The European Securities and Markets Authority (ESMA) has today published two Public Statements dealing with:
- the European common enforcement priorities for 2015 financial statements; and
- the improvement of the quality of disclosures in IFRS financial statements.
European common enforcement priorities for 2015 financial statements
ESMA issued this Public Statement which defines the European common enforcement priorities in order to promote consistent application of the International Financial Reporting Standards (‘IFRS’) as indicated in the the ESMA Guidelines on Enforcement of Financial Information.
As in previous years, ESMA, together with European national accounting enforcers, including IAASA, identified financial reporting topics which listed issuers and their auditors should particularly consider when preparing and auditing, respectively, the IFRS financial statements for the year ending 31 December 2015. ESMA, together with European national accounting enforcers, will pay particular attention to these common priorities when monitoring and assessing the application of all relevant IFRS requirements.
The common priorities for the 2015 financial statements encompass the following topics which are detailed in ESMA’s Public Statement:
- impact of the financial markets conditions on the financial statements;
- statement of cash flows and related disclosures; and
- fair value measurement and related disclosures.
IAASA’s annual Observations document was published on 14 October 2015 and highlights key topics to be considered by Irish issuers preparing, approving and auditing 2015 financial statements. The messages in both documents are consistent although the economic back drop is different in that the IAASA document focuses on financial reporting in an economic upturn.
Improving the quality of disclosures in the financial statements
ESMA’s Public Statement is aimed at improving the quality of disclosures in financial statements following growing concern over their relevance. ESMA stresses the need for clear and concise disclosures which are entity specific and to avoid boiler-plate templates. It highlights that the size of annual reports often makes it hard for users to identify key information and urges entities to avoid “disclosure overload”.
IAASA is one of a number of European accounting enforcers which contributed to this ESMA Public Statement and is one of the enforcers mentioned that has taken initiatives in this area. IAASA also draws attention to item 10 of its 2013 Observations document which addresses this topic.