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Third Financial Reporting Community of Practice Workshop

13-14 September 2010, Vienna

On 13-14 September 2010 the World Bank Centre for Financial Reporting Reform (CFRR) organized a two-day workshop for the Financial Reporting Community of Practice (FRCoP) in Vienna.

Financial Reporting Community of Practice Workshop, 13-14 September 2010

Summary


Objectives

The workshop's main objectives were:

  • to help the REPARIS countries to align their accounting laws with the acquis communautaire;
  • to assist them in choosing appropriate financial reporting requirements for different types of entities; and
  • to understand the principles governing the preparation and presentation of financial statements using the International Financial Reporting Standard for small and medium-sized enterprises (IFRS for SMEs)

Description

27 participants, representing Ministries of Finance, national setters of financial reporting standards, accountants' and auditors' professional bodies, and universities from the REPARIS countries attended the workshop.

Financial Reporting Community of Practice Workshop, 13-14 September 2010During the first substantive session of the workshop Pascal Frerejacque from the CFRR presented a summary of how financial reporting laws in the REPARIS countries matched up to the acquis communautaire, focusing on four key elements: the level of financial reporting requirements for different sizes and forms of entities; the size thresholds governing reporting requirements; the size thresholds defining statutory audit requirements; and the publication requirements for financial statements and audit reports. Mr Frerejacque emphasized that in the EU only a very small proportion of companies (around 0.1%) are required to use full International Financial Reporting Standards (IFRS) and only 4% of companies are required to undergo a statutory audit. As a result, REPARIS countries should consider taking advantage of the EU's more relaxed rules for small and medium-sized enterprises (and the proposed "micro" category) by raising the size thresholds in their national reporting frameworks towards the levels permitted by the EU, so that full reporting requirements are imposed only on large and public interest entities. In most REPARIS countries this would lead to a reduction in reporting requirements, although in Montenegro the thresholds would need to be reduced to come in line with those set by the EU.

This presentation was followed by a group session in which participants looked at the benefits and challenges facing individual countries in each of the four elements set out by Mr Frerejacque. Participants then came together to hold an informal debate, moderated by Luc Cardinal from the CFRR, on whether size thresholds for reporting obligations for SMEs should be raised to the maximum levels allowed by the EU.

The workshop was then addressed by Arto Leppilahti from the Financial Reporting Unit of the European Commission's Directorate-General for the Internal Market and Services. Mr Leppilahti outlined the background to the EU's approach to accounting regulation and emphasized, using the experience of Finland (his home country), how transposing the EU's Accounting Directives into national legislation requires time, both to adopt the legislation and to allow companies to adapt to the new system. He then outlined the Commission's current plans to simplify the Directives by exempting "micro" enterprises from the Directives (though some Member States are opposed to this) and simplifying the Directives for SMEs to reduce their reporting burden. The aim was to avoid forcing smaller enterprises, whose financial information was mainly of interest to the tax authorities and banks, from having to produce financial reports in addition to their tax returns.

Saskia Slomp from the European Financial Reporting Advisory Group (EFRAG) concluded the workshop's first day by describing EFRAG's role in advising the European Commission about international financial reporting issues and, in particular, its involvement in the process which leads to the endorsement of IFRS in the EU. She described EFRAG's more proactive work on emerging issues, which gave Europe a bigger influence over new IASB decisions and outlined how the REPARIS countries could be involved in EFRAG's activities. She concluded by describing EFRAG's recent analysis of the incompatibilities between the IFRS for SMEs and the requirements of the acquis. Ms Slomp emphasized that the introduction of IFRS for SMEs has been resisted by several EU Member States which are worried that, because of the links between SME accounting and taxation, accepting the international standard will result in the existence of dual systems, thus increasing the administrative burden on SMEs.

Financial Reporting Community of Practice Workshop, 13-14 September 2010Most of the second day of the workshop was devoted to technical presentations from Michael Wells of the IFRS Foundation and David Cairns of the CFRR on the details of IFRS of SMEs. These were followed by case studies in which the workshop participants split into groups and used the knowledge that they had acquired in the previous sessions to answer questions on the consolidated financial statements of a company group, prepared using the IFRS for SMEs.

The workshop concluded with a discussion of the community's future priorities. Several issues were suggested as possible topics for future activity including case studies of the experience of individual countries, the possible adoption of IFRS for SMEs in Moldova and the review of accounting laws in Serbia and Montenegro. In addition, the group requested that it be kept up to date on developments in the EU, especially the Transparency Directive and any progress made in the Commission's plans to simplify the Accounting Directives for smaller firms.

Results

The workshop met its aims with 80% of participants declaring that they were "very satisfied" with the event. Their comments indicate that they found particularly useful the way in which the sessions on IFRS for SMEs drew on a range of examples to illustrate key issues. It is clear that participants value approaches based on case studies, both for analyzing technical accounting issues (such as IFRS for SMEs) and for discussing the challenges facing the effective implementation of reforms to national financial reporting frameworks.

Videos


Videos of Speakers' Presentations

Full length videos of presentations held at the workshop.

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