Global Financial Strategy - Esma wants 'comprehensive' review of IASB

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Esma wants ‘comprehensive’ review of IASB

Wednesday 23 November 2011 – by [email protected]

The European securities watchdog is calling for a review of the standard-setting process at The International Accounting Standards Board, saying it should reassess the time given for firms to implement amendments.

The European Securities and Markets Authority says that while the IASB has made significant steps in developing its outreach programme, further steps are needed.

Greater resources need to be dedicated to understanding the impact of proposals before issuing exposure drafts, Esma said in a letter released on Tuesday.

More consideration should be given to the number of amendments that can be reasonably made within certain timeframes. It adds that feedback statements could be more formalised, with post-implementation reviews carried out more systemically than is currently the case.

The IASB is also advised to “strive” for a period of calm over the next three years, with changes surrounding the conceptual framework among the few areas needing immediate improvement.

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The IASB should also ensure that the raft of new accounting principles are being applied consistently across the globe.

“Consistent application and implementation of IFRS is of the utmost importance for investors’ confidence in financial statements and for the success of IFRSs,” Esma said in its submission to the IASB’s agenda consultation, written on 9 November.

Esma says that ongoing projects surrounding revenue recognition, leases, insurance contracts and financial instruments should be finalised “as soon as possible”, before any new major projects are undertaken.

During the period of calm, the IASB is advised to place a high priority on kick-starting the conceptual framework project.

The conceptual framework scheme aims to update and refine existing concepts to reflect the changes in markets, business practices and the economic environment that have occurred in the two or more decades since the concepts were first developed.

But in consultation documents dating back to 2006, the IASB has only completed one of the eight targeted improvements. Improvements to the framework will only become effective once each of these areas has been dealt with, Esma argues.

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