Financial reporting enforcement results in Europe 2022
In March 2023, the European Securities and Markets Authority (ESMA) published its annual report 2022 Corporate reporting enforcement and regulatory activities. The report provides an overview of the ESMA-coordinated activities in 2022 of European national accounting enforcers.
The report is clearly divided into three parts:
- enforcement of financial reporting (including IFRS enforcement and enforcement of alternative performance measures)
- enforcement of non-financial reporting
- ESEF reporting.
In the report, ESMA provides companies, their audit committees and auditors with recommendations and examples of how they can improve financial reporting in the future. The recommendations are based on ESMA’s assessment of how the companies have complied with IFRS standards, regulations related to non-financial information, and ESMA’s guidelines and statements.
In 2022, national enforcers examined the financial statements or interim reports of 640 listed companies as part of their regular IFRS enforcement. These led to enforcement actions against 225 companies, which represents 38% of the companies reviewed. Enforcement actions related to recognition and measurement accounted for 13% of the total, while actions relating to disclosures accounted for 25%. Enforcers identified most shortcomings in the areas of accounting for financial instruments, impairment of non-financial assets, presentation of financial statements and revenue recognition. In addition, enforcement highlighted, in particular, the need to improve the disclosures of climate-related matters in financial statements. This work will continue as part of the enforcement of the European common enforcement priorities in the 2022 financial statements.
Financial reporting enforcers also examined non-financial information disclosed by 403 companies. This represents around 18% of issuers required to provide this information. Enforcement actions were taken in relation to 100 companies.
In addition, enforcers examined 521 management reports to assess compliance with ESMA’s APM Guidelines. Based on these, enforcement actions were taken in relation to 89 companies, constituting an action rate of 17%.
In 2022, ESMA also promoted the development of financial reporting through many actions. These actions included:
- ESMA’s statement Implications of Russia’s invasion of Ukraine on half-yearly financial reports
- ESMA’s statement Transparency on implementation of IFRS 17 Insurance Contracts
- ESMA’s assessment and statement to the EU Commission on EFRAG’s draft European Sustainability Reporting Standards (ESRS) Set 1
- ESEF XBRL taxonomy files 2022 and ESEF Reporting Manual update
For further information, please contact:
Nina Lindeman, Senior Specialist, IFRS, nina.lindeman(at)fiva.fi