The European Securities and Markets Authority (ESMA) this week released its enforcement priorities for financial statements for the current year.

EMSA's European Common Enforcement Priorities of 2013 are designed to promote consistent application of the International Financial Reporting Standards (IFRS). The priorities are used by national regulators in the European Economic Area (EEA) during their assessments of the financial statements of listed companies. Listed companies and their auditors are instructed to use the priorities as they prepare or audit IFRS statements for the year ending 31 December 2013.

“ESMA, in setting out these enforcement priorities for listed companies' financial statements, aims to ensure that the IFRS recognition, measurement, and disclosure principles are consistently applied across the EEA,” Steven Maijoor, ESMA chair, said in a statement. “Consistent application of accounting standards is a key factor in ensuring the transparency and accuracy of the financial information which investors rely upon, and ultimately contributes to the proper functioning of Europe's capital markets. Finally, considering the focus on asset quality in the financial sector, listed financial institutions and their auditors should pay particular attention to properly measuring financial instruments and the accurate disclosure of related risks.”

The 2013 priorities relating to IFRS are:

·         Impairment of non-financial assets

·         Measurement and disclosure of post-employment benefit obligations

·         Fair value measurement and disclosure

·         Disclosures related to significant accounting policies, judgments, and estimates

·         Measurement of financial instruments and disclosure of related risks

ESMA's enforcement priorities for the previous year were financial assets, impairment of non-financial assets, defined benefit obligations, and provisions, contingent liabilities, and contingent assets.

While national regulators will use the priorities to guide their reviews and take any necessary corrective actions, they are not limited to only focus on the specific priorities outlined. The national authorities also may look at any areas deemed locally relevant. Both ESMA and the national authorities will monitor how the IFRS requirements are applied.

ESMA officials said they will again collect data on how European listed companies applied the priorities and subsequently publish a report on the data in the beginning of 2015. A report detailing its review of how the 2012 priorities were applied by European listed companies is due to be released in early 2014.

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