The European Commission last week hired the Institute of Chartered Accountants in England and Wales (ICAEW) and Paris-based Mazars Group to review the use of international accounting standards in the European Union.

The two groups jointly will assess the impact of the International Financial Reporting Standards (IFRS), now in its eighth year of use in the EU. The global standards were issued by the International Accounting Standards Board, and have come under fire from members of parliament and others who argue the set of standards can skew financial reports and lead to misleading statements. The dispute led to a brief threat against IASB's budget last year.

“The task of Mazars and ICAEW is to take stock after eight years of IFRS reporting in the EU and assess the impact of the switch to IFRS on the comparability and transparency of the financial reports of European companies,” Robert Hodgkinson, ICAEW's executive director, said in a statement announcing the review. “Our work is intended to help the European Commission determine whether or not the implementation of the 2002 IAS Regulation has delivered the expected benefits.”

The contract, worth €149,800, was awarded following a tender process initiated in June 2013, according to ICAEW's publication economia. The publication said the study will include a cost-benefit analysis for different stakeholders, an analysis of the benefits and drawbacks of the regulations, and recommendations for improvements if applicable. The project is slated to be completed in the fall of this year.

Both groups have worked with EU legislative bodies before. ICAEW was tapped by the commission in 2006, to review the implementation of IFRS across the European Union in the previous year. Mazars was hired last year by European Parliament to assess the performance of the three members of the European Supervisory Authorities – the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities Markets Authority (ESMA).

Also last week, the heads of the three European Supervisory Authorities (ESAs) sent a joint letter to Internal Markets and Services Commissioner Michel Barnier, expressing their concerns over recommendations in another commissioned review of IFRS. Barnier commission Philippe Maystadt, former president of the European Investment Bank, to review the EU's contributions in shaping and influencing the global set of accounting standards. Maystadt issued his report to the commission in November.

The heads of the ESAs objected in their letter to Maystadt's recommendation that the best way to enhance the EU's influence in the standards-setting process was through a reorganization of the European Financial Reporting Advisory Group (EFRAG). They argue such a move does not address the public interest, given the fact that EFRAG is a mixture of public and private parties. The responsibility to give endorsement advice to the European Commission, which makes the legal decision on whether to adopt accounting standards, should be given only “to a public body that has the duty to protect the public interest,” the letter said. They argued that the process for adopting accounting standards should not differ from the process used in adopting other financial regulations, in which the public bodies make recommendations to the commission following a consultation period.

The three ESAs “are independent authorities which act in the public interest and should contribute to the stability of the financial system, enhancing the transparency of markets and financial products as well as ensuring consumers' protection – from a truly European perspective,” the letter said. “These objectives are unlikely to be always aligned to the objectives of the private stakeholders or national standard setters represented in the EFRAG SB.”

The letter's signatories – EBA Chair Andrea Enria, EIOPA Chair Gabriel Bernardino, and ESMA Chair Steven Maijoor – also called into question the proposed voting model, which calls for a single point of view to be expressed. They said that proposal would not allow their groups to offer dissenting views or “veto advice that would run counter to the public interest.”

If the voting model is adopted as proposed, the ESAs will not accept membership in the EFRAG Supervisory Board, and instead seek observer status. They also said they reserve the right to submit opinions on existing, new, and amended standards to both the EC and IASB.

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