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News • 2019-04-18

International Financial Reporting Standards (IFRS) in the European Union

International Financial Reporting Standards (IFRS) are developed by the International Accounting Standards Board (IASB) based in London. Before new as well as revised standards become applicable in the EU for companies preparing their accounts under IFRS ‘as adopted by the EU’, these standards go through an endorsement process where EFRAG, the European Financial Reporting Advisory Group, plays a key role.

The main role of EFRAG is to advise the European Commission on whether new IFRS and revisions to existing standards should be endorsed in Europe. The criteria for endorsement of new or revised IFRS are:

  1. Technical: do they meet the criteria of understandability, relevance, reliability and comparability of the financial information needed for making economic decisions, e.g. investment decisions, and are they not contrary to the principle of the true and fair view set out in the European accounting directives?
  2. Qualitative: are they conductive to the European public good?


EFRAG is a private not-for-profit association based in Brussels and was established in 2001 with the encouragement of the European Commission to serve the public interest. Member organisations are mainly European stakeholder organisations in the areas of accounting, business and finance, and national accounting organisations in European countries. Observers at the EFRAG board are the European Commission, the European Central Bank, the European Supervisory Authorities (EBA, EIOPA and ESMA) and Better Finance (representing private investors and financial services users).

The mission of EFRAG goes beyond the pure endorsement of new IFRS. EFRAG actively develops and promotes European views in the area of financial reporting through research projects and discussion papers, comment letters to IASB proposals and contribution to all IASB projects, influencing and improving new accounting and reporting standards. As an example, EFRAG established in 2018 a European Corporate Reporting Lab to monitor and promote reporting best practices. The first project of the European Lab relates to climate-related reporting. The overall objective of EFRAG’s activities is to serve the European public interest.

The main technical activities of EFRAG in 2018 are summarised hereafter:

Endorsement-related work

Of particular interest to the accounting profession is the updated  ‘Endorsement Status Report EFRAG’ regularly publishes on its website. The report provides an overview of IFRS standards and interpretations applicable and those not yet applicable in the EU.

IFRS 17 Insurance Contracts dominated EFRAG’s endorsement-related work in 2018.  IFRS 17 is almost certainly EFRAG’s most challenging endorsement advice to date, reflecting the need for in-depth impact assessment, the complexity of the Standard and some of the products it addresses, and the diversity of insurance accounting practices in Europe. EFRAG’s evidence-gathering activities included an unprecedented programme of 60 case studies with individual insurers to evaluate the expected costs, benefits and potential wider effects of the new Standard.

The EC timetable requested EFRAG’s advice by the end of 2018 but the project has since taken a different course. EFRAG’s case study and other activities identified several concerns and EFRAG highlighted to IASB some aspects of IFRS 17 that merit further consideration. Following these comments by EFRAG, IASB will indeed consider some amendments to the Standard.

Despite the various concerns raised with IFRS 17, there is however widespread agreement on the need for a high quality new insurance standard. EFRAG will continue to play its part in achieving this.

Influencing IFRS

EFRAG has been reappointed to the IASB’s Accounting Standards Advisory Forum - a key important forum to bring European views to the international debate.

One of the 2018 highlights has been EFRAG’s work on the IASB’s Discussion Paper Financial Instruments with Characteristics of Equity (FICE). EFRAG published an early draft comment letter in August and conducted an ‘early-stage impact analysis’ with the objective to assess the wider effects and potential unintended consequences of changes to rules on FICE reporting.

EFRAG Research Work

In November 2018 EFRAG delivered a comment letter to the EC on Equity Instruments – Impairment and Recycling as part of its ongoing investigations as to whether the IASB’s new requirements on accounting for equity investments are fully conducive to long-term investing and to Europe’s sustainable finance aims.

Furthermore, EFRAG regularly publishes research papers on its website. Recent examples are:

For further information, please visit or contact your local PKF office.

Jean Medernach, March 2019

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