should reintroduce the concepts of prudence, stewardship and reliability into the framework underpinning global accounting standards. 

It commented: "The conceptual framework should state that the role of prudence is in the development of accounting policies, particularly in ensuring that all losses and liabilities are reflected promptly and that gains are not recognised except where there is adequate evidence.”

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