REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the activities of the IFRS Foundation, EFRAG and PIOB in 2021
Date: 2022-10-06
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU financing, EU office or agency, EU programme, audit, financial accounting, financial control, foundation, international standard, single market, standardised accounting system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 6.10.2022  COM(2022) 504 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the activities of the IFRS Foundation, EFRAG and PIOB in 2021  
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on the activities of the IFRS Foundation, EFRAG and PIOB in 2021 

1. 

PURPOSE AND SCOPE OF THE REPORT 

On 28 April 2021, the European Union adopted the Single Market Programme.1 It provides an 
integrated package to support and strengthen the governance of the single market with EUR 
4.21  billion  over  the  period  of  2021  to  2027.  The  Single  Market  Programme  Regulation 
foresees a budgetary envelope of EUR 220.5 million for standardisation processes, of which 
EUR 61 million is allocated to support the development of high-quality international financial 
and non-financial reporting and auditing standards and to faciltate their integration into Union 
law.  

Under the Single Market Programme, the Commission continues2 to provide annual operating 
grants to three organisations in the field of financial reporting and auditing: the International 
Financial Reporting Standards Foundation (IFRS Foundation) as regards the development of 
International  Financial  Reporting  Standards,  as  well  as,  in  general,  the  European  Financial 
Reporting Advisory Group (EFRAG), and the Public Interest Oversight Board (PIOB). These 
three organisations play an important role in ensuring the quality, reliability and avaibility of 
public information about companies, financial but also non-financial information in corporate 
reports. This information serves to promote efficient capital markets, to protect the interest of 
members,  investors  and  other  providers  of  capital  to  companies  and  to  promote  corporate 
social responsibility inluding sustainability. 

Regulation  (EU)  2021/690  establishing  the  Single  Market  Programme  requires3  the 
Commission to prepare an annual report, to be transmitted to the European Parliament and the 
Council, on the activity of the IFRS Foundation as regards the development of International 
Financial Reporting Standards, as well as, in general, of the PIOB  and of the EFRAG. This 
report  fulfils  that  obligation  and  summarizes  the  activities  of  these  three  organisations  in 
2021. 

2. 

IFRS FOUNDATION 

2.1. 

GOVERNANCE  

The  IFRS  Foundation  is  a  non-profit  organisation  under  the  general  corporation  law  of  the 
State  of  Delaware  (United  States)  and  headquartered  in  London  (United  Kingdom), 

1 Regulation (EU) 2021/690 establishing a programme for the internal market, and the competitiveness of enterprises), OJ L 

153, 3.5.2021, p. 1–47. 

2 Grants were in past provided under Regulation No 258/2014 of the European Parliament and of the Council (OJ, L 105, 

8.4.2014, p. 1.), amended by Regulation 2017/827 (OJ, L 129, 19.5.2017, p. 24). 

3 Article 18(3). 

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established  to  develop,  promote  and  facilitate  the  use  of  a  single  set  of  high-quality, 
understandable, enforceable and globally recognised accounting standards. 

The  IFRS  Foundation  hosts the  International  Accounting Standards  Board (IASB), which is 
responsible for the development of International Financial Reporting Standards (IFRS). Under 
Regulation  (EU)  No  1606/20024  on  the  application  of  international  accounting  standards 
(‘IAS Regulation’), the Commission may endorse new or amended IFRS following EFRAG's 
endorsement advice. 

In November 2021, the IFRS Foundation adapted its constitution and created the International 
Sustainability  Standards  Board  (ISSB),  which  is  responsible  for  the  development  of 
susatinability  reporting  standards.  The  Commission  provides  financial  support  to  the  IFRS 
Foundation for the development of IFRS. 

The IFRS Foundation is governed by a Board of 22 Trustees that is collectively responsible 
for general oversight and appointments to the IASB and to the ISSB. The Trustees designation 
is  subject  to  an  apportionment  by  geographical  origin  and  to  approval  by  the  Monitoring 
Board5,  which  is  designed  to  provide  a  link  with  public  authorities  and  of  which  the 
Commission is a member. 

The  IASB  consists  of  14  members  subject  to  geographical  balance  requirements.  IASB 
members  are  nominated  for  a  five-year  term,  renewable  once.  The  IASB  is  responsible  for 
standard  setting.  In  July  2021,  Prof  Dr  Andreas  Barckow  succeeded  Hans  Hoogervorst  as 
Chair of the IASB. 

The  ISSB  will  consist  of  14  members  from  across  the  world  with  a  mix  of  professional 
perspectives, and will include investors and preparers. ISSB members are also nominated for 
a five-year term, renewable once. The ISSB is responsible for developing standards that could 
be used as a comprehensive global baseline of high-quality sustainability disclosures for the 
benefit of investors and the capital markets. In December 2021, the Trustees announced  the 
appointment of Emmanuel Faber to serve as Chair of the ISSB, from 1 January 2022 onward. 

The Trustees also appoint the 14 members of the IFRS Interpretation Committee, dedicated to 
interpreting the application of IFRS standards and providing guidance on financial reporting 
issues, and the members of the IFRS Advisory Council. 

2.2 

ACTIVITIES 

2.2.1 

STANDARD SETTINGS 

Following  the  outbreak  of  the  COVID-19  pandemic  in  March  2020,  the  IASB  provided 
support  to  stakeholders  on  COVID-19-related  questions  about  the  application  of  IFRS 

4 OJ L 243, 11.9.2002, p. 1. 
5 The Monitoring Board, of which the Commission is a member, consists of public authorities responsible for setting the form 

and content of financial reporting. 

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standards  and  has  postponed  less  critical  consultations  and  some  effective  dates  of  recently 
adopted amendments. 

In February 2021, the IASB issued amendments to International Accounting Standard (IAS) 1 
Presentation  of  Financial  Statements  and  to  IAS 8  Accounting  Policies,  Changes  in 
Accounting Estimates and Errors, which clarify the differences between accounting policies 
and accounting estimates to ensure further consistent application and comparability. 

In March 2021, the IASB issued a request for information on its Third Agenda Consultation 
on standard setting priorities for 2022 to 2026. The initial feedback analysis showed support 
for standard setting actvities on climate-related risks and intangibles. The IASB will consider 
the feedback and determine the future work plan during the first half on 2022. 

The  IASB  published  an  amendment  to  IFRS 16  Leases  Covid-19-Related  Rent  Concessions 
on  28  March  2020.  As  the  COVID-19  situation  continued,  the  IASB  issued  another 
amendment to IFRS 16 Leases: Covid-19-Related Rent Concessions beyond 30 June 2021 on 
31  March  2021  that  extends  the  existing  optional  relief  for  lessees  for  lease  contracts  with 
payment relief and payments by an additional year. 

In  May  2021,  the  IASB  issued  amendments  to  IAS 12  Income  Taxes,  which  clarify  how 
companies  have  to  account  for  deferred  taxes  on  transactions  such  as  leases  and 
decommissioning  obligations  and  aim  to  reduce  diversity  in  the  reporting  of  deferred  tax 
assets and liabilities on leases and decommissioning obligations. 

In  July  2021,  the  IASB  published  the  Exposure  Draft  Subsidiaries  without  Public 
Accountability: Disclosures, which was open for comments until January 2022. The Exposure 
Draft sets out the IASB's proposals for a new IFRS Accounting Standard that would permit 
to  apply  IFRS  Accounting  Standards  with  reduced  disclosure 
eligible  subsidiaries 
requirements in their financial statements. 

In December 2021, the IASB issued an amendment to the transition requirements in IFRS 17 
Insurance Contracts that allows companies to overcome one-time classification differences of 
comparative information of the previous reporting period upon initial application of IFRS 17 
and IFRS 9 Financial Instruments. 

In  2021,  the  IASB  continued  to  discuss  the  feedback  on  its  request  for  information  on  the 
second Comprehensive Review of the IFRS for SMEs Standard with a view to align it with the 
full IFRS standards without causing undue cost and effort for SMEs. 

Finally, the IFRS Foundation updated the IFRS taxonomy in order to reflect the implications 
of new standards and amendments.6 

6 The financing provided by the European Union also supports the timely update of the IFRS taxonomy which in turn serves 

as an input to the European Single Electronic Format. 

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A  complete  overview  of  the  standard-setting  activities,  including  the  work  of  the  IFRS 
Interpretations Committee (IFRIC), is available on the IFRS Foundation's website.7 

2.2.2.  RESEARCH PROJECTS 

In September 2021, the IASB published a request for information to the post-implementation 
review  (PIR)  of  IFRS  9  Financial  Instruments  on  the  classification  and  measurement 
requirements. It was open for comments until January 2022. 

During 2021 the IASB discussed feedback on the Discussion Paper Business Combinations -
Disclosures,  Goodwill  and  Impairment  and  decided  to  prioritise  performing  further  work  to 
make  tentative  decisions  on  the  package  of  disclosures  about  business  combinations  and  to 
analyse specific aspects of the feedback on the subsequent accounting for goodwill. 

A complete overview of the research projects is available on the IFRS Foundation's website.8 

2.3. 

TRANSPARENCY AND ACCOUNTABILITY 

2.3.1.  TRANSPARENCY RULES 

All meetings of the IASB and the IFRS Interpretation Committee are open to the public. The 
meeting agendas are published in advance and the meetings themselves can be watched on-
line. In addition, the IASB publishes quarterly meetings with stakeholders on its website.9 

2.3.2.  REPRESENTATION OF STAKEHOLDERS 

The IFRS Foundation constitution requires the appointment of  six Trustees from Europe, as 
well as for America and Asia-Oceania plus one Trustee from Africa and three Trustees from 
any  area  subject  to  maintaining  an  overall  geographical  balance.  Similary,  the  criteria  for 
appointment  as  board  member  of  the  IASB  require  four  members  from  each  region,  one 
member from Africa and one member from any area. 

On 31 December 2021, the IFRS Advisory Council comprised 51 organizations including the 
European Central Bank (ECB) and the European Securities and Markets Authority (ESMA). 
The Commission participates as an observer. 

2.3.3.  PREVENTION OF CONFLICT OF INTERESTS 

The Trustees of the IFRS Foundation are appointed for a three years term that can be renewed 
once, and must commit to act in the public interest. In principle, a Trustee and a Monitoring 
Board Member cannot be employed by the same organization. 

7 IFRS Foundation work plan: https://www.ifrs.org/projects/work-plan/; and completed projects: 

https://www.ifrs.org/projects/completed-projects/. 

8 https://www.ifrs.org/projects/work-plan/#research-and-standard-setting.  
9 https://www.ifrs.org/groups/international-accounting-standards-board/stakeholder-engagement-register/. 

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With  one  exception,  all  IASB  members  are  full-time.  They  have  to  sever  all  employment 
relationships  and  ties  that  might  affect  their  independence.  Neither  secondment  from  an 
employer nor rights to reintegrate with the former employer are allowed. 

2.3.4.  BREAKDOWN OF FUNDING 

In 2021, the IFRS Foundation received a EUR 4.5 million grant from the Commission for the 
development  of  IFRS,  representing  22.1%  of  the  total  contributions  received.  The 
Commission  continued  to  be  the  largest  contributor.  The  relative  share  of  the  Commission 
budget and Member States funding went down compared to 2020 (from 42.8% to 36.5%), as 
United Kingdom is no longer an EU Member State. 

A  breakdown  of  funding  by  main  geographical  areas  and  international  accounting  networks 
shows that the EU and its Member States made 36.5% of the total contributions, Asia-Oceania 
32.6%,  international  accounting  networks  12.7%,  Americas  5.7%,  Africa  0%  and  others 
12.4%. 

The downward trend in contributions to the IFRS Foundation in recent years has continued in 
2021.  The  reported  contributions  were  down  by  4.2%  (GBP  768,000)  as  a  whole,  however 
with significant variations between contributors. 

The total retained surplus as at 31 December 2021 amounted to GBP 40.7 million. 

3. 

EFRAG 

3.1. 

GOVERNANCE 

EFRAG  is  a  publicly  and  privately  funded  organisation  working  in  the  European  public 
interest.  EFRAG  has  the  legal  form  of  an  AISBL  (Belgian  international  non-profit 
organisation).  EFRAG’s  Member  Organisations  comprise  eight  European  Stakeholder 
Organisations,  mainly  industry  and  investor  associations,  and  nine  National  Accounting 
Standard setting Organisations. 

EFRAG’s  mission  is  to  serve  the  European  public  interest  by  developing  and  promoting 
European views in the field of financial reporting and ensuring that these views are properly 
considered  in  the  IASB’s  standard-setting  process  and  in  related  international  debates. 
EFRAG  provides  advice  to  the  Commission  on  whether  new  (or  revised)  IFRS  should  be 
endorsed  by  the  EU,  based  on  the  criteria  of  IAS  Regulation10,  including  the  true  and  fair 
view principle and whether they would be conducive to the European public good. Alongside, 
EFRAG performs also pro-active accounting research work.  

2021  was  a  very  intense  year  for  EFRAG.  In  addition  to  continuing  its  financial  reporting 
advsiory activities, EFRAG developed the sustainbility reporting pillar (see section 3.2.2). 

10 Please see footnote 4. 

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3.2 

ACTIVITIES 

3.2.1.  ENDORSEMENT AND RESEARCH ACTIVITIES 

In  2021,  EFRAG’s  work  on  financial  reporting  remained  largely  driven  by  the  work 
programme  of  the  IASB,  the  IFRIC  and  the  IFRS  Foundation.  In  2021,  EFRAG  organised 
146  meetings  and  conferences  including  16  EFRAG  Board  meetings  and  17  EFRAG 
Technical  Expert  Group  (TEG)  meetings.  In  terms  of  output,  EFRAG  issued  5  final 
endorsement  advices  (and  5  corresponding  draft  endorsement  advices),  issued  9  final 
comment letters, and published a research paper in August 2021. 

On  31  March  2021,  EFRAG  submitted  its  most  important  endorsement  advice  on  the  new 
major standard IFRS 17 Insurance Contracts. Taking into account this advice, the Commision 
proposed  the  endorsement  of  IFRS  17  with  an  optional  carve-out  subject  to  disclosure 
requirements  and  a  review  clause.  Other  endorsement  advices  submitted  by  EFRAG  to  the 
Commision  in  2021  include:  Initial  Application  of  IFRS  17  and  IFRS  9  –  Comparative 
Information, and disclosure of accounting policies (IAS 1 and IAS 8), and COVID-19-Related 
Rent Concession beyond 30 June 2021 for leases (IFRS 16).11 

Before EFRAG issues final  endorsement advice  on a standard issued by  the  IASB, EFRAG 
issues  (draft)  comment  letters  to  the  IASB  and  draft  endorsement  advice.  A  robust  due 
process  allows stakeholders to express their views on EFRAG’s positions.  EFRAG issued 9 
final  comment  letters  including  on  Goodwill  and  Impairment,  Lack  of  Exchangeability 
(IAS 21), Lease Liability in a Sale and Lease Back transaction (IFRS 16), Regulatory Assets 
and  Regulatory  Liabilites.  EFRAG  emphasised  in  its  comment  to  the  Post-Implementation 
Review of IFRS 9 on Classification and Measurement the importance of re-cycling changes in 
Fair  Value  accumulated  in  Other  Comprehensive  Income  for  equity  instruments.  Finally, 
another very important comment letter was EFRAG’s repsonse to the IASB’s  Third Agenda 
Consultation  aimed  at  determining  the  IASB  standard  setting  agenda  for  the  2022  –  2026 
period. EFRAG pointed out the following priorities for the IASB: climate risks, liabilities and 
crypto asstes-liabilities. 

Through its Academic Panel and Academic Network, EFRAG enhanced its cooperation with 
academics. 

3.2.2.  SUSTAINABILITY REPORTING  

During  2021  EFRAG  intensively  worked  on  sustainability  reporting  in  response  to  two 
mandates  received  on  25  June  2020  from  Executive  Vice-President  Dombrovskis.  On  8 

11 https://efrag.org/Endorsement. 

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March  2021,  EFRAG  published  two  reports  in  response  to  these  two  mandates  on  its 
website.12 

The first mandate was a request for EFRAG to  undertake preparatory work for possible EU 
Sustainability  Reporting  Standards  (ESRS)  in  a  revised  Non-Financial  Reporting  Directive 
(now the draft Corporate Sustainability Reporting Directive [CSRD]). EFRAG established a 
multi-stakeholder Project Task Force “on preparatory work for the elaboration of possible EU 
non-financial  reporting  standards”  (PTF-NFRS)  chaired  by  Mr  Patrick  de  Cambourg, 
president of the French  Autorité des Normes Comptables. The PTF-NFRS report included a 
roadmap and 54 recommendations for the development of a comprehensive set of ESRS.  

The  second  mandate  was  an  invitation  ad  personam  to  EFRAG  Board  President  Jean-Paul 
Gauzès, to provide recommendations on the possible need for changes to the governance and 
funding of EFRAG, if it were to become the ESRS setter as proposed by the Commission in 
the  CSRD.  Mr  Gauzes’  report  proposed  reforms  to  EFRAG's  governance  and  funding 
structure13. 

On  21  April  2021,  the  Commission  adopted  a  legislative  proposal  for  a  Corporate 
Sustainability  Reporting  Directive  to  revise  and  strengthen  the  provisions  of  the  Non-
Financial  Reporting  Directive14.  The  proposal  was  a  key  initiative  of  the  EU  sustainable 
finance  agenda  and  important  to  meet  the  objectives  of  the  European  Green  Deal.  The 
Commission proposal, politically agreed by the European Parliament and the Council on 21 
June 2022, envisaged the adoption of European sustainability reporting standards as delegated 
acts  by  the  European  Commission  to  be  developed  by  EFRAG,  using  proper  due  process, 
public oversight and transparency, and with the expertise of relevant stakeholders. 

Following up on a request from Commissioner McGuinness in May 202115, EFRAG amended 
its governance structure based on Mr Gauzes recommendations and supported the PTF-NFRS 
work on developing the inital set of draft ESRS. 

EFRAG undertook signficant goverance reforms to implement the EFRAG’s chair proposed 
governance reforms by establishing a sustainability reporting pillar and extending EFRAG’s 
members base with fourteen organisation with an interest in sustainability reporting (including 
twelve  civil  society  organisations).  After  public  calls  for  candidates  and  a  transparent 
selection  process,  EFRAG  established  the  Sustainability  Reporting  (SR)  Board  on  13  April 
2022 and EFRAG SR TEG on 25 April 2022. 

In  order  to  meet  the  timelines  contained  in  the  CSRD  proposal,  the  PTF-NFRS  started 

12 https://efrag.org/Activities/2010051123028442/Non-financial-reporting-standard. 
13 https://www.efrag.org/Activities/2010051124018235/Ad-personam-governance-mandate#. 
14  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending  Directive  2013/34/EU,  Directive 
2004/109/EC,  Directive  2006/43/EC  and  Regulation  (EU)  No  537/2014,  as  regards  corporate  sustainability  reporting, 
COM/2021/189 final. 
15https://www.efrag.org/Assets/Download?assetUrl=/sites/webpublishing/SiteAssets/210512%2520Commissioner%2520Mc
Guinness%2520to%2520EFRAG%2520on%2520sustainability.pdf  

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developing  the  initial  set  of  draft  ESRS  in  parallel  with  the  legislative  negotiations  on  the 
Commission proposal for the CSRD. On 28 April 2022, the EFRAG SR Board issued the first 
set of 13 draft ESRS for public consultation16. 

3.3. 

TRANSPARENCY AND ACCOUNTABILITY 

3.3.1  TRANSPARENCY RULES 

EFRAG  has  a  transparent  public  due  process.  This  due  process  allows  all  European 
constituents  to  put  forward  their  views  for  consideration  by  EFRAG.  It  ensures  that  the 
diversity of accounting and economic models and views in Europe are taken into account in 
determining  EFRAG’s  positions,  especially  with  regard  to  the  endorsement  of  IFRS 
standards.  In  2021,  EFRAG  has  further  developed  its  due  process  policies  to  accommodate 
the ESRS standard setting process. 

As part of its due process, EFRAG publishes draft positions for consultation, undertakes field 
tests  and  other  forms  of  effect  analyses,  organises  outreach  events  (some  of  which  are 
especially  aimed  at  users)  and  undertakes  surveys,  publishes  their  results  in  feedback 
statements  and  then  publishes  its  final  positions.  EFRAG  contributes  to  evidence-based 
standard setting by undertaking quantitative studies  that inform  the discussion  on EFRAG’s 
comment letters and endorsement advice and which are gradually becoming a more important 
part of EFRAG’s research work. 

Meetings of the EFRAG Financial Reporting (FR) Board and EFRAG SR Board, EFRAG FR 
TEG  and  EFRAG  SR  TEG  and  EFRAG  Consultative  Forum  of  Standard  Setters  (EFRAG 
CFSS)  are  held  in  public.  The  agendas,  supporting  agenda  papers  and  summaries  of  the 
meetings  are  published  on  EFRAG’s  website.  Since  March  2018,  the  meetings  can  also  be 
watched on-line and recordings remain online for several months.  

EFRAG maintains a public transparency  register, which covers the meetings of the EFRAG 
Board President, the EFRAG TEG Chairwoman and the EFRAG CEO. 

3.3.2 

REPRESENTATION AND ACCOUNTABILITY  

EFRAG strives for a proper geographical, professional background and gender balance in its 
Financial Reporting and Sustainability Reporting Boards, the corresponding Technical Expert 
Groups, its Working Groups and Advisory Panels, and the European Lab Steering Group and 
its project task forces. There is a limit for the number of members of the FR and SR Boards 
and  TEGs  with  the  same  nationality  and  there  are  rules  on  professional  background  and 
gender balance.  

16 https://efrag.org/lab3  

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EFRAG  Board  members  are  nominated  by  the  EFRAG  Member  Organisations.  The  gender 
balance and geographic representation of the FR and SR Boards and corresponding TEGs was 
significantly improved during 2021.  

3.3.3 

PREVENTION OF CONFLICT OF INTERESTS 

EFRAG has a conflict of interest policy to underpin its public interest mandate. It is published 
on  EFRAG’s  website.17  EFRAG  Board  members  and  EFRAG  staff  confirm  yearly  their 
independence in a signed declaration.  

3.2.4  CONTACTS THE EUROPEAN PARLIAMENT AND MEMBER STATES 

EFRAG  regularly  attends  meetings  of  the  Accounting  Regulatory  Committee  to  discuss 
outstanding issues with Member States’ experts, in particular concerning the endorsement of 
IFRS standards. 

EFRAG  has  occasionally  contacts  with  members  of  the  European  Parliament.  On 
sustainability reporting the European Parliament has set up a sustainability reporting team that 
regularly engages with EFRAG.  

3.4 

DIVERSIFICATION AND BUDGET 

The  Commission  funds  a  maximum  60%  of  EFRAG’s  eligible  costs.  In  2021,  EFRAG 
requested a EUR 2.9 million grant from the Commission. Other cash contributions came from 
European  stakeholder  organisations  (EUR  625,000)  and  national  stakeholder  organisations 
(i.e.  France,  Germany,  UK,  Italy,  Netherlands,  Denmark,  Spain,  Sweden  and  Luxembourg) 
(EUR 1.5 million). 

In 2021, EFRAG broadened its membership base with the aim to cover all EU Member States 
and welcomed the support of the Commission, European Parliament and the Member States to 
encourage other national organisations to join. In 2021, EFRAG welcomed new contributions 
from an Austrian organisation and countries of the European Economic Area (EEA). 

In  March  2021,  the  EFRAG  General  Assembly  approved  a  new  finance  and  governance 
structure  to  bring  more  transparency,  logic  and  fairness  in  EFRAG’s  financial  contribution 
system. The financing for the two chapters, which provide the private funding of EFRAG (i.e. 
European  Stakeholder  Organisations  and  National  Organisations)  has  been  changed.  The 
national  organisations  chapter’s  financial  contributions  are  based  on  a  GDP  criterion.  The 
European  stakeholder  organisations  chapter’s  financial  contributions  are  based  on  a  sector 
model  (accountancy  profession  sector,  banking  sector,  corporate  sector,  insurance  sector, 

17 www.efrag.org.  

9 

 
 
                                                           
SME/SMP18  sector)  with  a  financial  contribution  of  EUR  150,000  per  sector.  There  is  an 
exemption for the user sector. 

In addition to financial contributions, EFRAG receives contributions in kind provided by the 
members of EFRAG TEGs, the EFRAG Boards, the Working Groups  and Advisory Panels, 
for instance in the form of temporary secondments. 

4.  

PIOB 

4.1. 

GOVERNANCE 

The PIOB is the global independent oversight body that oversees the standard-setting process 
for  the  international  audit,  assurance,  and  ethics  standards  formulated  by  the  international 
standard-setting boards: the International Auditing and Assurance Standards Board (IAASB) 
and  the  International  Ethics  Standards  Board  for  Accountants  (IESBA).  Its  main  role  is  to 
ensure that IAASB and IESBA follow the due process for the development of standards and 
strategies, in line with the public interest framework. The PIOB is based in Madrid. Oversight 
is  carried  out  through  continuous  observations  and  follow-up  by  the  PIOB  Board  and 
oversight staff of the standards under development by the two boards.  

The  Monitoring  Group,  of  which  the  Commission  is  a  member,  monitors  how  the  PIOB 
carries out the oversight of the standard setting process and appoints the ten PIOB members 
(including the Chair). 

4.2 ACTIVITIES 

Following  the  Monitoring  Group  recommendations  on  the  reform  of  the  standard-setting-
system19, in November 2021, the PIOB established a nominations committee for the selection 
of future members of IAASB and IESBA, thus replacing the IFAC nomination committee. Its 
purpose is to reinforce the independence from the profession and to ensure that the boards will 
have  the  necessary  skills,  are  diverse,  and  made  up  of  multi-stakeholders.  The  new 
responsibilities  of  the  PIOB  will  also  include  the  governance  and  oversight  of  a  new  entity 
housing the IAASB and the IESBA, which it is expected to be incorporated as a non-for-profit 
entity in the United States of America in 2022.  

In  2021,  the  PIOB  continued  to  engage  with  the  IAASB  and  IESBA  on  some  key  projects, 
e.g.  on  group  audits,  audits  of  less  complex  entities,  going  concern,  fraud,  audit  evidence, 
assurance  of  sustainable  reporting  standards  and  technology.  As  an  example,  in  light  of 
corporate scandals and audit failures in the past and the additional fraud risk placed on entities 
due  to  Covid-19,  the  PIOB  actively  challenges  the  IAASB  to  further  strengthen  auditor’s 
responsibilities  in  relation  to  the  identification  and  reporting  of  fraud  in  audits  of  financial 

18 Small- and Medium-sized accountancy Practices 
19 https://www.iosco.org/about/monitoring_group/pdf/2020-07-MG-Paper-Strengthening-The-International-Audit-And-
Ethics-Standard-Setting-System.pdf.  

10 

 
 
                                                           
statements as well as the requirements regarding the exercise of professional skepticism and 
professional judgment On 22 July 2022, the PIOB published its 17th Public Report published 
which gives a full overview of the PIOB’s activities.20  

4.3. 

DIVERSIFICATION OF FUNDING 

The  funding  of  the  PIOB  is  designed  to  preserve  its  independence  from  the  accountancy 
profession in fact and appearance. Since 2010, the Commission has been the second biggest 
donor.  In  2021,  PIOB’s  revenue  (monetary  and  in-kind  contributions)  amounted  to  EUR 
1,937,836.  The  EU  contribution  was  EUR  345,000  (or  17,80%),  whereas  the  International 
Federation  of  Accountants  (IFAC)  still  contributed  EUR  1,109,587  (or  57,26%),  which  is 
below the cap  of two-thirds  permitted by  Article  12(3) of Regulation (EU) 2021/690. Other 
contributions came from the International Organization of Securities Commissions (IOSCO), 
the  Bank  for  International  Settlements  (BIS),  the  International  Forum  of  Independent 
Regulators  (IFIAR),  the  Financial  Reporting  Council,  the  Swiss  Federal  Audit  Oversight 
Authority,  and  the  Financial  Supervisory  Commission  of  Taiwan,  while  the  Spanish 
government provides the Madrid office for free (estimated at EUR 189,318 in 2021). Further 
diversification of funds remains necessary. As part of its reform, the Monitoring Group aims 
to bring the IFAC funding of the PIOB below 50%. 

5. 

CONCLUSIONS  

The EU funding has been indispensable for the three beneficiaries (IFRS Foundation, EFRAG 
and PIOB). The EU funding enabled the IASB to develop high quality international financial 
reporting  standards,  EFRAG  to  serve  the  European  public  interest  by  developing  and 
promoting  European  views  in  the  field  of  financial  reporting  and  ensuring  these  views  are 
properly  considered  by  the  IASB,  and  the  PIOB  to  safeguard  the  public  interest  in  setting 
International Standards on Auditing. Moreover, in 2021, EFRAG has taken important steps to 
adapt its structure for the development of European Sustainability Reporting Standards in line 
with the CSRD proposal. 

20 https://ipiob.org/  

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