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ESMA responds to EC consultation on Fitness Check

The European Securities and Markets Authority (ESMA) published its response to the European Commission (EC) Consultation Document seeking feedback to evaluate the Fitness of the European Union (EU) framework for public reporting by companies (Fitness Check).

ESMA, consistent with its prior positions, disagrees with the introduction of the possibility to modify the content of IFRS as issued by the International Accounting Standards Board (IASB) (a mechanism known as ‘carve-in’). In ESMA’s view, any European-specific adjustments to IFRS would defy one of the key objectives of the IAS Regulation, namely that financial reporting standards applied by listed issuers are accepted internationally and are truly global standards. The EU should increase its ability to influence the development of IFRS and continue to actively do so as part of the IASB’s due process.

ESMA believes that the primary objective of endorsed accounting standards remains the promotion of transparency and better decision-making in financial markets and, therefore, they should be considered as neutral with respect to other public policy objectives. In ESMA’s view, this approach also supports long-term investment decisions. ESMA strongly believes that the current EU endorsement process already provides the necessary safeguards to the European public good, by providing the possibility for the non-endorsement of a standard, which is not conducive to European public good.

ESMA again highlights the need for deeper harmonisation through EU-level legislative measures in the area of enforcement of financial information and the benefits on investors’ confidence and development of the EU Single Market.

The ESMA response may be accessed here.