Accounting Standards Body Agrees Future Working Relationship With EC

by Ulrika Lomas, for LawAndTax-News.com, Brussels

28 March 2006

The European Commission and the European Financial Reporting Advisory Group (EFRAG), which is composed of accounting experts from the private sector in several Member States and provides the Commission with advice on the technical soundness of new accounting standards, on Thursday agreed their future working relationship.

In particular, it was announced that EFRAG will continue to provide the Commission with advice on the endorsement and interpretation of International Financial Reporting Standards (IFRS). It will also provide opinions on the development and improvement of the standards and on how to implement them effectively.

In addition, EFRAG is expected to participate in the early phases of debates on new and upcoming issues in the area of accounting standards.

Internal Market and Services Commissioner Charlie McCreevy announced that:

"I am very pleased that the working arrangement between EFRAG and the Commission has now been formalised. In this crucial phase of IFRS implementation, there is an obvious need to have an effective framework in place that supports our work on the endorsement of accounting standards. This is important not just for listed companies, but for all European businesses."

The specifics of the agreement are set out in the document 'Working arrangement between European Commission and EFRAG', which was signed last week by Alexander Schaub, Director General for Internal Market and Services, and Göran Tidström, Chairman of EFRAG's Supervisory Board.

However, the EC also announced on Thursday that it may create a High Level Group to review EFRAG opinions, explaining that:

"There is a need to be able to demonstrate to stakeholders that EFRAG's opinions to the Commission in the endorsement process are objective and well-balanced."

"For this reason, the Commission is considering creating a separate small group of independent financial reporting experts to review EFRAG’s opinions from these perspectives. These experts will not be involved in EFRAG’s work."

"Preliminary ideas for the creation of the High Level Group will be discussed with Member States shortly."

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