ESMA responds to EC consultation on Fitness Check

On 17th July 2018, the European Securities and Markets Authority (ESMA) published its response to the European Commission (EC) Consultation Document seeking feedback to evaluate the Fitness of the European Union (EU) framework for public reporting by companies (Fitness Check). ESMA’s response focused on those matters falling under the remit of securities regulators, and emphasised the requirements applicable to issuers admitted to trading on regulated markets.

ESMA, consistent with its prior positions, strongly disagreed with the introduction of the possibility to modify the content of IFRS as issued by the International Accounting Standards Board (IASB) (a mechanism known as ‘carve-in’).

In ESMA’s view, any European-specific adjustments to IFRS would defy one of the key objectives of the IAS Regulation, namely that financial reporting standards applied by listed issuers are accepted internationally and are truly global standards. On the contrary, the EU should show leadership in reaffirming its commitment to IFRS. This in turn would increase its ability to influence the development of IFRS, which the EU should continue to actively do as part of the IASB’s due process.

ESMA also urged the EC to swiftly endorse the draft RTS on European Single Electronic Format (ESEF) in order to provide certainty to the relevant market stakeholders and ensure timely preparedness of both software and issuers’ capabilities.