EFRAG – European Financial Reporting Advisory Group - was established in 2001 with the encouragement of the European Commission to provide input into the development of IFRS issued by the IASB and to provide the European Commission with technical expertise and advice on accounting matters.
EFRAG is a private association established in conformity with Belgian law and whose members known collectively as “EFRAG Member Organisations” are European stakeholders and National organisations having knowledge and interest in the development of IFRS and how they contribute to the efficiency of capital markets.
EFRAG’s role as advisor to the European Commission is formalised in a Working Arrangement which states that “EFRAG will provide advice to the European Commission on all issues relating to the application of IFRS in the EU. In close consultation with the European Commission, EFRAG will participate in the early phases of debate on all issues related to the standard-setting process”. As a result, EFRAG’s activities are aimed at ensuring that European views on the development of financial reporting standards are properly and clearly articulated in the international standard-setting process, so that ultimately IFRS can be endorsed in Europe to the satisfaction of all European stakeholders. Following the implementation of the “Maystadt” reform in 2014, EFRAG’s activities include assessments of whether the IFRS proposals/requirements are conducive to the European public good. This includes the interaction with economic concerns such as financial stability and growth.
EFRAG is achieving its mission both through its participation in the IASB consultation process and its proactive work, and, under the leadership of the European Commission, its interaction with the Accounting Regulatory Committee, to hear about the potential economic or political concerns from Member States’ representatives. Upon request, EFRAG also provides the European Commission with technical expertise and advice on whether newly published IFRS meet the criteria for endorsement in the European Union, in conformity with the 1606-2002 “IAS Regulation”.
“EFRAG Member Organisations” provide for the primary funding of EFRAG. Additional substantial funding is secured from the European Commission under yearly grant agreements. However, the EFRAG contents and publications are the sole responsibility of EFRAG and can under no circumstances be regarded as reflecting the views of the European Union.
EFRAG Member Organisations form the EFRAG General Assembly which is competent to appoint the President and members of the EFRAG Board, to approve EFRAG’s audited accounts and yearly budget, and to modify, when necessary, the EFRAG Statutes and Internal Rules.
The current acting President of the EFRAG Board is Roger Marshall, inter alia a Board Member and the Chairman of the Accounting Committee of the UK Financial Reporting Council. The acting Vice-President of the EFRAG Board is Claes Norberg, Director of Accountancy at the Confederation of Swedish Enterprise and professor of Corporate Law.
The composition of the EFRAG Board makes EFRAG the legitimate European voice in the development of IFRS. The EFRAG Board includes in equal numbers representatives of European Stakeholder Organisations and National Standard Setters and is led by a President of the EFRAG Board nominated by the European Commission, after having heard the European Parliament and the Council of Ministers. The EFRAG Board is responsible for all EFRAG positions and operates on the basis of a consensus-based decision-making process with the objective of Europe speaking with one voice. The European Commission, the European Supervisory Authorities and the ECB participate in the EFRAG Board in an observer capacity.
The EFRAG Board does not rely solely on its broad representativeness, it adopts well-informed positions
The EFRAG Board is taking all its decisions after having considered the advice of the EFRAG TEG and the results of EFRAG’s due process, and after having heard from the Accounting Regulatory Committee and made all assessments deemed relevant from a political perspective.
The composition and member profiles of the EFRAG Board can be found here.
EFRAG Technical Expert Group (EFRAG TEG)
As part of its decision-making process, the EFRAG Board considers the expert advice provided by the EFRAG Technical Expert Group (EFRAG TEG), which recommends technical positions reached independently, albeit after having given due consideration to all input received through EFRAG’s due process. Following the reform of EFRAG, EFRAG TEG is composed of up to sixteen members, twelve of which being selected on the basis of professional expertise and competence, and four others being nominated by the National Standard Setters of France, Germany, Italy and the UK to act as a strong liaison between EFRAG TEG and their national constituencies. The EFRAG Technical Expert Group members devote 30% to 50% of their time – free of charge – to EFRAG, except for its Chairman, Françoise Flores, who is employed by, and the CEO of, EFRAG.
The European Securities and Markets Authority, the ESAs and ECB, the IASB and the European Commission attend EFRAG Technical Expert Group meetings as observers.
Aiming for well-balanced and independent technical positions
The EFRAG Technical Expert Group Members are appointed through a formal process: an open call for candidates to support rotation among the 12 members selected solely on the basis of their professional expertise and competence, and a call for nominations sent to standard setters to select members who act as liaison with their national constituencies. In addition to bringing to EFRAG TEG members having the relevant level of knowledge and experience, the aim is to establish a broad balance in geographical and professional backgrounds. As a result, the EFRAG Technical Expert Group is composed of a mix of preparers, auditors, users of financial statements and academics, to ensure its deliberations and conclusions are independent and not unduly influenced by any interest group or constituency. Members of the EFRAG Technical Expert Group are required to act in the European public interest and not to consider themselves as representing sectorial or national interests. This also applies to EFRAG TEG members nominated as liaison with National Standard Setters.
Well-informed technical positions
The EFRAG Technical Expert Group benefits from expert advice in specialist areas provided by EFRAG working groups, such as the EFRAG Financial Instruments Working Group, the EFRAG Insurance Accounting Working Group, and the Rate-Regulated Activities Working Group. Essential to the work of EFRAG is input received from EFRAG’s User Panel. This essential input is reinforced by hearing more broadly from users thanks to the User Outreach Programme launched in 2012. EFRAG also works closely with all National Standard Setters in Europe, meeting with them every three months in the Consultative Forum of Standard Setters (EFRAG CFSS), and by working with them and the IASB to organise and conduct public hearings and field tests in accordance with EFRAG’s field work policy.
The composition of the EFRAG TEG can be found here.
The EFRAG secretariat provides support for all activities of the EFRAG Board, the EFRAG Technical Expert Group, and more generally all EFRAG working groups, outreach initiatives and field tests.
Public accountability is ensured on the one hand by EFRAG’s governance and on the other by EFRAG’s due process. It is of crucial importance to the success and credibility of EFRAG. EFRAG is accountable to the public at large and the European institutions through its open and transparent due process; including public consultation on its publications; transparency of EFRAG’s work; public meetings of the EFRAG Technical Expert Group, EFRAG Board , EFRAG Board public agenda papers and open nomination processes. EFRAG publishes every year an extensive Annual Review discussing its activities and presenting financials of the past year. The funding by the European Commission brings enhanced scrutiny of EFRAG’s activities and expenses, including the publication of audited annual accounts and detailed activity reports to the European Commission.
Building strong influence beyond the borders of Europe
EFRAG enjoys a constructive relationship with the IASB in many ways: EFRAG welcomes IASB members and staff as observers to the EFRAG Technical Expert Group’s and Working Group meetings; EFRAG staff cooperates with the IASB staff on a frequent basis; the IASB participates in outreach events and field-testing organised by EFRAG in partnership with European National Standard Setters; and EFRAG and IASB Chairs meet privately on a regular basis.
EFRAG is a member of the European delegation to the IASB Accounting Standards Advisory Forum (ASAF), a member of the International Forum of Accounting Standard Setters (IFASS) and has bilateral relationships with regional or national groups interested and involved in IFRS development. EFRAG also participates in the World Standard Setters meeting. EFRAG is a member of the IFRS Advisory Council.