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Europe 10 years after IFRS first-adoption Franoise Flores EFRAG TEG ChairmanRamon Aceres Foundation Madrid 17 February 20151EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

2002: IAS Regulation2005: First-time adoptionProgress towards global standards

2001: No major economies use international standards.2012: 100+ countries require or permit IFRSs2/3rds of G20 now require IFRSSource: IASPlus / Deloitte3G20 Members requiring use of IFRSAdoption yearTurkey2005U.K.2005France2005Germany2005Italy2005South Africa2005Australia2007Brazil2010Canada2011Korea2011Mexico2012Argentina2012Russia20122007: IFRS without reconciliation for US foreign issuersEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 20153In the last 15 yearsIASB was refounded and EFRAG was createdEFRAG has developed from an endorsement advice mechanism into a strong international playerAll Europeans and many outside Europe - speak IFRSStrong involvement of all European stakeholders and National Standard Setters in a fully developed due processConcrete effects of European influenceFully converged standards seem out of reach at present

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 20154Towards fully converged standards2006: convergence agreement reached between the IASB, the FASB, the SEC et the European Commission = joint projects

2011-2012: the decision by the SEC is expected however will not be madeEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

Numerous joint projectsConcrete output: Revenue RecognitionSimilar standards: Leases (?), Consolidation Bitter disappointment: Financial Instruments Projets that have been stopped: Debt /Equity, Financial Statement Presentation, Employee benefits, Derecognition, Insurance, Conceptual Framework

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Latest contributions in the IFRS standard settingEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Convergence

PAFAGLASSASAF: Technical discussion forum with the IASB

AFSBCanadaUKGermanySpainAustraliaJapanChina8Multilateral Discussion ForumCreation of the lAccounting Standard Advisory Forum end of 201212 participants, regional groups and national standard setters3 seats for Europe, EFRAG+2 (Germany, Spain)3 seats for the Americas (US, Canada, Latin America)3 seats for Asia-Oceania (AOSSG, Japan, China)1 seat for Africa (PAFA represented by South Africa)2 seats at large (UK, Australia)EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAGs field work policyEffect studies/Field tests = IFRS quality controlIntended outcomesClarity of requirementsOperationalityEFRAG (and National Standard Setters) should be participants in an IASB quality control processEFRAG has taken the initiative to ensure proper quality control for Europe EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Keeping the debate open: LeasesEFRAG and NSS supplementary round of consultation over summer with preparers and users Concerns about arrangements scoped into the lease proposals although they are service contractsPreference for IASB or FASB modelHalf of the preparers surveyed prefer IAS 1715 September; EFRAG RoundtableASAF: discussion on boundary between leases and services relaunched

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAG Early Stage Proactive activitiesEither on conceptual issuesBulletins on the Conceptual Framework (with 4 NSS): Prudence, Stewardship, Business Model, Asset/Liability approach,Reliability, ComplexityDP on Classification of ClaimsTo help structure the Debt/Equity distinction

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015With the distinct objective of easing participation of all stakeholders in those more conceptual discussionsEFRAG Early Stage Proactive ActivitiesOr on more practical issuesDP on IFRS in Separate Financial Statements (with ICAC, RJ and OIC)EFRAG Short Discussion SeriesLevies: what would have to be changed in IFRS for a different accounting outcomePresentation of the reversal of acquisition Step UpsEquity method: one line consolidation or measurement basis?

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

We want more influence!

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAG reform was announced late 2012Today EFRAG has become a body which is globallyrecognised for its technical expertise, but the expectations of European constituents have alsoevolved.

Time has may be come to beef up EFRAG to include allpublic policy considerations in the endorsement process

Extract from speech by Olivier GuersentHead of Cabinet of Commissioner BarnierIFRS Foundation EFRAG joint event 11 October 2012 Europes reform in 2013Initiated by the EC in 2012, involvement of the ECOFIN and the EPFinal Maystadt report October 2013: Should IFRS be more European?Objectives:To ensure that European views are presented in a coherent, convincing and timely mannerTo make IFRS accepted by European constituents, i.e. have them endorsedTo test whether change is needed in the European endorsement process Finance Regulation

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Main recommendations in the Maystadt reportConfirm EU IFRS policyRetain the current endorsement process, standard by standard, on an adopt or reject basisFormalise that IFRS should not hinder economic growth or financial stability, should be prudentTransform EFRAG to widen its mandate and make it a fully representative all inclusive institution (private stakeholders, national standard setters, European regulators)Adopt a consensus based decision making process for EFRAGImprove interaction of EFRAG with the ARC and the EPEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

European IFRS endorsement processRegulation (EC) 1606/2002 Preamble (10)An accounting technical committee should provide support and expertise to the Commission in the assessment of international accounting standardsArticle 6The Commission shall be assisted by an accounting regulatory committeeEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

ARC

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Before the Maystadt reformTrue and fair view principleConducive to the European public goodThe European Commission assisted byAn accounting technicalCommittee An accounting regulatoryCommittee

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Before the Maystadt reformTrue and fair view principleThe European Commission assisted byAn accounting technicalCommittee

EFRAG TECHNICAL STAFF EFRAG TECHNICAL EXPERT GROUP: Defines all EFRAGs technical positionsSUPERVISORY BOARD IASBEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015After the Maystadt reformTrue and fair view principleConducive to the European public goodThe European Commission assisted byAn accounting RegulatoryCommittee

Provides advice on both technical and economical aspects

An accounting technicalCommittee 21EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Structure after the Maystadt reformTrue and fair view principleEFRAG BoardDetermines all EFRAG positionsThe European Commission assisted by

European public goodFinancial stabilityEconomic growth EFRAG TECHNICAL EXPERT GROUP: Provides technical advice to the EFRAG BoardEFRAG TECHNICAL STAFFFieldworkFieldworkIASBComposition of the Board of EFRAGThe EFRAG Board is composed of 17 members:8 representatives of European organisations (Preparers, Auditors, Users)8 representatives of NSS (France, Germany, Italy, the UK + four others)1 President nominated by the European CommissionEuropean regulators are observersFunding EFRAG has become a condition for nominating representativesEFRAG TEG becomes an advisor to the EFRAG BoardEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Roger Marshall, Chairman FRC AC (UK) Acting PresidentChairman ANC (until the appointment: Michel Barbet-Massin) (France) Hans Buysse, nominated by EFFASAngelo Caso, Chairman OIC (Italy) Stig Enevoldsen, Member DASC (Denmark) Grard Gil, nominated by EBF, ESBG, EACBJorge Gil Lozano, nominated by EBF, ESBG, EACBBenot Jaspar, nominated by Insurance EuropeLiesel Knorr, Chairman ASCG (Germany) Erlend Kvaal, Chairman NASB (Norway), Patrice Marteau, nominated by BUSINESSEUROPEClaes Norberg, nominated by BUSINESSEUROPELaurence Rivat, nominated by FEE Peter Sampers, Incoming Chairman DASB (Netherlands) Anders Ullberg, Chairman SFRB (Sweden) Mark Vaessen, nominated by FEE

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Is this no more than another reform?How has EFRAGs governance evolved over time?No fundamental change took place from 2001 to 2014:The EFRAG Supervisory Board was responsible for oversight and fundingA Technical Expert Group determining all of EFRAGs positions, deriving its legitimacy from the independence and expertise of its members and of EFRAGs due processWorking groups to provide specific expertiseStrong involvement of National Standard SettersTransparency of proceedingsEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015How has the EFRAGs governance evolved over time? 4 reforms in 13 years:2003, 2008, 2012, 2014Seeking more influence for Europe and more cohesivenessTwo major drivers:Increased interaction with National Standard SettersIncreased funding

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015This reform of EFRAG is:More than an evolution, rather an institutional overhaul Implemented with a lot of continuityEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

31st October 2014Reform entered into force EFRAG today and tomorrowA private association created 13 years ago to assist the EU IFRS policyServing the European public interestAcknowledged as independent technical advisor to the European CommissionParticipation of all European stakeholders, with National Standard Setters playing a prominent roleFunded 50 % privately, 50% by the European Commission

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 201530EFRAGs main activities Expressing the European view in the IFRS standard setting processFacilitating participation of all European stakeholders:Draft comment lettersOutreach events/ surveysField testsProactive workEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 201531EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Europe speaking with one voice

EFRAG

EFRAGs main activities (2)Providing the European Commission with endorsement adviceWhether IFRS meet ALL endorsement criteria of the IAS RegulationEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Agenda of the new EFRAG BoardEndorsement IFRS 15 Revenue RecognitionEndorsement IFRS 9 Financial InstrumentsCommenting on Rate-regulated Activities Discussion PaperCommenting on the Conceptual Framework Exposure DraftMonitoring finalisation of :Insurance Project Leases ProjectContributing to future steps in the Macro hedging projectLaunching new proactive activitiesEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015What has been accomplished so far?New approach to endorsementRecommendation whether to endorse a newly published IFRSCover letter, summarising the main conclusions and supporting argumentsAppendix 1: Understanding the main changesAppendix 2: Assessing the new IFRS against the technical criteria of the IAS RegulationAppendix 3: Assessing whether the new IFRS is conducive to the European public goodAppendix 4: Responding to specific requests of the European CommissionEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015NEWALREADY DONEWhat does the IAS Regulation say?Explicit objective of the Regulation was:

to ensure a high degree of transparency and comparability to support an efficient functioning of capital markets (Art 1, Aim)

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015This in itself is conducive to the European public goodIs an IFRS conducive to the European public good?Is the IFRS improving financial reporting, increasing transparency, investor protection?Are benefits outweighting the costs?Would there be negative side-effects?Competitive disadvantages for European companies?Impact on investor and issuer behaviours that would be negative to the European economy?Any impediment to economic growth or financial stability?

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015IFRS 15 Revenue RecognitionIASB published IFRS 15 in May 2014ARC discussion in June:No supplementary field test neededEFRAG to seek input on the effective date of 1 January 2017EFRAG Final Endorsement advice: February 2015Positive endorsement advice, with effective date as mandated by the IASBNo adverse effect on the European public good identified

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015IFRS 9 endorsement adviceIFRS 9 issued in July 2014Draft endorsement advice expected to be issued end of April, final endorsement advice end of July 2015Specific assessments expected from ESMA, EBA, EIOPA, ECB to assess:Investor protectionPotential effects on financial stability

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015IFRS 9: endorsement adviceDetailed endorsement advice request received from the European Commission:Interrelationships between IFRS 4 (Insurance) and IFRS 9, relevance for long-term investment activitiesUse of fair valuesReliability and potential effects of the impairment model Continuity of the European carve-out

EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Other projectsFormer EFRAGs positions on Leases and Insurance Contracts confirmed (November and December 2014)Final comment letter on Rate-Regulated Activities approved as proposed by EFRAG TEG (January 2014)Conceptual framework: support for issues identified/comments by EFRAG TEG (February 2014)Review of ASAF: should continue, has worked out wellEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Approach to EFRAGs strategyThe EFRAG Board will determine in particular:How to better pool resources in Europe?How to conduct effect analyses? Scope? Resources?How to make Europes influence stronger?How to ensure EFRAGs representativeness?How to ensure greater cohesiveness?What strategy towards the US?EFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015

EFRAG receives financial support of the European Union-DG Internal Market and Services. The contents of this presentation is the sole responsibility of EFRAG and can under no circumstances be regarded as reflecting the position of the European Union.www.efrag.orgEFRAG - Ramon Aceres Foundation Conference - Madrid - 17 February 2015Thank you for your attention!4444