European international accounting standards

According to the report from the Commission to the Council and the European Parliment on the operation of Regulation (EC) No 1606/2002 of 19 July 2002 concerning the application of international accounting standards, 1, 731 companies apply international accounting standards.

The IAS Regulation places an obligation on European companies whose securities are admitted to trading on a regulated market in the EU to prepare their consolidated accounts, as of 1 January 2005, in conformity with IAS/IFRS  and SIC/IFRIC issued by the International Accounting Standards Board (IASB) and endorsed by the EU.

Member States were also allowed to postpone application of this framework to 1 January 2007 for companies which have issued only debt securities admitted to trading on a regulated market in the EU and for companies whose securities are admitted to trading outside the EU and which, for that purpose, had been using internationally accepted standards before the IAS Regulation was published.

Effective use and Consistent application of IFRS in the EU

In 2005 the number of IFRS adopters whose securities were admitted to trading on a regulated market in the EU stood at 7,365, of which 5,534 were equity issuers.

Based on the information gathered from the sources mentioned in Section 2.2, the Commission has analysed the consistency of application of the endorsed standards/interpretations in the EU for the financial year 2005. Some of the Commission's conclusions included:

  • Overall, application of IFRS has been a challenge for all stakeholders, but it has been achieved without disrupting markets or reporting cycles
  • There is a general perception among preparers, auditors, investors and enforcers that application of IFRS has improved the comparability and quality of financial reporting and has led to greater transparency.
  • Most stakeholders believe that the understandability of financial statements has generally improved, except for certain areas, where there seems to be room for improvement, notably on financial instruments, business combinations and share-based payments.

According to the report, The first year of mandatory application of IFRS in the EU has been generally positive, even if the regulatory changes and lack of experience have posed a challenge for first-time appliers. The value of the accounting information supplied has increased and IFRS have generally been applied consistently in the EU. The level of consistency between IFRS accounts is likely to increase over time as preparers and auditors gain experience with applying the new accounting framework.

The EU endorsement process per se ensures technical quality, political legitimacy and relevance to business. The system has been working well and standards have been endorsed in good time. The endorsement system is flexible and has already been amended – inclusion of SARG, new working methods in EFRAG, new rules on committee procedures, effect studies, etc. The net result has produced an efficient and legitimate structure.