ESMA enforcement priorities for 2018
ESMA enforcement priorities for 2018
European regulator highlights priorities for 2018 IFRS financial statements
Priorities for national securities regulators
The European regulator, ESMA1, has issued a statement (PDF 288 KB) highlighting the common areas that European national securities regulators will be focusing on when reviewing listed companies’ 2018 IFRS financial statements. Their aim is to promote the consistent application of IFRS and other reporting requirements.
Given the scale of accounting change, application of the new standards is its key priority with a focus on transparent disclosure of information relevant to users’ understanding of the entity’s financial performance and financial position.
Now that the new financial instruments and revenue standards are effective – and with IFRS 16 due soon – ESMA expects issuers to step up to the challenge of delivering the required level of detail and transparency in their 2018 disclosures.
Chris Spall, Partner,
KPMG International Standards Group
Although the topics included in the statement are those deemed to be most relevant at a European level, regulatory bodies outside Europe are also likely to pay particular attention to many of the same topics. These topics are not exhaustive, however, and national regulators may have additional areas of focus.
Main focus is on the new standards – IFRSs 9, 15 and 16
ESMA expects to see a sufficient level of transparency on how the new standards on financial instruments and revenue –
- the entity-specific accounting policies; and
- transition impact with explanations over material impacts on financial position and performance.
For IFRS 16 Leases – effective from 1 January 2019 – ESMA expects companies to have substantially completed their implementation analysis and is
|Topic||Preparers need to consider|
|Applying IFRS 9||
|Applying IFRS 9 to credit institutions and insurance undertakings/conglomerates||
|Applying IFRS 15||
|Disclosures on the impacts of implementing IFRS 16||
Also available are the 2018 editions of our Guides to annual financial statements – incorporating Illustrative disclosures (PDF 2.78 MB) and a companion Disclosure checklist (PDF 41 MB). With Insights into IFRS and our newly effective standards web tool, these form your complete guide to the
Other key areas of focus – Non-financial information and APMs
ESMA is also reminding preparers of the need for increased transparency in other parts of the annual report to improve clarity, consistency
This includes disclosures over non-financial information2, including:
- environmental matters (including climate change);
- social and employee matters;
- respect for human rights; and
- anti-corruption and bribery matters.
If preparers decide not to develop or pursue policies on those matters, they are required to document their rationale and disclose in the annual report the principal risks related to those matters. Preparers are also required to disclose non-financial KPIs and link these to the relevant non-financial information.
In terms of APMs, preparers are reminded of the requirements in ESMA’s Guidelines on Alternative Performance Measures (PDF 253 KB) and ESMA's Q&A document aimed at transparent and unbiased presentation of such measures. For more information, please refer to our article Communicating effectively through non-GAAP information.
Other relevant priorities
- ESMA continues to focus on Brexit-related disclosures. Visit KPMG’s Brexit homepage to find out more about the impacts on your business.
- Also highlighted are the financial reporting consequences of Argentina being classified as a hyperinflationary economy under IFRS as of 1 July 2018.
- Listed companies and their auditors should continue to pay attention to the other enforcement priorities previously published by ESMA, which remain relevant.
Download our web article as a PDF handout (PDF 490 KB).
1 European Securities and Markets Authority
2 Per the requirements in Article 19a of the Accounting Directive
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