The European Securities and Markets Authority (ESMA) has published its 2014 public statement outlining common enforcement priorities for financial statements.
The identified priorities include: preparation and presentation of consolidated financial statements; financial reporting by entities with joint arrangements; recognition and measurement of deferred tax assets; and any other related disclosures.
These particular topics have been identified as, following new regulatory standards, they could lead to significant changes of accounting practices. Alternatively, they could represent particular challenges to issuers under new international financial reporting standards (IFRS), particularly when forecasting future taxable profits in times of low economic growth.
ESMA identified these priorities with the help of European national enforcers and with the intention of further increasing transparency in financial reports.
Chair of ESMA, Steven Maijoor, said: “The aim of the common enforcement priorities is to achieve a high level of harmonisation in enforcement and to contribute to consistency in the application of IFRS across the EU.
“In view of the impact of new standards on financial information, ESMA believes that listed companies and their auditors should pay particular attention in the areas of consolidated financial statements, joint arrangements and valuation of deferred tax assets when preparing and auditing their 2014 IFRS financial statements.”
“This will contribute to ensuring the relevance and reliability of financial information provided to investors, and ultimately contributes to the proper functioning of Europe’s capital markets.”
The public statement encourages companies to provide any entity-specific information relating to performance and financial situation.
It also highlights additional areas to be considered in the preparation of 2014 financial statements, including any information on material effects of the ECB’s assessment of the banking sector and any changes to regulatory capital required as a result.
ESMA pointed out that the 2013 report on comparability of institutions’ financial statements remains relevant to the 2014 reports, and supervision will continue until findings are published in early 2016.
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