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The European Securities and Markets Authority has hit out at a recent decision by a key IFRS committee that would see improvements to the accountancy standard IFRS 8 delayed.
Esma's standing committee on corporate reporting criticised a tentative decision by the International Financial Reporting Standards committee in a letter disclosed on Monday.
The supervisory authority argues that the accounting standard does not address either the aggregation of operating segments or the identification of the chief operating decision maker in IFRS 8.
It argues that the issues must be looked at as part of the regulator's annual review of improvements that could be made to its standards.
The IFRS interpretations committee recommended that the IASB should consider the aggregation of operating segments as part of a planned post-implementation review of the standard.
But Esma says it has concerns over the fact that it does not know when the review will take place and how long it will take.
The IFRS's handbook says that analysis of its standards should occur around two years after being introduced. With IFRS 8 being required from 2009, an IASB staff note has said that a review of the standard is expected in 2011.
"Esma does not support the committee's decision to recommend to the [International Accounting Standards] Board to consider these issues as part of the future post-implementation review of IFRS 8 as we believe that it would be beneficial if both issues could be clarified earlier," says the letter, signed by Julie Halbo, chair of Esma's corporate reporting standing committee.
"In addition, it remains unknown precisely how and when post-implementation reviews will be carried out and more importantly what the timescale might be for dealing with any improvements identified as being needed."
The letter argues that further consideration should be given to defining the chief operating decision maker, noting that independent directors may have less detailed information than executive directors.
"The fact that non-executive directors are often identified as operating decision makers, which appears to be contradictory to their governance responsibilities, indicates that preparers appear to be confused by the definition in the standard and this could be easily resolved either by way of interpretative guidance or an annual improvement," says the letter, which was sent on 23 August. The interpretations committee also recently called for an additional disclosure to be made in paragraph 22 of IFRS.
The committee argued that a brief description of both the operating segments that have been aggregated and the economic indicators that have been assessed should be included in order to conclude that the operating segments have "similar characteristics".
Esma is pushing for a speedier introduction of these changes. "To conclude, Esma would strongly encourage the IFRS interpretations committee to recommend the board to deal with both issues as part of the annual improvements project."
Source: GFS News
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