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Beyond 2005 - Financial Reporting by EU Private Companies EFRAG response to the IASB project on SMEs Paul Rutteman Secr

Beyond 2005 - Financial Reporting by EU Private Companies EFRAG response to the IASB project on SMEs Paul Rutteman Secretary General, EFRAG. Introduction to EFRAG and TEG. Pro-active contribution to work of IASB and IFRIC

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Beyond 2005 - Financial Reporting by EU Private Companies EFRAG response to the IASB project on SMEs Paul Rutteman Secr

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  1. Beyond 2005 - Financial Reporting by EU Private CompaniesEFRAG response to the IASB project on SMEsPaul RuttemanSecretary General, EFRAG

  2. Introduction to EFRAG and TEG • Pro-active contribution to work of IASB and IFRIC • Contribute to and influence IASB standard setting process before a standard is issued • Technical assessment of IAS and interpretations after they are issued • Provide endorsement advice to the European Commission under the Regulation procedure • Advise European Commission on changes to the EU Accounting Directives

  3. Introduction to EFRAG and TEG • IAS Regulation • Listed companies in Europe to apply same accounting standards throughout EU in 2005 • IFRS (endorsed) – the common basis • EFRAG advises European Commission on endorsement • Aim: to be able to support endorsement through efforts prior to IFRS being agreed

  4. EFRAG Technical Experts Group • Stig Enevoldsen-Chairman Accountant/Former Chairman IASC • Andreas Bezold Preparer (Dresdner Bank) • Allan Cook Technical Director ASB/IASC • Begoña Giner Professor University of Valencia • Hans Leeuwerik Preparer (Shell), NL Std. Setter • Friedrich Spandl Financial Analyst (BAWAG) • Dominique Thouvenin Accountant, F. Std. Setter • Ugo Marinelli Professor University of Rome – Tre/Accountant • Catherine Guttman Preparer/Accountant, Deloitte Partner • Françoise Flores Preparer/Accountant, Technical Adviser ACTEO MEDEF Observers • Mary Keegan Chairman Accounting Standards Board - UK • Antoine Bracchi Chairman of the French CNC - France • Klaus Pohle Chairman of Deutscher Standardisierungsrat - Germany • + Observers from European Commission, CESR and IASB

  5. Initial Focus of TEG • Listed companies and IAS Regulation for 2005 • SMEs secondary focus, because • Tracking IASB priorities • IFRSs must precede IFRSSEs • Uncertainty of demand in Europe • Tax complications

  6. How EFRAG is Tackling SME Issues • Use expertise of network to best advantage • Through FEE – appoint Gerhard Prachner as EFRAG nominee to SME Advisory Panel • Direct contact and meeting with Paul Pacter, IASB • Discussions on Policy approach • Setting up a special SME group

  7. EFRAG’s view on IASB decisions D1-D15 For example: • D3. National jurisdictions decide who should IFRSSEs apply to • Does this result in European harmonisation? • D4a. IFRSSEs should reduce the financial reporting burden √ • D4b. IFRSSEs should be built on the same conceptual framework √ • D7. Disclosure and presentation modifications based on user needs √

  8. EFRAG’s view on IASB decisions D1-D15 Cont. • D8. Rebuttable Presumption of no recognition and measurement modifications • Does this really imply simplification for SMEs? • D9. If issues not addressed, full IFRSs mandatory √ • D12. No quantitative size test √ • D13. Use of the “no public accountability” criterion for definition of SMEs √

  9. Public Accountability • High degree of outside interest in the entity • Essential public service responsibility • Substantial majority of stakeholders depends on external financial reporting But still leaves a wide spectrum of entities

  10. The name game • Applicability not based on size criteria • Alternative names: • Nationally determined private entities • Restricted entities • Compact entities • Non-public entities But SME is as good a name as any!

  11. The Outline IFRSSEs so far • IFRSSE 2 Inventories • IFRSSE 10 Events after the Balance Sheet Date • IFRSSE 19 Employee Benefits Impressive speed of development but questions of usefulness remain

  12. IFRSSE 19 Employee Benefits – Remarks: • If it is a simplification without changes in recognition and measurement principles, why not use it as the full IAS 19? • Options of IAS 19 deleted in IFRSSE 19: Is this really simplification for SMEs? • Should SME standards include modifications to recognition and measurement principles? • IFRSSE 19 only appropriate for entities with aspiration to go public? • Questions on usefulness!

  13. EFRAG expectations for the project • IASB should prepare more example IFRSSEs based on complex IASs, e.g. IAS 17 Lease • Take specifications of European SMEs into consideration, e.g. taxation, consolidation, resources, etc.

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