EUROPEAN COMMISSION Brussels, 18.6.2015 SWD(2015) 120 final COMMISSION STAFF WORKING DOCUMENT Evaluation of Regulation (EC) N° 1606/2002 of 19 July 2002 on the application of International Accounting Standards Accompanying the document Report from the Commission to the European Parliament and the Council Evaluation of Regulation (EC) N° 1606/2002 of 19 July 2002 on the application of International Accounting Standards {COM(2015) 301 final}



Contents 1. Executive summary 1.1. Evaluation process 1.2. Findings on evaluation criteria 1.2.1. Effectiveness 1.2.2. Efficiency 1.2.3. Relevance 1.2.4. Coherence 1.2.5. EU added value 1.3. Findings on endorsement process and criteria 1.3.1. Endorsement mechanism — process 1.3.2. Endorsement mechanism — flexibility 1.4. Governance 1.4.1. IFRS Foundation 1.4.2. EFRAG 2. Evaluation mandate 2.1. Background and legal basis

2.2. Main provisions of the IAS Regulation 2.2.1. Background 2.2.2. Objectives 2.2.3. Scope 2.2.4. Endorsement procedure and criteria 2.2.5. Enforcement 2.2.6. 2008 review of the operation of the IAS Regulation 2.3. Evaluation methodology 2.3.1. Scope 2.3.2. Key questions 2.3.3. Data sources 2.3.3.1. Expert group 2.3.3.2. Public consultation 2.3.3.3. Accounting Regulatory Committee (ARC) 2.3.4. Limitations 3. Findings of the evaluation of the IAS Regulation 3.1. Scope 3.1.1. Option for Member States to extend the scope of application of IFRS 3.1.2. Discussion on possible extension of scope 3.1.3. Voluntary application

3.2. Objectives of the IAS Regulation: key benefits of applying IFRS 3.2.1. Overall objectives 3.2.2. IFRS as a single set of global standards 3.2.2.1. International use of IFRS 3.2.2.2. EU decisions on equivalence with other GAAPs 3.2.2.3. Convergence between IFRS and US accounting standards 3.2.3. Quality of IFRS financial statements 3.2.4. The performance of IFRS during the financial crisis 3.3. Cost/benefit analysis of the adoption of IFRS in the EU 3.3.1. Limitations 3.3.2. Mandatory adoption of IFRS 3.3.2.1. First-time implementation 3.3.2.2. Ongoing application 3.3.3. Voluntary adopters 3.3.4. Overall cost/benefit assessment 3.4. Endorsement mechanism and criteria 3.4.1. Endorsement mechanism — process 3.4.2. Endorsement mechanism — flexibility 3.4.3. Endorsement criteria 3.4.3.1. Discussion on possible new endorsement criteria

3.4.4. Effects analysis 3.5. Consistent application of IFRS in the EU 3.5.1. Enforcement 3.5.1.1. Background – organisation of IFRS enforcement in Europe 3.5.1.2. Findings of the evaluation 3.5.2. Interaction with the IFRS Interpretations Committee 3.6. Coherence of EU law 3.6.1. Link with other EU legislation 3.6.1.1. Link between IAS Regulation and other legislation 3.6.1.2. Link between IAS Regulation and prudential requirements 3.6.2. Internal coherence of IAS Regulation and implementing regulations 3.6.2.1. Consolidation 3.6.2.2. Translation 3.6.2.3. Coherence of standards 3.7. Governance of bodies involved in standard-setting with European impact 3.7.1. IFRS Foundation 3.7.2. EFRAG References Glossary

Appendix 1 — Intervention logic for the evaluation of Regulation (EC) No 1606/2002 (IAS Regulation) Appendix 2 — Detailed overview of Member States’ use of options, per type of business (as of end 2013) Appendix 3 — Evolution of the use of Member States’ options compared to Commission review in 2008 Appendix 4 — Statistics on non-listed companies reporting under IFRS Appendix 5 — A review of the literature on the impact of the mandatory adoption of IFRS in the EU Appendix 6 — An overview of the literature on IFRS and the financial crisis Appendix 7 — Questionnaire for the public consultation on the Impact of IFRS in the EU Appendix 8 — Feedback from the public consultation on the impact of IFRS in the EU (7 August — 7 November 2014) Appendix 9 — Composition of the informal Expert Group on the Evaluation of the IAS Regulation



1.Executive summary Over ten years after the adoption of Regulation 1606/2002 (‘IAS Regulation’) and following an initial review of its operation in 2008, the Commission decided to assess whether it achieved what it set out to do as part of the Regulatory Fitness and Performance Programme (REFIT). In parallel, Regulation 258/2014 requires the Commission to report both on the findings of the evaluation including, if appropriate, proposals for amendments, and on the governance arrangements of relevant bodies. The objective of adopting International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) for use in the EU was to improve the efficient functioning of the EU capital markets and the internal market. Under the Regulation, since 2005, the consolidated financial statements of listed EU companies have been prepared in accordance with IFRS. Member States may extend the application of IFRS to individual annual financial statements and to non-listed companies. The ‘Transparency Directive’ n2004/109/EC also stipulates that all issuers (including non-EU ones) whose securities are listed on a regulated market located or operating in the EU must use IFRS. 1.1.Evaluation process The Commission conducted the evaluation which involved seeking the views of stakeholders through a public consultation (August — November 2014, 200 contributions), an informal expert group (18 public and private organisations, 3 meetings in 2014) and the Accounting Regulatory Committee (ARC) which comprises representatives of all Member States. It conducted a review of the literature on the impact of the mandatory adoption of IFRS in the EU and on the performance of IFRS during the crisis. It also drew upon internal experience of relevant international and European bodies. The evaluation took account of Mr Maystadt’s recommendations to reinforce the EU’s contribution in the international standard-setting arena. The evaluation sought to compare the situation under the IAS Regulation with what would have been the case if IFRS had not been adopted. However, there was no clear benchmark against which to compare IFRS, as there is no single alternative in the EU and as national or US generally accepted accounting principles (GAAPs) evolved during the period under review. The evaluation was generally from the perspective of the EU as a whole, without systematic analysis of the interaction of the Regulation with national legislation. The evaluation did not include a technical review of IFRS standards, nor were individual standards analysed from the perspective of the administrative burden they may impose. Neither did it consider possible alternative accounting regimes for EU non-listed companies. 1.2.Findings on evaluation criteria The objective of the IAS Regulation were to harmonise the financial reporting of listed companies by ensuring a high degree of transparency and comparability of their financial statements in order to enhance the efficient functioning of EU capital markets and of the internal market. The Regulation attached importance to IFRS becoming globally accepted so that EU companies would be able to compete on an equal footing for financial resources in the world capital markets.

1.2.1.Effectiveness Transparency and comparability The Commission found that the IAS Regulation has increased the transparency of financial statements through improved accounting quality and disclosure and greater value-relevance of reporting, leading to more accurate market expectations including analysts’ forecasts. It also led to greater comparability between financial statements within and across industries and countries although some differences persist. Collected evidence suggested that the quality of financial statements prepared under IFRS is good, which implied that the standards are of good quality. Nevertheless, there were criticisms of their complexity. Findings suggested most complexity is unavoidable as it arises from the underlying complexity of business; although standards are not industry specific, they were considered flexible enough to accommodate most business models but there was some concern about their suitability for long-term investors and about the volume of disclosures. The IAS Regulation recognised that high quality financial reporting depends on proper and rigorous enforcement. Under the Transparency Directive, enforcement of accounting standards is the responsibility of individual Member States; the European Securities and Markets Authority (ESMA) coordinates their activities to enhance supervisory convergence and ensure consistent application of IFRS in the EU. Collected evidence suggested that there are proper mechanisms in place to ensure adequate enforcement of IFRS and that ESMA plays an important role in promoting consistency and coherence in enforcement across the EU. Nevertheless, some evidence showed that some differences in enforcement persist between Member States. ESMA recently published new guidelines on enforcement which could lead to further improvements in this area but it is too early to assess their impact. Consistent implementation of standards can depend on how they are interpreted. ESMA refers areas of diversity in practice to the IFRS Interpretations Committee. The Commission welcomes the effective cooperation between the two bodies. Efficient Functioning of the EU Capital Markets and Internal Market The Commission found evidence of improved capital market outcomes: higher liquidity; lower costs of capital; increased cross-border transactions; easier access to capital at EU and global level: improved investor protection and maintenance of investor confidence. However, as noted above, the effects of IFRS could not be isolated from other changes affecting capital markets. The extent to which, if any, the use of IFRS may have exacerbated the financial crisis has been widely debated and the evidence was mixed. Two aspects of accounting fall under the spotlight. The first is the use of current prices (fair values) to value financial instruments. When markets are overly buoyant or pessimistic, values can be exaggerated. By contrast, instruments such as bank loans are reported based on cost, with a constant need to assess whether customers will repay amounts due. During the financial crisis, the applicable standard for loan impairment was widely criticised for having led to ‘too little, too late’ provisioning. Other criticisms concerned a lack of disclosure by some banks. After an extensive due process, the IASB published a new standard for financial instruments in 2014 (IFRS 9) which is currently being assessed for adoption. Overall, the financial crisis highlighted that standards can have broad economic effects.

Global Standards The IAS Regulation envisaged IFRS becoming global standards which would benefit EU companies. Stakeholders believed that the EU’s decision to adopt IFRS provided a major impetus to the credibility and acceptance of IFRS globally. To date, over one hundred countries accept IFRS and the standards are supported by international organisations, such as the G20, Financial Stability Board, World Bank, International Monetary Fund and the Basel Committee on Banking Supervision. The United States does not permit its domestic companies to use IFRS which constitutes a significant limitation on their global application. The ‘equivalence’ arrangement whereby the US Securities and Exchange Commission (SEC) accepts financial statements prepared under IFRS for foreign companies is perceived as an important benefit for around 90 large European issuers with US listings. In 2002, the IASB and the US standard setter (FASB) began a programme to converge their respective standards. The financial crisis highlighted the importance of this work which was actively supported by the G20 and FSB. In some areas, however, the Boards were unable to achieve common positions. 1.2.2.Efficiency Overall, the evidence from the evaluation showed that the benefits of the implementation of the IAS Regulation outweigh the costs. Nevertheless, application of accounting standards does not readily lend itself to traditional cost-benefit analysis as benefits are not quantifiable in money terms; there is little data on costs and there is an uneven distribution of costs and benefits whereby costs are largely incurred by companies preparing IFRS financial statements whereas benefits are shared by them, users of financial statements including investors and the wider economy. Nevertheless, companies largely supported IFRS which implies that they find the costs commensurate with the benefits. Evidence suggested that the ratio of costs to benefits depends on characteristics of a company such as its size and scale of international operations. Some stakeholders saw merits in extending the use of IFRS by giving an option to companies to adopt IFRS as there would be cost savings, especially for companies in listed groups. Also, some suggested a lighter version of IFRS, with reduced disclosures, for subsidiaries of listed groups. It was noted that the cost of adopting IFRS may represent an obstacle for an initial public offering, especially for small and medium size companies (SMEs). Users of financial statements largely supported IFRS for improving the transparency and comparability of financial statements. All stakeholders incur costs during the development and endorsement of standards. Some feedback suggested that, more recently, the trade-off between costs and benefits has been adversely affected by frequent changes to standards, their complexity and the increasing volume of disclosures.

1.2.3.Relevance Overall, the evidence from the evaluation showed that the objectives of the IAS Regulation remain relevant. The increasing globalisation of capital markets has made the need for one financial reporting language even more relevant. In 2002, there was no level playing field for listed companies across EU capital markets. This has now been achieved so the debate focuses on whether a level playing field exists globally. As noted, international organisations support IFRS as global standards. The crisis evidenced the need to understand the effects of regulations on financial markets and on economies. The IAS Regulation specifies that as a condition to being brought into EU, international standards must be conducive to the European public good. The term ‘public good’ is not defined but may be understood to encompass broad financial stability and economic considerations. In particular, it is necessary to assess whether accounting standards could be detrimental to the economy or to particular stakeholders, such as long-term investors. There is also a growing call for regulations to be considered holistically in terms of their cumulative effects. At the time of the adoption of the IAS Regulation, it was agreed that its objectives were more relevant for listed EU companies which was reflected in the scope of mandatory application which Member States have the option to extend. Some stakeholders considered that the use of IFRS could potentially bring similar benefits, in particular to investors, if their use was extended (e.g. to individual annual financial statements of listed companies not preparing consolidated financial statements). Others highlighted a risk of imposing complex standards on SMEs. 1.2.4.Coherence Within the IAS Regulation IFRS adopted by the EU have been codified in a legally-binding Commission Regulation amended for each new standard and amendment. Twice yearly, the Commission draws up a non-binding consolidated version of current standards in all EU languages. Evidence shows a need for improved translations for certain languages, practical difficulties in the consolidation of the standards and some discrepancies between IASB and the EU consolidated texts. An official codification of all IFRS by the Commission could therefore represent a useful exercise. A different aspect of the coherence of the Regulation was raised by some stakeholders who questioned whether there is a need for assurance, beyond the IASB’s due process, that new standards or amendments are coherent with the existing body of IFRS. With other EU legislation The IAS Regulation interacts with other EU regulations and directives. The Commission is committed to help address any points of friction in the interactions between the IAS Regulation and the Accounting Directive. Thus far, adequate interpretation and transposition methods by the Member States have enabled such points to be overcome. Capital maintenance and dividend distribution rules have also been cited as a source of legal challenge which can arise in certain jurisdictions where Member States permit or require the use of IFRS for individual annual financial statements on which distributable profits are based. Each Member State considers how to address such issues in their national legislation within the framework of the EU capital maintenance requirements. The IASB’s existing Conceptual Framework states that the objective of general purpose financial reporting is to provide information about the reporting entity that is useful to existing and potential investors, lenders and other creditors. Although IFRS-based financial information is the starting point for much prudential regulation, the IASB does not include prudential supervisors or regulators on its list of users. Nevertheless, there is a need to ensure that financial information is fit for that purpose whilst recognising that prudential regulators can demand other information to meet their different objectives. The evidence suggested that although IFRS, regulatory requirements, tax and capital maintenance rules may impose different reporting requirements on companies, such differences are largely considered to be proportionate and legitimate given the array of objectives pursued. 1.2.5.EU added value In the late 1990s, the internationalisation of companies, the achievement of the single market and the globalisation of financial markets led to the need to find a common accounting language for listed companies. Some of them had to prepare an additional set of accounts under international or US standards because their national accounts were not recognised internationally. The EU decided to apply IFRS for listed companies through a Regulation because difficulties in reconciling different accounting traditions between Member States would have impeded adequate enhancement of the Accounting Directives. Evidence has shown that the Regulation’s objectives have been achieved effectively and efficiently and that they remain relevant. Also, to date, there is still no well-defined alternative to IFRS. Thus the Regulation continues to provide added value to Europe reducing cross-border barriers through a common international accounting language and by allowing for a strong EU voice in the development of international standards. Evidence showed that the balance between the mandatory scope of application of the Regulation and the option for Member States to extend the use of IFRS at national level ensures proper subsidiarity and proportionality. Member States have implemented the options in diverse ways which take account of their specific economic and legal environments. Compulsory use of IFRS has not been widely extended to non-listed companies or to individual financial statements. 1.3.Findings on endorsement process and criteria

1.3.1.Endorsement mechanism — process IFRS issued by the IASB are endorsed by the Commission under a comitology process. An endorsement process remains necessary to ensure that the standards developed by a private body meet certain criteria and are fit for the European economy before becoming part of EU law. The Commission aims to ensure that the endorsement process runs smoothly and efficiently; feedback indicated that most stakeholders consider that it works well. Timing raised some concerns as it introduces regulatory uncertainty. Nevertheless, the need for a proper due process allowing adequate time for stakeholders to contribute as appropriate must be respected. Another important factor for the endorsement process is that the effects of a standard are fully understood. To date, the IASB has provided limited analysis of the effects of its standards, focusing on the quality of the information provided to users of financial statements. Additionally, the Commission services and the European Financial Reporting Advisory Group (EFRAG) assess the effects of a standard at EU level. 1.3.2.Endorsement mechanism — flexibility Some European stakeholders consider that the IAS Regulation is lacking in flexibility as it does not allow IFRS to be amended by adding text and has only limited scope for ‘deleting’ (‘carving-out’) text. In the EU, one carve-out used by a number of banks has been in effect since 2005. Other stakeholders considered that standards issued by the IASB should not be altered for application in Europe. The Maystadt Report stated that caution is necessary in this area and most stakeholders supported maintaining the status quo. The feedback received also expressed the belief that the reform of EFRAG should enhance Europe’s influence over the development of standards earlier in the process. 1.3.3.Endorsement criteria The IAS Regulation sets out a number of criteria that must be met in order for a standard to be endorsed in the EU. The standard should not be contrary to the "true and fair" view principle set out in the Accounting Directive, should be conducive to the public good in Europe and should meet basic criteria related to the quality of information required for financial statements. The Maystadt report noted that two other criteria could be added as components of public good: that the standards should not endanger financial stability and must not hinder the economic development of the Union. Alternatively it suggested issuing a Communication giving guidelines for the interpretation of the public good criterion. Overall, feedback suggested that the existing criteria work appropriately and, while some stakeholders would like to see other criteria included in the Regulation, there was no clear majority view calling for a particular criterion to be added. Nevertheless, some stakeholders considered that it would be helpful to be more specific about what European public good encompasses while others considered that the term is generic enough to have meaning and allows flexibility in practice. Most stakeholders did not recommend making any changes to the IAS Regulation itself but preferred that the Commission identify areas of focus for EFRAG on a case by case basis. The challenge is that there should be a shared understanding of terms in the Regulation, including "public good" and "true and fair". In the latter case, some stakeholders recommended that a standard should be explicitly assessed in terms of whether it would lead to prudent accounting which they saw as an important factor in providing a true and fair view. The Commission, together with EFRAG, should produce guidance for improving the understanding of the endorsement criteria. 1.4.Governance 1.4.1.IFRS Foundation The IFRS Foundation is an independent organisation setting accounting standards for more than 100 countries. Hence, it needs strong governance arrangements to ensure public accountability. It has a three-tier governance structure aiming at favouring transparency, segregation of duties and adequate oversight. The Monitoring Board of public authorities, including the European Commission, ensures that the IFRS Foundation is subject to public oversight. It can refer matters of broad public interest to the IASB. In 2013, the IFRS Foundation was mainly financed through contributions. It aims at establishing (compulsory) national financing regimes, proportionate to a country’s GDP. This has so far proved challenging as many countries that use IFRS do not make commensurate contributions. Thus, the Foundation continues to rely on voluntary contributions, often from the private sector which may give rise to a risk of conflicts of interests. The EU as a whole, including the Member States contributions, is the main financial backer of the IFRS Foundation, with a multi-year commitment which provides the IFRS Foundation with a stable source of funding and helps it to diminish its reliance on the private sector. In the period under review, there were a number of positive changes: creation of the Accounting Standards Advisory Forum, with European representation; recommendations to the Trustees from a consultative group on the methodology for field work and effects analyses which will be implemented by the IASB, and the introduction of post-implementation reviews of standards. In response to demand from stakeholders, including European concerns, the IASB is developing its Conceptual Framework which will improve financial reporting by providing a complete and updated set of concepts to use in their future work. An exposure draft has been published on 28 May 2015 and addresses a number of important matters including reinstating the concept of prudence as an important element in financial reporting. The IFRS Foundation is bound by its Constitution to review its organisational structure every five years. Past reviews significantly improved its governance. The next review will present an opportunity to tackle the issue of the Foundation’s funding and decision-making process, including the role of the Monitoring Board. 1.4.2.EFRAG

In July 2014, the Commission reported on the progress achieved in the implementation of the reform of EFRAG following the Maystadt Report. The Commission came to a favourable conclusion regarding the progress made to date. The reform took effect on 31 October 2014 when the amended EFRAG Statutes and Internal Rules came into force. It involved establishing a new Board of EFRAG, its new decision-making body, with balanced representation of public and private interests, with a view to strengthening the legitimacy of its positions and contributing to the objective of Europe speaking with one voice.

2.Evaluation mandate 2.1.Background and legal basis Over 10 years on from the adoption of Regulation (EC) No 1606/2002 on the implementation of international accounting standards (the ‘IAS Regulation’), the European Commission decided to assess whether it had achieved what it set out to do. In the wake of the financial crisis, the standards have been discussed increasingly at international (e.g. G20, Basel Committee) level and with various interested parties in the EU. Several initiatives concerning technical and governance issues have been taken at international and EU level. In the EU, Philippe Maystadt reported in October 2013 on the findings of his mission to advise Commissioner Barnier, the former Commissioner for the internal market and services, on how to improve the EU’s contribution to the development of international accounting standards. This evaluation of the IAS Regulation was designed to complement this action by providing factual data about experience in Europe to date. Evaluations are essential for the Commission’s decisionmaking and its ‘better regulation’ process to ensure that European laws and regulation are well targeted, implemented correctly and at the right level, and proportionate to need. This evaluation is included in the 2015 Commission’s work programme as part of the Regulatory Fitness and Performance (REFIT) Programme, the objective of which is to simplify existing legislation and reduce administrative burdens. The evaluation is a comprehensive policy examination, covering all relevant criteria, i.e. the effectiveness, efficiency, relevance, coherence and EU added value of EU legislation. Article 9(2) of Regulation (EU) No 258/2014, which established a funding programme for organisations in the accounting and audit field, requires the Commission to report to the European Parliament and the Council on the findings of its evaluation, including, where appropriate, proposals for amending the Regulation with a view to improving its functioning, and on governance arrangements for all relevant institutions. Criteria for the endorsement of standards in the Union were referred to in the recitals of the Regulation. This staff working document (SWD) accompanies Report from the Commission to the European Parliament and the Council on the evaluation of Regulation No 1606/2002 of 19 July 2002 on the application of international accounting standards (the IAS Regulation). The Report draws conclusions on the findings of the evaluation, on the Regulation’s endorsement criteria and on governance aspects, and maps out a way forward. The SWD is organised by topics covered in the IAS Regulation. 2.2.Main provisions of the IAS Regulation 2.2.1.Background The EU started to harmonise national accounting rules in the late 1970s. However, the aim was never full convergence and accounting standards continued to differ from one Member State to another. The lack of comparability between accounts prepared according to different regimes constituted a major barrier to cross-border investment and the integration of European capital markets at a time of increased company internationalisation and financial market globalisation. Furthermore, European companies listed outside the EU had to prepare an additional set of financial statements under international or US standards because their national financial statements were not recognised internationally. Given the difficulty of reconciling different Member States’ accounting traditions to enhance the Accounting Directives for listed companies in the EU, the EU took a decisive step in 2002 with the IAS Regulation, which required that a single set of internationally accepted accounting standards be applied to listed companies from 2005 onwards. These International Accounting Standards (IAS), the International Financial Reporting Standards (IFRS) and interpretations of them (SIC/IFRIC) are drawn up by the International Accounting Standards Board (IASB), a not-for-profit private organisation based in London. 2.2.2.Objectives Under Article 1 of the IAS Regulation: ‘This Regulation has as its objectives the adoption and use of international accounting standards in the Community with a view to harmonising the financial information presented by companies … in order to ensure a high degree of transparency and comparability of financial statements and hence an efficient functioning of the Community capital market and of the Internal Market.’ Thus, the expected and desired effects of mandatory IFRS adoption are to increase the transparency and comparability of European financial reporting, so as to allow capital markets to function more efficiently, in particular by eliminating barriers to cross-border trading in securities, reducing the cost of capital for companies and enhancing investor protection. One of the EU’s objectives in adopting the Regulation was to create a level playingfield for EU companies, assuming that the IFRS would become the single set of high quality international accounting standards. An intervention logic is presented in Appendix 1. 2.2.3.Scope When the IAS Regulation was adopted, it was agreed that the above objectives were more relevant for large, internationally active EU companies. Therefore, mandatory application of IFRS at EU level is limited to the consolidated financial statements of European companies whose securities are traded on a regulated market in the EU.

In addition, Member States may extend this scope by allowing or requiring that IFRS are used in their country for the consolidated financial statements of other companies and for annual individual financial statements, regardless of whether the company is listed on a regulated market in the EU. This was to ensure proper subsidiarity and proportionality. The Transparency Directive (2004/109/EC) also requires all issuers (including non-EU ones) whose securities are listed on a regulated market, located or operating in an EU country, to use IFRS. 2.2.4.Endorsement procedure and criteria IASB international accounting standards and interpretations are endorsed in the EU in line with a procedure laid down in the IAS Regulation. The European Commission decides on their application by adopting implementing measures in the form of Commission regulations, which are adopted by the regulatory procedure with scrutiny laid down in Council Decision 1999/468/EC, as amended by Council Decision 2006/512/EC (comitology procedure). Chart 1 — The EU’s IFRS endorsement process The endorsement procedure for new standards, and interpretations of and amendments to existing standards, involves a number of steps: I.on request from Commission officials, the European Financial Reporting Advisory Group (EFRAG) examines potential impact and advises on endorsement; II.following receipt of this advice, the Commission decides on endorsement for the EU; III.if the Commission decides to endorse, officials prepare a draft implementing measure; IV.this is submitted to the Accounting Regulatory Committee (ARC), composed of representatives from relevant Member State authorities, for its opinion; V.if the ARC’s opinion is positive, the Commission submits a draft implementing measure to the Council and the European Parliament for a three-month scrutiny period; and VI.finally, the Commission adopts an endorsing regulation. The new regulation is then published in the Official Journal of the European Union. Overall, including translation of the standard into the languages of the Member States, the process typically takes eight months. The future status of ARC is uncertain due to changes resulting from the Treaty of Lisbon, which replaced the current comitology procedure with new forms of implementing legislation, namely delegated acts and implementing acts. The ARC may be transformed into a ‘group of experts’ discussing inter alia issues relating to accounting policy. In the context of IFRS endorsement, the Council and the Parliament retain their right of final resort control in line with the Treaty (right to object). In 2006, an additional group, the Standards Advice Review Group (SARG) was established to provide the Commission with independent advice on EFRAG’s endorsement recommendations. However, as EFRAG’s role evolved and expanded, the Commission decided that it no longer needed additional advice and SARG’s mandate was not renewed; it was dissolved in July 2011. Under Article 3(2) of the IAS Regulation, for an IFRS standard to be adopted in the EU, it must: (1) not be contrary to the ‘true and fair’ view principle set out in the Accounting Directive; (2) be conducive to the public good in Europe; and (3) satisfy basic criteria as to the quality of information required for financial statements to serve users (i.e. statements must be understandable, relevant, reliable and comparable, and provide the financial information needed to make economic decisions and assess stewardship by management).

2.2.5.Enforcement According to recital 16 of the IAS Regulation, ‘a proper and rigorous enforcement regime is key to underpinning investors’ confidence in financial markets. Member States by virtue of Article 10 of the Treaty are required to take appropriate measures to ensure compliance with international accounting standards. The Commission intends to liaise with Member States, notably through the Committee of European Securities Regulators (CESR), to develop a common approach to enforcement’. Enforcement activities regarding companies listed on regulated markets are defined in the Transparency Directive (Article 24): ‘Each Member State shall designate the central authority […] responsible for carrying out the obligations provided for in the [Transparency] Directive and for ensuring that the provisions adopted pursuant to this Directive are applied’. In particular, the central authority has to assess whether the consolidated accounts are ‘drawn up in accordance with the Regulation (EC) No 1606/2002’, which introduced IFRS in the EU. In 2011, as part of the new European supervisory architecture, the European Securities and Markets Authority (ESMA) took over the activities of the CESR, including the coordination of national enforcers’ activities concerning enforcement of IFRS in the EU. ESMA acts within the scope of the Transparency Directive and does not have the power directly to enforce accounting standards. However, under Article 16 of Regulation (EU) No 1095/2010, it may issue guidelines and recommendations to competent authorities or financial market participants with a view to establishing consistent, efficient and effective supervisory practices within the European system of financial supervision, and to ensuring the common, uniform and consistent application of Union law. 2.2.6.2008 review of the operation of the IAS Regulation In 2008, a review of the operation of the IAS Regulation was conducted under Article 10 of the Regulation. Conclusions on the first years of mandatory application of IFRS in the EU were generally positive, indicating: an increase in the value of accounting information; consistent application of IFRS in Europe in general; and an EU endorsement process ensuring technical quality, political legitimacy and relevance to business. The inclusion in the IASB’s work programme of issues raised by the EU was identified as a significant factor in maintaining a high level of acceptance of IFRS in the EU. The crucial need for EU institutions, Member States and stakeholders to become involved in the standard-setting process as early as possible was highlighted, as were the careful monitoring of future IASB impact assessments and the assessment of IASB governance and funding. 2.3.Evaluation methodology 2.3.1.Scope The evaluation covers the whole IAS Regulation so as to provide a basis for the conclusions presented in the Report. It is retrospective, comparing the situation under the IAS Regulation with the situation had IFRS not been adopted (e.g. national or US GAAPs). The evaluation was generally from the perspective of the EU as a whole, without systematic analysis of the interaction of the Regulation with national legislation. Differences in Member States’ legal, fiscal and social environments are often reflected in differences in their national accounting frameworks and the traditions and cultures that underpin them and can affect their views. The evaluation focused on the requirements of the IAS Regulation and did not address possible alternative accounting regimes for non-listed companies in the EU (e.g. the IASB’s ‘IFRS for SMEs’ standard, designed for companies that do not have public accountability, which has not been adopted in the EU). Feedback was received from a very limited number of stakeholders, in the margin of the consultations, but is reported for the sake of completeness. Lastly, the evaluation did not include a detailed technical analysis of the provisions of each IFRS standard or an analysis of the administrative burden that may be imposed. The IASB itself has started postimplementation reviews, to which EFRAG and ESMA are contributing actively. 2.3.2.Key questions The key questions addressed in the evaluation were: To what extent have the objectives of the IAS Regulation been achieved? In particular, have IFRS provided stakeholders (e.g. companies preparing financial statements, users of financial statements, i.e. analysts and investors) with greater transparency and comparability than other accounting standards (e.g. national or US GAAPs)? Do stakeholders see benefits in international convergence? To what extent has the functioning of the internal market improved? Have the changes contributed to greater protection for investors and to maintaining confidence in the financial markets? To what extent are the objectives of the IAS Regulation still relevant today? In particular, are its endorsement criteria still relevant and adequate? Is the endorsement process adequate? What lessons can be learned from the crisis?

What are the impacts of the use of IFRS in Europe (including costs and benefits)? Is the governance of IASB and of EU bodies involved in endorsing IFRS adequate? The evaluation also addresses more detailed questions; these are shown below, along with the corresponding evaluation criteria, as used in the Report, and sections of the SWD: Category Evaluation questions SWD section Effectiveness To what extent have the objectives of the legislation been achieved (i.e. transparency and comparability of financial statements, better functioning of the EU capital markets through support for cross-border transactions or crosslistings, lower cost of capital, better protection for investors and maintenance of confidence in the financial markets)? To what extent have implementation issues been an obstacle to transparency and comparability? To what extent have enforcement activities helped enhance transparency and comparability? Were the criteria for endorsing IFRS in the EU adequate to ensure the effectiveness of the Regulation? Were the governance arrangements with organisations developing the standards and advising on their endorsement adequate to ensure the effectiveness of the Regulation? 3.2







3.5

3.5

3.4

3.7 Relevance To what extent are the needs that were identified when the EU adopted the IAS Regulation still valid? In what way have these needs evolved, in particular in the light of the financial crisis? To what extent does the IAS Regulation still address these needs? Are the endorsement criteria of the IAS Regulation still relevant and adequate? Are the governance arrangements for organisations developing the standards and advising on their endorsement still relevant? 3.2

3.2

3.2 3.4 3.7 Efficiency What have been the costs/benefits of the IAS Regulation? 3.3 Coherence Is internal consistency of the Regulation and of its implementing Regulations ensured (e.g. translation, codification)? To what extent is the consistency of EU law ensured (in particular between the IAS Regulation, the Accounting Directive and prudential requirements)? 3.6

3.6 EU added value To what extent has addressing the problem at EU level gone beyond what could have been achieved by national, global or other measures? How were the options given to Member States to extend the use of IFRS to other types of companies used (Article 5)? 3.2 3.1 2.3.3.Data sources Commission officials conducted the evaluation internally and consulted stakeholders via a public consultation, and discussions in the framework of an expert group and in the ARC. The work involved: an economic review of the available evidence in the literature published until 2014 on the impact of mandatory IFRS adoption in the EU (see Appendix 5), including its performance in the financial crisis (see Appendix 6); an inventory of the scope of application of IFRS in each Member State (Appendix 2); a survey on the number of European companies applying IFRS in the EU in commercial databases; and a review of the relevant institutions’ governance arrangements. The evaluation drew on the Commission’s experience of relevant international and European bodies, including the G20, the Basel Committee, European supervisory authorities (ESAs), in particular ESMA, and participation in different groups of the IFRS Foundation (oversight body of the IASB) and of EFRAG. As regards the governance of accounting organisations, officials reviewed the IFRS Foundation’s governance on the basis of public sources of information (the Foundation’s constitution, Due Process Handbook, 2013 Annual Report) and the Commission’s experience of the Foundation’s Monitoring Board. This work follows up on the Commission staff’s ex ante evaluation for establishing a Union programme to support specific activities in the field of financial reporting and audit. As regards the governance of EFRAG, the evaluation took full account of the Maystadt Report and the progress achieved in implementing the reform of EFRAG. As regards the coherence of EU legislation, the officials consulted other Commission departments at different stages of the process, through a steering committee composed of the SecretariatGeneral, the Legal Service, the Directorates-General for Budget, Competition, Internal Market, Industry, Entrepreneurships and SMEs, Justice, Taxation and Customs Union, Translation, Eurostat and the Publications Office. They drew on the experience of the unit in charge of the present evaluation, which is also responsible for the Accounting Directive and facilitating its transposition by Member States. They also referred to the Commission’s 2008 review on the operation of the IAS Regulation. 2.3.3.1.Expert group The then DirectorateGeneral for Internal Market and Services (DG MARKT) set up an informal expert group in June 2014 to advise and assist it in its work. It was composed of 18 member organisations (Appendix 9), with a balance between the public sector (ESMA, national standardsetters, national supervisors) and the private sector (industry, users of financial statements, i.e. analysts and investors, academics). It met three times in 2014 (in July, October and December). Officials used the group as a sounding board, consulting it on the questionnaire for the public consultation, preliminary feedback from the consultation, the endorsement criteria and mechanism, enforcement, and the scope of the IAS Regulation. All information on the group’s meetings is available on a dedicated website. 2.3.3.2.Public consultation Between 7 August and 7 November 2014, Commission officials conducted a public consultation on the impact of IFRS in the EU, covering several aspects of the IAS Regulation. The questionnaire is attached (Appendix 7), as is a feedback statement, which identifies the respondents (Appendix 8). A total of 200 respondents commented on the public consultation, of whom 23% requested anonymity (including 40% of the companies preparing financial statements and half the private respondents) and one asked for non-publication. The remaining responses are published on the Commission’s website. There was a significant number of responses from three Member States, Germany, the United Kingdom and France, and global and EU-level organisations.



Chart 2 — Geographical origin of respondents to the public consultation Of all respondents, 47% (93) were companies (60) or business associations (33), mostly preparing and, in some cases (12), also using financial statements under IFRS. Nearly all the companies were large, operating internationally, listed on regulated markets and required to apply IFRS for consolidation purposes. Industry and financial services were equally represented. Some 8% of respondents (6 companies, 10 associations) were investors, analysts and lending institutions, with industry and financial services again equally represented. Another 15% were accountants or auditors (30, including 11 firms and 12 associations) and 14% public authorities (including three European authorities). Chart 3 — Respondents to the public consultation by profile

2.3.3.3.Accounting Regulatory Committee (ARC) ARC members provided the Commission with updates on the scope of IFRS application in their Member States in autumn 2013. They discussed the evaluation in February 2014 and were consulted in November 2014 on the scope of the IAS Regulation, including national extension, on the basis of initial feedback from the public consultation. 2.3.4.Limitations There are some limitations to the methodology and techniques used. Some key points are highlighted below. More details as to the challenges in the empirical measurement and interpretation of results in academic studies are presented in section 3 of the literature review (Appendix 5). Data availability It was difficult to obtain quantitative data on EU companies applying IFRS and on the costs and benefits of IFRS application. Complete historical data on EU companies applying IFRS on a mandatory and voluntary basis (beyond the mandatory scope of the IAS Regulation) were available neither from commercial databases nor from Member States. Implementation of Transparency Directive provisions (Article 21a) on a central access point for regulated information by 1 January 2018 could improve the situation for listed companies in the future. A quantitative cost/benefit analysis was not possible. The nature of the benefits is such that they cannot easily be expressed in monetary terms. Evidence of costs is scarce in the literature and stakeholders were not able to give figures. Instead, Commission officials focused on qualitative factors. Challenges in isolating the effects of IFRS on market behaviour The period under review saw significant regulatory and economic changes in the EU and internationally, making it difficult to draw conclusions about the effects of IFRS adoption in isolation. For example: the financial crisis meant that banks had to raise capital on the market due to the decrease in their own funds; changes in the EU regulatory framework included the introduction of the Market Abuse Directive, the Markets in Financial Instruments Directive (MiFID), the Directive on statutory audits (2006/43/EC), changes in corporate governance rules and adjustments to enforcement frameworks; and changes in international regulations, such as the Sarbanes Oxley Act and listing and delisting procedures, also served to blur possible causal links between the use of IFRS and the behaviour of EU companies.

Lack of clear benchmark Much of the academic research into the benefits of IFRS adoption focuses on the period immediately after adoption, as this is when the effects are likely to be most easily detectable. IFRS are not static and early research results may no longer hold. There appears to be a need for further research into the long-term impacts of IFRS, but at the same time such research faces significant challenges, as the longer the period studied the more difficult it is to control for confounding factors and isolate the direct effects of IFRS adoption. Differences in Member States’ GAAPs when IFRS were first adopted also present challenges for academic researchers, as do variations in the application of the principles-based IFRS across and within countries. Full cost/benefit analysis is hampered by the lack of a clear benchmark against which to compare IFRS, as there is no single alternative in the EU and national GAAPs may have evolved during the period under review. Some local GAAPs are being brought more into line with IFRS. In addition, some countries had no fully developed standards before IFRS adoption. Bias in sample Empirical research in this field also focuses mostly on larger companies. In addition, the Commission’s public consultation cannot be regarded as a statistical analysis as, despite the good response rate, the sample of respondents from particular groups of interests is too small and self-selected (e.g. high number of respondents from three Member States). In addition, public consultations may be an opportunity for lobbies to convey their views on future policy development rather than a gauge of the results of adopted legislation.

3.Findings of the evaluation of the IAS Regulation In this section, sources of evidence are generally specifically identified. When the term 'consultations of stakeholders' is used, it refers to findings derived from the public consultation, the expert group and the ARC. 3.1.Scope ESMA estimates that about 4 800 European companies prepare their consolidated financial statements under IFRS as endorsed by the EU, as their securities are traded on a regulated market in the EU. It estimates that over 1 000 European companies listed on regulated markets draw up their individual annual financial statements under IFRS where there is no obligation to prepare consolidated financial statements (Member State option for listed companies). No reliable and comprehensive data are available on the number of companies not listed on regulated markets, but applying IFRS for their consolidated or individual annual financial statements as a result of Member States’ application of the options for non-listed companies or of a requirement from a non-regulated stock exchange (multilateral trading facilities). Consultations showed broad agreement among stakeholders, including Member States and experts, on the appropriateness of the current mandatory scope of application of the Regulation, together with the flexibility to widen IFRS application at national level. Over two thirds of respondents to the public consultation are of this view. 3.1.1.Option for Member States to extend the scope of application of IFRS The options for extending the scope of the IAS Regulation at MemberState level (see section 2.2.3) have been implemented in different ways depending on the economic and legal environments in individual Member States, in particular the links to fiscal rules and company law. Compulsory use of IFRS does not appear to have been widely extended to non-listed companies and/or individual financial statements. However, the use of IFRS for some nonlisted companies’ consolidated financial statements is broadly permitted in all Member States. Only six Member States allow neither listed nor non-listed companies to use IFRS for their individual financial statements. Table 1 shows Member States’ use of the options in Article 5 of the IAS Regulation as of end 2013 and Appendix 2 sets out in more detail the types of company concerned. Use of IFRS is more widespread today than at the time of the Commission review in 2008 (see Appendix 3 for a detailed comparison). More Member States have taken up the options to allow or require the use of IFRS (more requirements and permission for individual financial statements of listed companies, more requirements for consolidated accounts of other undertakings). Two are considering extensions of their use of the options. Two others explained that they do not wish to extend application, one because there was no demand from companies and the other because IFRS were already permitted and requiring them would be regarded by many as too burdensome for companies. Two Member States reported positive experience of extending the use of the options. They explained how they sought to ensure compatibility between the various applicable frameworks. One reported that a dualtrack approach was used initially for taxation purposes. At present, the two countries’ taxation systems are in line with IFRS and there are specific rules on capital maintenance. In this respect, a KPMG (2008) study commissioned by the Commission highlighted differences in the way Member States applying IFRS to individual annual financial statements were dealing with capital maintenance aspects in view of profit distribution (at the time, 17 of 27 Member States used the IFRS option, of which eight had different rules for dividend distribution purposes). Table 1 — Snapshot of Member States’ use of options offered by the IAS Regulation

Source: Accounting Regulatory Committee, end 2013 Consultations showed that a majority of stakeholders regarded the options for national governments as appropriate. The fact that Member States have a great diversity in their use of options was seen by some as proof that the system works well and does not need to be changed. It may also be that, due to the diversity of legal frameworks in the EU, it would be difficult to achieve more consistency. 3.1.2.Discussion on possible extension of scope While stakeholders do not see an immediate need for change, about a third acknowledged that extension of the use of IFRS beyond the present mandatory scope could be explored in certain areas to achieve greater harmonisation where possible, to inform investors but also to save costs. However, the stakeholders who expressed an opinion on this via the public consultation, the expert group and the ARC highlighted practical issues that Member States could have difficulties in overcoming. These concerned taxation, company law, capital maintenance and variable remuneration. Also, there was an increased need for Member States to assess the impact of IASB developments at national level. A potential need to align certain European directives was also stressed. Chart 4 — Results of the public consultation on possible extension of the scope of IFRS Note: respondents proposing extension while satisfied with the current scope of the Regulation were mostly in favour of extending IFRS use through the options offered to Member States. Company option for reporting under IFRS Many stakeholders were in favour of giving companies the option of applying IFRS and saw this as particularly useful for groups. Expected benefits of this option were: substantial savings for multinational groups and their subsidiaries; a level playingfield for large companies or local companies operating internationally; and easier listing for entities seeking to go public (by developing their expertise in and history of relevant reporting, and ensuring fewer changes in the year of the initial public offering). In particular, banking associations maintain that a double set of accounting standards for statutory reporting is an obstacle to the integration of the EU financial markets and an avoidable cost for banks’ crossborder operations. Experts also discussed the impact of differences in accounting standards, or in their application, on dividend distribution for groups, with potentially misleading information being conveyed. One saw merit in an optional use of IFRS, where companies within a group would choose what they consider the best accounting framework for them in view of the particularities of the jurisdictions in which they operate. However, another highlighted that some analysts use subsidiaries’ individual financial statements prepared under local GAAPs as an additional check. IFRS mandatory for individual annual financial statements of listed companies Some stakeholders were in favour of making IFRS compulsory for the individual annual financial statements of companies listed on regulated markets (in particular those that do not prepare consolidated accounts), to improve transparency, comparability and the quality of the financial information available to the markets. IFRS mandatory for large companies A minority of respondents were in favour of extending the scope to large companies, in particular public-interest entities (PIEs) or entities that are important for the stability of the economy or the financial system, irrespective of their size. Expected benefits were the increased comparability of financial statements for investors who operate in private equity or non-regulated markets. Applying IFRS to PIEs could also reduce the reconciliation burden for prudential requirements and would allow for more precise statistical data at EU level. Also highlighted was the potential need for a common language for banks in the context of the launch of a banking union. In this respect, it is worth noting that the competent authority (the European Central Bank) may require that institutions value assets, offbalancesheet items and determine own funds in accordance with IFRS as adopted in the EU.

Other proposals Other discussions focused on small and mediumsized enterprises (SMEs). Opinions were divided. It was suggested that the application of IFRS should be extended to companies listed on a nonregulated EU public market. The case was highlighted of certain SMEs listed on such markets which disclose only limited information due to limitations under the Accounting Directive (e.g. small biotech companies with very little turnover, net assets and employee numbers, but still potentially representing higher risk investments). Alternative accounting arrangements for non-listed companies were not included in the scope of the evaluation and the consultations, but comments were made on these nevertheless. IFRS were seen as an unnecessary burden for non-listed companies, which are less exposed to international benchmarking and global financing. One idea put forward was to harmonise further the national GAAPs for individual and consolidated financial statements, with the development of a reference or benchmark system for optional use, while others argued against creating an additional new accounting regime. One expert mentioned that modernised national GAAPs were deemed to meet the needs of such companies in individual Member States in terms of cost, level of complexity, publication requirements and relations with creditors and rating agencies. Some stakeholders proposed using a lighter version of IFRS, with reduced disclosures for entities not listed on regulated markets (e.g. subsidiaries) or differentiated levels of disclosure by sector (more disclosure on financial instruments in the financial sector and lighter arrangements for industry), after a proper consideration of consistency with other directives. This would reduce operational cost and effort. 3.1.3.Voluntary application Given the scope of the IAS Regulation, the focus of the Commission’s analysis was on listed companies. Officials gathered limited feedback on voluntary applications, which were not core to the discussions. According to the literature review, companies are likely to adopt IFRS voluntarily if they expect the benefits (e.g. in terms of lower cost of capital and widening the pool of potential investors) to exceed the costs. The fact that some companies adopt IFRS voluntarily and others do not suggests differences in the cost/benefit trade-off (see section 3.3.3). The literature (Appendix 5) shows that voluntary adopters are generally larger, more likely to have international cross-listings, rely more extensively on outside funding, have geographically dispersed operations and more diffuse ownership, and are more likely to be based in countries with low-quality local reporting. As acknowledged in the literature, limited data are available on companies listed neither on regulated markets nor other markets. For the purpose of the present analysis, it was not possible to obtain data on the full current population of IFRS reporters in the EU. Instead, the analysis was based on a sample of companies extracted from a commercial database (S&P Capital IQ) in 20022013 (see Appendix 4). The sample includes non-listed companies incorporated in an EU Member State, with no distinction possible between those preparing consolidated financial statements and those preparing individual annual financial statements. The representativeness of the sample was considerably impaired by the fact that the database covers only a very small proportion of non-listed companies. Early voluntary adoption of IFRS (2002 to 2004) Companies did not switch overnight in 2005 from a pre-IFRS environment to an IFRS environment. Some EU companies were reporting on an IFRS basis anyway prior to mandatory adoption and some adopted IFRS in anticipation of mandatory adoption. Chart 5 shows a gradual increase in IFRS adoption from 2002 onwards. In that year (the year the IAS Regulation was adopted), around 12% of the listed companies in the sample were reporting under IFRS. This increased to around 16% in 2003 and to approximately 58%by 2004. In addition, the proportion of listed companies in the sample reporting under US GAAP fell from around 5% in 2002 to approximately 2% in 2004. Chart 5 – Use of international accounting standards by listed companies (2002-2004) Source: S&P Capital IQ Early voluntary adoption of IFRS was allowed in several EU Member States. For instance, Germany allowed it from 1998 and a large proportion of German listed companies took up this option. Chart 6 shows that, in 2003, Austria and Germany were the Member States with the largest proportions of IFRSreporting listed companies in the sample (around 57% and 45% of their companies). By contrast, hardly any companies in Ireland (1%) and the UK (2%) were reporting under IFRS in 2003. Chart 6 — Distribution by Member State of listed companies reporting under IFRS (2003)

Source: S&P Capital IQ The use of IFRS by non-listed companies The results in this section should be interpreted with caution given the limited representativeness of non-listed companies in the sample. The data show that a number of non-listed companies also adopted IFRS both before and after 2005. Chart 7 shows that in 2002 around 15% of the non-listed companies in the sample were reporting under IFRS. The percentage increased to around 18% in 2003 and 66% by 2013. These high percentages are likely to reflect the fact that large companies, including some preparing for a listing, are overrepresented in what is quite a small sample. The data are reported only to illustrate the fact that some non-listed companies opted (voluntarily) to report under IFRS (see also Appendix 4 for the country breakdown). Chart 7 — Use of financial accounting standards by non-listed companies (2002-2013) Source: S&P Capital IQ Non-listed companies may decide to adopt IFRS voluntarily in anticipation of a listing at a later stage. Around 59% of the non-listed companies in the sample (which were reporting under local GAAP and adopted IFRS by 2013) became listed by 2013. In addition, 62% of the non-listed companies in the sample that were reporting under local GAAPs before 2005 had adopted IFRS by 2013, while 28% continued to report under local GAAP. 3.2.Objectives of the IAS Regulation: key benefits of applying IFRS 3.2.1.Overall objectives As stated in section 2, the overall aim of the IAS Regulation was to require use of IFRS in the EU in order to improve the transparency and comparability of financial reporting and thus enhance the efficient functioning of EU capital markets and the single market. In addition, the Regulation emphasised the importance of IFRS becoming accepted globally, so that European companies would be able to compete on an equal footing for financial resources in the world capital market. Evidence from the evaluation confirmed that the Regulation had been effective in achieving these objectives. In particular, the review of academic literature (Appendix 5), notwithstanding inherent limitations, found that there is evidence suggesting that the mandatory adoption of IFRS in the EU resulted in: a higher degree of transparency of financial reporting, through improved accounting quality and disclosure, more value-relevant reporting and more accurate market expectations and analyst forecasts; greater comparability of financial reporting across countries and industries, although differences persist; and improved capital market outcomes, as measured by higher liquidity, lower cost of capital and increased cross-border investment. This shows that the IAS Regulation clearly adds value at EU level. However, not all academic research supports these conclusions: while most studies show positive capital market effects, the results as regards transparency and comparability are more mixed. It was acknowledged that these benefits generally depend on the existence of good enforcement regimes and companies’ incentives to produce high-quality financial reports;

while the Regulation reduced differences between accounting standards applied across the EU, the same degree of uniformity does not exist in countries’ enforcement frameworks and companies’ reporting incentives. Consultations of stakeholders confirmed the findings of the literature review. As detailed in Chart 8 below, a vast majority of respondents to the public consultation found that the application of IFRS in the EU, as compared with the situation before mandatory adoption, improved the transparency of companies’ financial statements and their comparability at national, EU and global level. In addition, a strong majority found that: IFRSbased financial statements are easier to understand; companies compete on an accounting level playingfield and can raise capital more easily at EU and global levels; there was a positive impact on the cost of acquiring companies; and investors are better protected and have greater confidence in financial markets. The results of the consultations are less definitive as regards the overall cost of capital and the ease of raising capital on domestic markets. Chart 8 — Results of the public consultation on the benefits of applying IFRS as compared with the situation before mandatory adoption or the likely situation had IFRS not been introduced Moreover, consultations of stakeholders (including close to 95 % of respondents to the public consultation, across all categories) show that the objectives of the IAS Regulation are still valid today, and even more so given the growing globalisation of capital markets. This confirms the need to maintain the requirements at EU level. IFRS provide for a common accounting language that is based on a single set of rules governing the preparation of the consolidated accounts of companies listed on regulated markets and shared by issuers and investors across the EU and more widely. It was acknowledged that this is vital for capital and trade flows across the EU. Also, in all consultations and discussions held, it emerged clearly that the use of IFRS in the EU is supported by a large majority and that there is no well-defined alternative to international high-quality standards. The process in recent years of amending the Accounting Directives to harmonise further the arrangements for large companies outside the scope of the IAS Regulation illustrated that it can be hard to reach agreement across Europe on both principles and detailed provisions in the field of accounting. 3.2.2.IFRS as a single set of global standards 3.2.2.1.International use of IFRS The Regulation refers to IFRS as a set of global accounting standards. As detailed in the literature review (Appendix 5), the EU’s decision to adopt IFRS injected significant impetus to the acceptance and spread of IFRS, including in countries such as Australia, New Zealand, Hong Kong and South Africa, most of which adopted IFRS in 2005. Public expressions of support for the concept of global accounting standards were soon forthcoming from the G20, the World Bank, the International Monetary Fund (IMF) and the Basel Committee, among other groups concerned with the global financial system. To date, according to the IFRS Foundation (Pacter), nearly all of the 140 jurisdictions studied have publicly stated a commitment to support global accounting standards (130) and that those standards should be the IFRS (132). IFRS are required for all or most listed companies in more than 100 jurisdictions (116), including several that do not have stock exchanges but require IFRS for banks and other publicly accountable entities. Of the remaining countries, some permit IFRS for at least some listed companies (14) or are in the process of adopting IFRS. The combined 2012 GDP of IFRS jurisdictions is USD 41 trillion, or more than half of worldwide GDP. The combined GDP of IFRS jurisdictions outside the EU/EEA (USD 23.8 trillion) is now greater than that of the EU/EEA itself (USD 17.2 trillion), although the EU remains the single biggest user of IFRS. In this context, the term ‘IFRS jurisdiction’ covers countries in which IFRS are used to differing degrees. The Commission’s consultations show that most stakeholders are of the view that the IAS Regulation has significantly increased the credibility and acceptance of IFRS worldwide and hence furthered the move towards a single set of globally accepted high-quality standards.

Chart 9 — Results of the public consultation on IFRS as a set of globally accepted standards 3.2.2.2.EU decisions on equivalence with other GAAPs

The EU introduced an equivalence regime to encourage third countries to adopt IFRS and/or to align their national GAAPs with IFRS. The objective was to promote the use of IFRS as the worldwide accounting language. The Prospectus and Transparency Directives provide that the financial information in prospectuses filed by third country issuers seeking to list their securities in the EU and in financial statements prepared by third country issuers whose securities are already listed in the EU is to be prepared in accordance with IFRS or any other standard that has been declared equivalent to IFRS. A mechanism for determining the IFRSequivalence of a country’s GAAP was established in 2007, in order to ensure that equivalence is determined in all cases that are relevant to EU markets. Equivalence was granted on a temporary or permanent basis (‘permanent’ meaning for an indefinite period provided conditions remain unchanged). In 2008, the Commission adopted permanent equivalence decisions on the GAAPs of the United States and Japan. At that time, the USA had made a commitment to move to a single set of global standards and recognised that IFRS would be best-placed in this respect. Today the USA has still neither required nor permitted the use of IFRS for US domestic issuers, but in 2007 the US Securities and Exchange Commission (SEC) accepted their use by European companies seeking to meet US listing requirements. Around 90 major European companies currently benefit from this arrangement. In Japan, domestic listed companies are permitted to apply IFRS voluntarily for consolidated financial statements. In 2008, the GAAPs of China, Canada, South Korea and India were granted equivalence for a threeyear period. In 2011, this was converted to permanent equivalence in the cases of China, Canada and South Korea. China had adopted national accounting standards that were substantially aligned on IFRS, and Canada and South Korea had made the use of IFRS mandatory for most domestic companies. Temporary equivalence was granted to India following its Government’s public commitments to adopt IFRS. This was renewed in 2011 for a limited period of three years and the Commission is currently reassessing its status. Feedback has shown that IFRS’ status as a global set of accounting standards is a strong factor in the success of the IAS Regulation. While the fact that the USA has not yet adopted IFRS for use by its domestic companies limits the global application of IFRS, the EUUS equivalence arrangements are generally perceived as an important benefit for European companies. Some members of the expert group highlighted that the USA’s acceptance of IFRS financial statements as published by the IASB for EU companies brought huge benefits for preparers of financial statements, who do not have to prepare onerous IFRSUS GAAP reconciliation statements of their financial statements. Discussion in the expert group showed that, while such reconciliations provided useful information to investors in the past, their usefulness has diminished as the perspectives of IFRS and US GAAP have become more and more closely aligned and IFRS preparers have exercised any IFRS options over time to align with the latter where necessary. Respondents to the public consultation emphasised the risks for dual-listed companies of any departures in Europe from IFRS as published by the IASB, e.g. in terms of the scope for introducing changes to IFRS under the IAS Regulation or as regards the time required for the endorsement process (see section 3.4 below). 3.2.2.3.Convergence between IFRS and US accounting standards The United States does not currently allow its domestic issuers to use IFRS. In July 2012, a SEC report concluded that additional analysis and consideration were necessary before any decision could be taken. Since then, nothing has been finalised, but there are indications that the SEC is considering the matter again. Stakeholders commented in the consultations on the fact that the USA has not adopted IFRS for its own use. In general, this was a source of regret, because it limits the global application of the standards. It was acknowledged, however, that differences between the US and EU litigation environments might have implications for the accounting framework. Nevertheless, the IASB and the US standardsetter (FASB) have been engaged since 2002 in an ambitious programme to align their respective standards in order to ensure a level playingfield for companies on both sides of the Atlantic. This convergence programme has received international support from many organisations, including the G20, the Financial Stability Board and the Basel Committee on Banking Supervision. These efforts are highly relevant, because the closer the two sets of standards, the easier it would be for the USA to adopt IFRS. This also relates to the equivalence arrangements detailed above (section 3.2.2.2). After more than 10 years, the convergence process has achieved mixed results. There are success stories in the areas of revenue recognition (IFRS 15, issued in June 2014, is a fully converged standard), consolidation, fair value measurement and offbalancesheet disclosures. However, despite calls for convergence from the G20 and others, the Boards have achieved only partial convergence on financial instruments. In July 2014, the IASB published the final version of IFRS 9 on financial instruments, despite the Boards’ different approaches on impairment (i.e. loan loss provisioning). It is not clear whether there will be a converged standard for insurance contracts. The future of the leases project is uncertain. Convergence is not an aim in itself, but it should bring reporting languages closer together in order to enhance the comparability of annual reports across jurisdictions (users’ request), facilitate the adoption of IFRS and allow for the consistent application of prudential requirements. In the EU, Member State economics and finance ministers confirmed at the ECOFIN meeting of November 2013 that priority should be given to highquality standards over international convergence and reiterated their support for a cautious decoupling between the Boards in the interests of having a goodquality standard on financial instruments sooner rather than later. Similarly, members of the expert group and respondents to the consultation stressed the need for Europe to focus on highquality standards, which they saw as more important than convergence. There could be underlying differences between economies, products and markets that make it difficult or inappropriate to apply fully converged accounting standards. The aim is to have highquality standards appropriate for European markets; if they converge with US GAAP, that is an added advantage. The public consultation looked specifically into how IFRS were perceived in comparison to other GAAPs in terms of whether financial statements prepared under IFRS present a true and fair view. Only around a quarter of respondents expressed an opinion on this question, with most comparing IFRS to US GAAP. IFRS were largely seen as better than or equivalent to US GAAP in this respect. Many explained that this was because IFRS are more principlesbased. Many dual-listed companies, however, perceived IFRS and US GAAP as equivalent in terms of providing a true and fair view. 3.2.3.Quality of IFRS financial statements The Commission’s literature review concluded that the introduction of IFRS was seen as improving accounting quality, disclosure and the valuerelevance of reporting. However, the evidence is not unequivocal. The impact differs between companies and countries (the move to IFRS is more beneficial in countries with lowquality local accounting standards) and depending on the measurement approach. A high level of enforcement also appears key to ensuring highquality financial reporting (see section 3.5.1). Early survey evidence collected for the Commission by the Institute of Chartered Accountants in England and Wales (ICAEW 2007) shows that most investors, preparers and auditors surveyed thought that IFRS had improved the quality of consolidated financial statements and transparency, notably in certain areas (e.g. derivative instruments, offbalancesheet items, securitisation, stock options and segment reporting). Consultations show that most stakeholders (e.g. 7075% across all categories of respondents to the public consultation) see the quality of financial statements prepared under IFRS as good to very good. However, it was noted that other factors (e.g. role of management in preparing financial statements, audit and enforcement) also have an impact on quality. For many stakeholders, the comparability of financial statements prepared using IFRS was enhanced but complexity increased. However, as illustrated in Chart 10 below, a majority of stakeholders rate the complexity and understandability of IFRS-based reporting as reasonable, since most of the former was judged as unavoidable given the complexity of the business activity in question.

Chart 10 — Results of the public consultation on the complexity and understandability of IFRS financial statements Nevertheless, some complexity could be avoided. Many experts and respondents to the public consultation believe that there is still room for improvement, most notably with respect to the scale and appropriateness of disclosures. In particular, while acknowledging the improved quality of disclosures in certain countries and where companies have strong corporate governance, the literature review noted shortcomings in disclosure requirements in specific areas (e.g. financial instruments). However, it was unclear to what extent these concerned the application of standards, rather than the IFRS themselves (see section 3.5.1). Commission staff's consultations of stakeholders also led to the conclusion that there was an issue with the volume (perceived as excessive) and appropriateness of disclosures. EFRAG working with standard-setters in France and the UK has researched how to make disclosures more relevant for users of financial statements and limit them to useful information only. They published a discussion paper in 2012 and a feedback statement on this paper in 2013. The IASB is working on this issue as part of a ‘disclosure initiative’ research project. A discussion forum on disclosure in financial reporting was held in 2013, and the IASB conducted a survey and published a feedback statement in May 2013. This led to amendments to IAS 1 (published in December 2014) and other projects (e.g. on materiality) are still ongoing. Most stakeholders see IFRS as better than or equivalent to their local GAAPS in terms of being able to provide a true and fair view, mostly because IFRS are more comprehensive and involve more disclosures. This was the view of 87% of respondents who expressed their opinion on this question in the public consultation. As stated earlier, IFRS also compare well with US GAAP. Most stakeholders consider that IFRS allow for departures from their basic principles in order to ensure that a true and fair view is given, while a small group disagreed, seeing less flexibility or other external constraints. Many stakeholders consider IFRS sufficiently flexible to reflect different business models as they are principlesbased. However, others expressed concerns, particularly as regards insurance accounting. 3.2.4.The performance of IFRS during the financial crisis The period covered by this evaluation includes the financial crisis, which saw a liquidity freeze affecting, in particular, bonds issued through securitisations and the inter-bank lending market. While most would agree that IFRS did not cause the crisis, opinions are more divided as to whether the use of them exacerbated it. The various aspects of this question have been the subject of much discussion, writing in the press and academic research. Commission officials prepared a separate overview of literature in this area (Appendix 6). One of the key aspects is fair value accounting, because in Europe the application of IFRS generally led to a greater use of fair values, in particular for financial instruments, than had been the case under local GAAPs. It must be stressed, however, that this was not necessarily the case throughout Europe. In the UK, for example, national GAAP evolved in a similar direction to IFRS in terms of the use of fair values. Overall, the literature review found little empirical evidence to substantiate the claim that fair value accounting contributed significantly to the crisis. Academic proponents of fair values argue that such information is an objective measurement basis reflecting current market conditions and providing timely, transparent information which prompts corrective action. Most members of the expert group shared this point of view. However, some academics noted that prices can be distorted, and peaks and troughs exaggerated, by market behaviour, which tends to result in pro-cyclicality. A small number of respondents to the public consultation suggest that the use of fair values contributed to excessive remuneration and dividends in the period before the crisis, as profits were over-stated in overoptimistic market-based valuations; this in turn contributed to banks being undercapitalised as they entered the crisis. The Commission’s 2013 green paper on The long-term financing of the European economy sought input as to whether the use of fair values had led to short-termism. Respondents’ views were mixed. As recorded in the Commission’s 2014 Communication on Longterm financing of the European economy, fair value accounting was criticised by a range of stakeholders for introducing market volatility in financial reports and therefore favouring short-term behaviour. Many respondents commented on the significance of the IASB’s Conceptual Framework in ensuring that future accounting standards are developed in a way that is not damaging to long-term investment. They also pointed to the (then ongoing) work of the IASB to review the accounting of financial instruments (IFRS 9). The literature review accompanying this evaluation found some support for the relevance of fair value. For example, a 2008 Chartered Financial Analysts (CFA) Institute survey found that about 80% of investors felt that fair value requirements for financial institutions improved transparency. Some academics argue that fair values are relevant even for assets held with a long-term perspective. Fair value is used for some financial instruments only, the rest being valued at cost (or amortised cost). The above-mentioned green paper asked whether stakeholders could suggest a better alternative to fair value measurement and a small number of ideas were put forward, but in general the evidence suggests that there are no credible alternatives at this time, because for some instruments, such as derivatives or equity shares, cost is not a meaningful measure. Nevertheless, the literature review found that the fact that IFRS are a mixed-measurement model (blending the use of fair values with cost-based measurement) is important for financial stability. Some of the academic literature argued that financial stability concerns are a matter for prudential regulators and not for standardsetters, a view shared by some members of the expert group. Notwithstanding the importance of a mixed-measurement model, the literature review also found that cost-based information can lack relevance, for example where investors doubt that a bank will be able to hold assets to maturity because of liquidity issues. In particular, there have been concerns about the impairment loss model in the standard on financial instruments (IAS 39), which the G20 characterised as having led to ‘too little, too late’ in terms of loan provision, as it was based on an incurred-loss model that required evidence of actual impairment. Thus, during the crisis, although banks reported significant impairment losses on loans carried at amortised cost, these were reported later than they would have been had the loans been at fair value. The IASB has addressed this problem in the new standard replacing IAS 39 (IFRS 9) by developing a new impairment loss model based on expected losses which is required to take account of forwardlooking information, including macroeconomic indicators, in determining provisions. Nevertheless, the fact that capital markets did not have confidence in the levels of loan losses reported by banks is said to have contributed to their marketcapitalisation values being less than their bookcarrying values and to have inhibited funding to banks, leading the ECB and other central banks to intervene to provide liquidity. Since the crisis, the IASB has looked at all aspects of accounting for financial instruments, including the measurement and disclosure of fair values, the transparency of disclosures for offbalancesheet vehicles and the consolidation of such vehicles, and is addressing disclosures in a broad-based initiative. This work has involved a large number of stakeholders in a number of consultative phases. In Europe, at the time of writing, the endorsement process for the new financial instruments standard (IFRS 9) is ongoing. 3.3.Cost/benefit analysis of the adoption of IFRS in the EU 3.3.1.Limitations

Cost/benefit analysis is a technique used to evaluate the consequences of decisions. In the public sector, it helps in assessing different policy options and contributes to evidencebased policy-making. However, it has limitations, in particular for policy options with unquantifiable consequences or where costs and benefits are distributed unevenly across the population. Some academics have argued that straightforward cost/benefit analysis might be particularly unsuitable as a basis for deciding whether to adopt IFRS. On the one hand, some key benefits resulting from the use of IFRS are very difficult to quantify, cannot be easily monetised and are difficult to aggregate. Unquantifiable benefits include increased transparency and comparability, improved accounting quality, an accounting level playingfield for companies and investors and greater confidence in financial markets (see section 3.2). On the other hand, the distribution of costs and benefits seems particularly uneven. Costs are largely incurred by companies preparing IFRSbased financial statements, whereas the benefits are wider in scope and shared by them, the users of financial statements (including investors) and the wider economy. Adequate analysis of the impact of IFRS adoption is further complicated by the paucity of available data, even on relatively easily quantifiable consequences. It is difficult to compare cost estimates directly with the benefits. None of the respondents to the public consultation produced hard figures on the costs and benefits of IFRS. In addition, some experts argued that the cost/benefit analysis of the application of IFRS should acknowledge the parallel development of local GAAPs to take account of the increased complexity of businesses, the fact that some local GAAPs are converging on IFRS and the implementation costs of alternative standards. 3.3.2.Mandatory adoption of IFRS 3.3.2.1.First-time implementation As regards first-time implementation, estimates of preparers’ costs are available from the ICAEW (2007) study based on survey responses from preparers of IFRS consolidated financial statements. Chart 11 shows per-company cost estimates ranging from 0.31% of total turnover for companies with turnovers below EUR 500 million to 0.05% for larger companies. The expected additional recurring costs of IFRS are lower, ranging on average from less than 0.01% to 0.06% of turnover in the different size categories.

Chart 11 — Costs of preparing IFRSbased consolidated financial statements Company turnover Adoption costs (% of turnover) Recurring costs (% of turnover) < EUR 500 million 0.31% 0.06% EUR 500 million — EUR 5 billion 0.05% 0.01% > EUR 5 billion 0.05% 0.008% Note: Shows estimates of average additional costs of preparing IFRS financial statements compared to prior national requirements, based on preparers’ responses to an online survey. Split into adoption costs in the first year and expected recurring costs in subsequent years. Source: ICAEW (2007) According to ICAEW (2007), although the respondents were asked for estimated additional costs (i.e. incurred over and above what would have been spent on complying with national standards), some of the reported costs might not be truly incremental. For example, IFRS project teams might include staff not fully engaged on IFRS or software changes for IFRS might be made concurrently with other financial software upgrades. Moreover, there were a lot of ‘don’t knows’ in the responses on costs, which indicates that many companies did not track this information. A number of companies, particularly large ones, appear not to have thought it worthwhile to record separately the costs of IFRS implementation. The above estimates indicate that, proportionately, the smallest companies bore the highest costs. There appear to be economies of scale, even among larger companies with more complex transactions requiring more sophisticated accounting policies. Small companies appear to have been unable or unwilling to use internal resources and relied to a greater extent on external support, with external advice and auditing ranking as the most significant cost elements. The ICAEW (2007) analysis also suggests that the largest companies were more prepared to embed accounting changes to reduce future costs. Focusing on audit fees paid by EU companies in 20042008, Kim et al. (2012) find that, on average, IFRS adopter companies’ audit fees increase 5.44% more than other companies’. They also find that ‘the IFRS-related audit fee premium increases with the increase in audit complexity brought about by IFRS adoption, and decreases with the improvement in financial reporting quality arising from IFRS adoption’. It should be noted that cost estimates reflect private costs to IFRS preparers on a percompany basis, whereas many of the benefits are wider in scope and accrue to other companies, analysts, investors and the wider economy. Also, some of the costs for IFRS preparers translate directly into additional revenues for financial reporting consultants and auditing firms. 3.3.2.2.Ongoing application In addition to the key benefits of IFRS detailed in section 3.2.1, a strong majority of respondents to the public consultation found that IFRS financial statements entail improved group reporting (with a robust accounting framework and administrative and group audit savings) and a greater ability to trade and expand internationally (see Chart 12). Other benefits, cited less often, were: a robust accounting framework for preparing financial statements; administrative savings; group audit savings;

greater credibility of EU companies’ financial reports outside the EU; a wider international pool of finance professionals and job opportunities thanks to harmonised and higher qualifications among professionals; better internal communication within international companies; improved corporate governance and stewardship; and easier company acquisition/disposal. Chart 12 — Results of the public consultation on other benefits from application of IFRS as compared with the situation before mandatory adoption or with the likely situation had IFRS not been introduced Half of the users of financial statements responding to the public consultation considered that the use of IFRS in reporting improved their ability to estimate future cash flows and assess stewardship by management. Chart 13 — Results of the public consultation on the benefits from application of IFRS for users of financial statements For companies preparing financial statements, the costs include staff costs and training, IT, advisory services, valuation expertise and, for some, the cost of financial information being difficult to produce, audit and explain to investors. Users of financial statements also incur staff and IT costs. Results from the public consultation (see Chart 14) show that recurring costs were reduced for a majority of users, due to standardised items in IFRS facilitating analysis, while they were greater for a majority of preparers, in particular due to the constant need to adapt accounting and IT processes to regular amendments to IFRS, and for public authorities. The consultation highlights some issues which continue to be debated (e.g. the high level of disclosures, the complexity of some standards, the frequency of changes to standards, the need to have common enforcement, the role of prudence in the development of standards, the use of fair values, and the impact of new standards in terms of cost). Some experts highlighted the need to compare ongoing benefits (e.g. cost of capital) with ongoing costs (e.g. implementation costs for new standards). Others stressed that the biggest (albeit not extraordinary) costs were still to come for companies in the financial sector, with IFRS 9 on financial instruments and IFRS 4 on insurance (project still ongoing), and for other companies with IFRS 15 on revenue recognition. Chart 14 — Results of the public consultation on assessed ongoing costs of IFRS for preparers and users of financial statements 3.3.3.Voluntary adopters Analysis of the reasons why companies adopt IFRS voluntarily and looking at the cost/benefit ratio could also inform the overall cost/benefit analysis. However, evidence on voluntary adoption is limited (see section 3.1.3). Input was gathered from the literature, discussions in the expert group and very few responses to the public consultation from respondents using IFRS voluntarily. Evidence in the literature suggests that it is not obvious that all companies benefit from using IFRS. The (private) costs probably exceeded the (private) benefits for at least some mandatory IFRS adopters, while the benefits may be wider and societal in nature. The empirical evidence on the impact of voluntary adoption is summarised in Hail et al. (2009), among others. According to Hail et al. (2009), the evidence on voluntary IFRS (or IAS) adoption is somewhat mixed, but on balance suggests that voluntary adopters experienced positive capital-market effects. However, these results should be interpreted with caution. As the companies choose whether and when to adopt IFRS, it is difficult to attribute any observed economic consequences to the accounting standards per se and the evidence only provides an indication of the potential costs and benefits of IFRS for firms with particular characteristics. The effects may be attributable at least in part to the factors that gave rise to the IFRS adoption decision in the first place. 3.3.4.Overall cost/benefit assessment

Notwithstanding the limitations detailed in section 3.3.1, in particular regarding the quantification/monetisation of benefits, on balance the evidence from stakeholder consultations and the literature (see Appendix 5, section 8) shows benefits in terms of meeting the objectives set out in section 3.2. There seems to be broad agreement among stakeholders responding to the public consultation and the expert group that, on the whole, the benefits of IFRS outweigh the costs. From that perspective, the IAS Regulation appears to be an effective contribution to its stated objectives of greater transparency, comparability and better-functioning capital markets. Chart 15 — Results of the public consultation on the costs and benefits of IFRS application One Member State that had widened significantly the use of IFRS following the entry into force of the IAS Regulation, notably by requiring IFRS for individual financial statements of listed and financialsector companies, stated that, overall, benefits and in particular savings now far exceeded costs and difficulties at individual company level. Another way of assessin