Corporate Information

The European Securities and Markets Authority (ESMA) has published its annual Public Statement on European Common Enforcement Priorities (the Statement) which identifies enforcement priorities for listed companies’ 2016 financial statements and highlights the need for transparency in disclosing the potential impact of Brexit on issuers’ financial statements.

The Statement, directed at listed companies and their auditors, sets out the areas ESMA and national enforcers will focus on in particular when they examine listed companies’ 2016 financial statements in order to promote a consistent application of International Financial Reporting Standards (IFRS Standards) across the EU.  

Both recurring issues and the current economic climate, where it may pose challenges to issuers, are included in the Statement. The common priorities for 2016 financial statements encompass:  

  • Presentation of financial performance: ESMA again stresses the importance of providing investors with clear and high quality information on financial performance. ESMA urges issuers to ensure transparency and consistency when presenting their performance in the primary financial statements, notes and in the documents accompanying financial statements. 
  • Financial instruments: distinction between equity instruments and financial liabilities: ESMA notes there are cases where the distinction between equity and liability requires significant judgement and reminds issuers that the general principle for distinguishing liabilities from equity issued by an entity is whether the entity has an unconditional right to avoid delivering cash or another financial asset to settle the contractual obligation. 
  • Disclosures of the impact of the new standards on IFRS financial statements: ESMA highlights that some aspects of the new IFRS standards, which come into force at the start of 2018 and 2019, represent a significant change to current standards. They concern Financial Instruments (IFRS 9) Revenue from Contracts with Customers (IFRS 15) and Leases (IFRS 16). These new standards may affect the recognition, measurement and presentation of assets, liabilities, income, expenses and cash flows. Consequently, issuers should start preparing for these new standards now.

In addition, taking into consideration the relevance of Brexit for some issuers in Europe, ESMA urges issuers potentially affected by the result of the UK’s referendum to leave the EU to assess and disclose the associated risks and expected impacts it may have on their business activities. ESMA expects that more information about the impact will become available as the date of Brexit approaches. 

Next steps

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the Statement, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and ESMA will report on findings regarding these priorities in its Report on the 2016 enforcement activities.

The European Securities and Markets Authority (ESMA) and the IFRS Foundation today announced an updated set of protocols under which the two organisations will deepen their cooperation on the development of IFRS Standards and support for their consistent application across the European Union.

The European Securities and Markets Authority (ESMA) and the IFRS Foundation today announced an updated set of protocols under which the two organisations will deepen their cooperation on the development of IFRS Standards and support for their consistent application across the European Union.

The mission of the IFRS Foundation, through its standard-setting body, the International Accounting Standards Board (the Board), is to develop a single set of high quality global accounting standards, bringing transparency, accountability and efficiency to capital markets around the world. IFRS Standards are now required by more than 120 countries.

ESMA is an independent EU authority that contributes to enhancing the protection of investors and promoting stable and well-functioning financial markets in the European Union. One of ESMA’s responsibilities is to promote the effective and consistent application of financial reporting standards.

The Statement of Protocols published today builds on many years of cooperation between the two organisations, reflecting their work to support investors and the efficient running of capital markets. It updates an agreement from 2014 and outlines how the two organisations will continue working together in the development of IFRS Standards and in supporting the consistent implementation and application of the Standards.

Commenting on this agreement, Steven Maijoor, Chair of ESMA, said:

“I am pleased that ESMA and the IFRS Foundation have committed to further strengthening their cooperation together. Ensuring the consistency of financial information and improving the quality of the information provided to investors is fundamental in allowing capital markets to flourish. I look forward to continuing to work with the IFRS Foundation towards achieving this common goal.”

Michel Prada, Chairman of the IFRS Foundation Trustees, said:

“ESMA and the IFRS Foundation have a shared interest in promoting the reporting of financial information that is useful to investors. We will work together to share information that is relevant for the Board’s standard-setting and support the regulator in its role to promote consistent application of IFRS Standards.”

The ESMA/IFRS Foundation Statement of Protocols is available to download here.

The European Securities and Markets Authority (ESMA) has published its 2017 Work Programme which sets out its priorities and areas of focus for 2017 in support of its mission to enhance investor protection and promote stable and orderly financial markets.

The programme reflects the shift in focus of ESMA’s work, from building the single rulebook, towards ensuring its consistent application across the European Union (EU), as outlined in its 2016-2020 Strategic Orientation. The key areas of focus under ESMA’s activities of supervisory convergence, assessing risks, single rulebook and direct supervision will be:

  • Converging supervisory practices on the implementation of MiFIDII/MiFIR ;
  • Focusing on data quality;
  • Level 2 work on the Benchmarks Regulation and on various initiatives under the umbrella of the Capital Markets Union; and
  • Directly supervising credit rating agencies (CRA) and trade repositories (TR), with a particular focus on their ancillary activities given the trend of combining ancillary and core services.