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ESMA publishes report on EU accounting enforcement in 2021

The European Securities and Markets Authority (ESMA) has published its report 2021 Corporate reporting enforcement and regulatory activities

ESMA’s Report aims to assist companies, Audit Committees and their auditors to further improve future financial and non-financial reports, by assessing how companies comply with International Financial Reporting Standards (IFRS) and non-financial reporting obligations and adhere to ESMA’s recommendations.

The Report, with the objective of protecting investors, provides an overview of the activities carried out by ESMA and EU national enforcers on financial and non-financial information. 

European accounting enforcement highlights in 2021

  • 711 examinations of financial statements drawn up under IFRS, covering approximately 17% of issuers listed on EU regulated markets. The examinations led to enforcement actions against 250 companies in order to address material departures from IFRS, representing an action rate of 40%
  • 537 management reports were examined to assess whether or not the presentation and disclosure of alternative performance measures (APMs) complied with ESMA’s APM Guidelines, covering 13% of all IFRS listed issuers in the EU. Based on these examinations, enforcement actions were taken in relation to 97 issuers, constituting an action rate of 18%
  • European accounting enforcers examined non-financial statements of 711 companies, 36% of the total estimated number of companies required to publish a non-financial statement, to assess disclosures in non-financial statements. Related enforcement actions against 72 issuers represented an action rate of 10%

The majority of the enforcement actions concerned disclosures to be corrected in the future financial statements.

IAASA is an active participant in the ESMA-sponsored European Enforcers’ Co-ordination Sessions (EECS). The objective of EECS is to co-ordinate European enforcement activities in order to increase convergence amongst European national accounting enforcers and contribute to fostering investor confidence.

ESMA’s report can be accessed here.