REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the activities of the IFRS Foundation, EFRAG and PIOB in 2022
Date: 2023-11-20
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, 20.11.2023  COM(2023) 712 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the activities of the IFRS Foundation, EFRAG and PIOB in 2022  
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on the activities of the IFRS Foundation, EFRAG and PIOB in 2022 

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 facilitate their integration into Union 
law.  

Under the Single Market Programme, the Commission continues2 to provide grants to three 
organisations  in  the  field  of  financial  reporting  and  auditing:  1)  the  International  Financial 
Reporting  Standards  Foundation  (IFRS  Foundation)  as  regards  the  development  of 
International Financial Reporting Standards (IFRS Accounting Standards), 2) EFRAG, and 3) 
the Public Interest Oversight Board (PIOB). These three organisations play an important role 
in  ensuring  the  quality,  reliability  and  availability  of  public  information  about  companies, 
financial but  also  sustainability  information  in corporate reports. This  information  serves to 
promote  efficient  capital  markets,  to  protect  the  interest  of  companies,  investors  and  other 
providers  of  capital  to  companies  and  to  promote  corporate  social  responsibility  including 
sustainability. 

Article 18(3) of Regulation (EU) 2021/690 establishing the Single Market Programme requires 
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 2022.  

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

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 (EU) No 258/2014 of the European Parliament and of the Council of 3 April 
2014 establishing a Union programme to support specific activities in the field of financial reporting and auditing for the 
period of 2014-20 and repealing Decision No 716/2009/EC (OJ, L 105, 8.4.2014, p. 1.). 

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The IFRS Foundation hosts the International Accounting Standards Board (IASB), which is 
responsible  for  the  development  of  IFRS  Accounting  Standards,  and  the  new  International 
Sustainability  Standards  Board  (ISSB),  which  is  responsible  for  the  development  of 
Sustainability Disclosure Standards. The two boards are separate but complementary. 

Under Regulation (EU) No 1606/20023 of the European Parliament and of the Council on the 
application  of  international  accounting  standards  (‘IAS  Regulation’),  the  Commission  may 
endorse  new  or  amended  IFRS  Accounting  Standards  considering  EFRAG's  endorsement 
advice.  To  ensure  high  quality  IFRS  Accounting  Standards  that  are  not  contrary  to  the  EU 
public  good,  the  Commission  provides  financial  support  to  the  IFRS  Foundation  for  the 
development of IFRS Accounting Standards. 

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 Board4, 
which is designed to provide a link with public authorities and of which the Commission is a 
member. 

The  IASB  and  ISSB  each  consist  of  14  members  from  varied  national  and  professional 
backgrounds, including academia, accountancy, sustainability, investment, preparers, market 
or financial regulation and standard-setting. IASB and ISSB members are nominated for a five-
year term, renewable once. Andreas Barckow chairs the IASB and Emmanuel Faber the ISSB. 

The  annual  EU  funding  of  the  IFRS  Foundation  is  for  IASB  related  activities  on  IFRS 
Accounting  Standards  and  not  for  developing  IFRS  Sustainability  Disclosure  Standards. 
Therefore, this report does not describe the activities of the ISSB.  

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

2.2 

ACTIVITIES 

2.2.1 

STANDARD SETTINGS 

The IASB published its Feedback Statement on the Third Agenda Consultation in July 2022, 
outlining its priorities and work activities for the period 2022-2026. The three main strategic 
priorities are 1) to maintain the strategic direction and balance of the IASB’s activities while 
increasing  slightly  efforts  to  develop  digital  financial  reporting  and  improving  the 
understandability  and  accessibility  of  IFRS  Accounting  Standards;  2)  to  progress  current 
projects; and 3) to add intangibles, statement of cash flows and climate-related risk in financial 
statements to the work plan. 

In  September  2022,  the  IASB  issued  amendments  to  International  Financial  Reporting 
Standard (IFRS) 16 Leases, which specifies how the seller-lessee subsequently measures sale 
and leaseback transactions. 

3 OJ L 243, 11.9.2002, p. 1. 
4 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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In October 2022, the IASB issued amendments to International Accounting Standard (IAS) 1 
Presentation of Financial Statements  to specify how a company classifies a liability arising 
from a loan arrangement with covenants as current or non-current. 

In November 2022, the IASB decided to launch an accelerated project to propose narrow-scope 
amendments  to  IAS  12  Income  Taxes  as  a  result  of  international  tax  reforms.  These 
amendments will introduce a temporary exception from accounting for deferred taxes arising 
from the implementation of the OECD’s Pillar Two model rules, as well as targeted disclosures 
for affected entities. 

Finally, the IFRS Foundation updated the IFRS taxonomy in order to reflect the implications 
of new standards and amendments.5 

A  complete  overview  of  the  standard-setting  activities,  including  the  work  of  the  IFRS 
Interpretations Committee, is available on the IFRS Foundation's website.6 

2.2.2.  RESEARCH PROJECTS 

The IASB continued its discussions on the Primary Financial Statements project during 2022, 
which  aims  to  enhance  transparency  and  improve  comparability  of  performance  reporting 
globally. The IASB expects to issue this new IFRS Accounting Standard in  the first half of 
2024. 

In May 2022, the IASB added the project Dynamic Risk Management to its standard-setting 
programme. The scope of the new Accounting Standard is to develop requirements for macro-
hedging of interest rate risk in the banking book and to replace the current hedging approach 
of IAS 39 Financial Instruments: Recognition and Measurement, which the EU subjected to a 
carve-out in the EU to allow macro-hedging. The IASB expects to issue an Exposure Draft in 
2025. 

In  June  2022,  the  IASB  completed  its  Post-implementation  Review  (PIR)  of    IFRS  10 
Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of 
Interests  in  Other  Entities  and  concluded  that  the  requirements  of  these  three  standards  are 
working as intended and are meeting their objectives. The IASB assessed five matters to be of 
low priority, which could be explored if identified as priorities in the next agenda consultation. 

In July 2022, the IASB decided to start the PIR of  IFRS 9 Financial Instruments – Impairment 
and discussed the project plan for the first phase by identifying matters to be examined. The 
request for information was published in May 2023. 

In  September  2022,  the  IASB  launched  the  PIR  of  IFRS  15  Revenue  from  Contracts  with 
Customers. The objective is to publish a request for information in June 2023. 

In December 2022, the IASB decided to add the project Business Combinations – Disclosures, 
Goodwill and Impairment to its standard-setting programme after much research, stakeholder 
engagement  and  analysis.  The  new  Accounting  Standard  should  provide  users  of  financial 

5 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. 

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

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

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statements  with  more  useful  information  about  mergers  and  acquisitions  and  subsequent 
accounting for goodwill by retaining the impairment-only model. 

By  the  end  of  2022,  the  IASB  also  completed  its  PIR  of  IFRS  9  Financial  Instruments  – 
Classification  and  Measurement  concluded  that  these  classification  and  measurement 
requirements  are  working  as  intended.  Responding  to  the  feedback  to  this  PIR,  the  IASB 
prioritised  a  narrow-scope  standard-setting  project  to  address  specified  classification  and 
measurement requirements, including those that could affect the accounting for ESG-linked 
financial  assets.  Furthermore,  the  IASB  decided  to  add  a  project  on  amortised  cost 
measurement to its research pipeline. 

A complete overview of the research projects is available on the IFRS Foundation's website.7 

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 online. 
In addition, the IASB publishes quarterly meetings with stakeholders on its website.8 

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.  Similarly,  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 2022, the IFRS Advisory Council comprised 51 organisations including the 
European Central Bank (ECB), the European Securities and Markets Authority (ESMA) and 
the European financial reporting advisory group EFRAG. 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-year term that can be renewed 
once,  and  they  must  commit  to  act  in  the  public  interest.  In  principle,  a  Trustee  and  a 
Monitoring Board Member cannot be employed by the same organisation. 

All  IASB  members  are  full-time  and  must  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. 

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/groups/international-accounting-standards-board/stakeholder-engagement-register/. 

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2.3.4.  BREAKDOWN OF FUNDING 

In 2022, the IFRS Foundation received a EUR  3.85 million grant from the Commission for 
IASB related activities, representing 19.4% of the total contributions for IASB related activities 
received. The Commission continued to be the largest contributor, although the relative share 
of the Commission and Member States funding went down compared to 2021 (from 36.5% to 
34.4%). 

A  breakdown  of  funding  for  IASB  related  activities  by  main  geographical  areas  and 
international accounting networks shows that the EU and its Member States made  34.4% of 
the  total  contributions,  Asia-Oceania  35.1%,  international  accounting  networks  14.7%, 
Americas 5.7%, Africa 0% and others 10.1%. 

The downward trend in  contributions  for IASB related activities to  the IFRS Foundation in 
recent years has continued in 2022. The reported contributions were slightly down by 1.6% 
(GBP 270,000)  as  a  whole,  however  with  significant  variations  between  contributors.  The 
decrease is primarily based on a 13% cut in the Commission's grant funding and a suspension 
of direct funding by Norway and Russia. 

The total retained surplus of the IFRS Foundation as at 31 December 2022 amounted to GBP 
49 million. The increase in the amount of retained surplus of GBP 8.29 million in 2022 was 
largely  due  to  the  cash  received  as  part  of  the  consolidation  with  the  Value  Reporting 
Foundation (VRF)9. 

3. 

EFRAG 

3.1. 

GOVERNANCE 

EFRAG is a publicly and privately funded organisation working in the European public interest 
and has the legal form of an AISBL (Belgian international non-profit organisation). Since 2022, 
EFRAG has a dual mission.  

In the area of financial reporting, 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  Accounting  Standards  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.  

In 2022 following up on a request from Commissioner McGuinness in May 202111, EFRAG 
amended its organisation and governance structure based on the recommendation of the chair 
of the EFRAG Board. EFRAG established a Financial Reporting Pillar continuing EFRAG’s 
original mandate, and a Sustainability Reporting Pillar to develop draft European Sustainability 

9  The  Value  Reporting  Foundation  was  a  global  non-profit  organisation  that  offered  a  comprehensive  suite  of  resources 
designed to help businesses and investors develop a shared understanding of enterprise value—how it is created, preserved or 
eroded over time. 
10 Please see footnote 4. 
11https://www.efrag.org/Assets/Download?assetUrl=/sites/webpublishing/SiteAssets/210512%2520Commissioner%2520Mc
Guinness%2520to%2520EFRAG%2520on%2520sustainability.pdf  

5 

 
 
 
Reporting Standards (ESRS) as technical advice to the European Commission in view of their 
adoption as delegated acts by the Commission. For the Financial Reporting Pillar, EFRAG’s 
Member Organisations comprise eight European Stakeholder Organisations, mainly industry 
and investor associations, and ten National Accounting Standard setting organisations.  

With  the  new  Sustainability  Reporting  Pillar,  EFRAG  expanded  its  membership  base  for 
sustainability reporting with three additional European stakeholder member organisations and 
eleven members from civil society organisations including NGOs, trade unions, academic and 
consumer organisations. 

After public calls for candidates and a transparent selection process, EFRAG established the 
Sustainability Reporting Board (SRB) on 13 April 2022 and EFRAG Sustainability Reporting 
Technical Expert Group (SR TEG) on 25 April 2022. The previous EFRAG Board became the 
Financial Reporting Board (FRB) and the former EFRAG TEG became the Financial Reporting 
Financial Reporting Technical Expert Group (FR TEG).  

On  15  November  2022,  following  nomination  by  the  Commission  in  consultation  with  the 
European Parliament and Council, EFRAG appointed Mr Wolf Klinz former MEP, as chair of 
the FRB and Mr Patrick de Cambourg as chair of the SRB.  Mr Hans Buysse succeeded Mr 
Gauzes as chair of EFRAG’s Administrative Board.  

EFRAG’s  Statutes  and  Internal  Rules  establish  that  the  EFRAG  Administrative  Board  is 
responsible for the due process oversight of all technical bodies of EFRAG. In doing so, it is 
supported by a Due Process Committee (DPC). The EFRAG DPC started its activities in March 
2022 as part of the new two-pillar governance structure.  

In December 2022, the Corporate Sustainability Reporting Directive12 mandated EFRAG to 
provide  technical  advice  on  European  Sustainability  Reporting  Standards  (ESRS).  In 
developing  draft  ESRS,  EFRAG  should  align  draft  ESRS  with  other  international  standard 
setters, in particular the ISSB and GRI (the Global Reporting Initiative).  

3.2 

ACTIVITIES FINANCIAL REPORTING PILLAR 

3.2.1.  ENDORSEMENT AND RESEARCH ACTIVITIES 

In  2022,  EFRAG’s  work  on  financial  reporting  remained  largely  driven  by  the  work 
programme of the IASB, the IFRS Interpretations Committee and the IFRS Foundation.  

Before  EFRAG  issues  a  final  endorsement  advice  on  a  new  IFRS  accounting  standard  or 
amendments to already existing IFRS Accounting Standards adopted by the IASB, EFRAG 
issues (draft) comment letters to the IASB and draft endorsement advice for the Commission. 
This robust due process allows stakeholders to express their views on EFRAG’s positions. 

In terms of output, EFRAG issued in 2022 one final endorsement advice on the amendment to 
IFRS 17 Insurance Contracts and IFRS 9 Financial Instruments “Comparative Information”, 
two draft endorsement advice on the amendments to IFRS 16 Leases “Lease Liability in a Sale 
and Leaseback” and on the amendments to IAS 1 Presentation of Financial Statements “Non-
current Liabilities with Covenants”. 

12 OJ L322,16.12.2022, p. 15. 

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The  EFRAG  FRB  also  issued  five  final  comment  letters  and  7  feedback  statements,  and 
published research papers on accounting for crypto assets and better information on intangibles. 

In addition, EFRAG closely monitored important ongoing IASB projects that are expected to 
result  in  IASB  standard  setting  requiring  EU  endorsement  in  2024  or  2025.  These  projects 
include  Primary  Financial  Statements,  Accounting  for  Regulatory  Assets  and  Regulatory 
Liabilities,  Business  Combinations  Disclosures,  and  Financial 
Instruments  with 
Characteristics  of  Equity.  EFRAG  organised  during  2022  extensive  outreach  activities  and 
roundtables to identify whether and how IASB considered accounting treatments would work 
for European constituents or pose application challenges. EFRAG then informed the IASB of 
issues faced by European stakeholders. 

As a sign of good repute EFRAG has been granted the Chairmanship of the International Forum 
of  Accounting  Standard  Setters  (IFASS)  (formerly  known  as  National  Standard-Setters). 
IFASS is a grouping of national accounting standard setters from around the world, plus other 
organisations that have a close involvement in corporate reporting issues. 

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

3.2.2.  SUSTAINABILITY REPORTING PILLAR 

On 21 April 2021, the Commission adopted the CSRD proposal to revise and strengthen the 
provisions of the Non-Financial Reporting Directive13. 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, which was politically agreed by the European Parliament and 
the Council on 21 June 2022 envisaged the adoption of ESRS as delegated acts by the European 
Commission taking in to account the draft ESRS developed by EFRAG as technical advice, 
using proper due process, public oversight and transparency, and with the expertise of relevant 
stakeholders.  The  CSRD  was  adopted  and  published  in  the  Official  Journal  in  December 
202214. 

The Project Task Force on European Sustainability Reporting Standards (PTF-ESRS) started 
in 2021 to develop the ESRS in project mode. To meet the timelines in the CSRD proposal, the 
PTF-NFRS  started  developing  the  initial  set  of  draft  ESRS  in  parallel  with  the  legislative 
negotiations  on  the  Commission  proposal  for  the  CSRD.  The  aim  was  to  provide  timely 
exposure drafts (EDs) to the EFRAG SRB to allow a proper public consultation on ESRS. On 
28 April 2022, the EFRAG SRB issued the first set of 13 draft ESRS for public consultation.15  

Underpinned by the political agreement on the CSRD in June 2022, the EFRAG SRB and SR 
TEG worked intensively on finalising draft ESRS. The newly formed EFRAG SRB and SR 

13  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. 
14 Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) 
No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability 
reporting (OJ L 322 of 16.12.2022, p. 15). 
15 https://efrag.org/lab3. 

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TEG held intense series of public meetings and organised preparation roundtables and outreach 
events on draft ESRS during the public consultation that ran from 30 April to 8 August 2022.  

EFRAG received around 700 responses to the ESRS consultation from 19 EU Member States 
and  EEA  countries  with  most  responses  from  France  and  Germany.  Some  responses  were 
received from stakeholders outside the EU including Japan and the US. Following the public 
consultation,  EFRAG  made  some  important  changes:  replacing  the  rebuttable  presumption 
approach  by  materiality  assessment  for  most  ESRS,  deleting  one  cross  cutting  ESRS, 
significantly  reducing  the  number  of  disclosure  requirements  and  datapoints  and  put  some 
transitional provisions in relation to value chain reporting.   

The EFRAG SRB submitted the first set of 12 final draft ESRS to the European Commission 
on  20  November  2022,  which  the  Commission  adopted  on  31  July  2023  after  further 
simplification, improved proportionality and additional phase-ins. 

In November 2022, EFRAG also launched two workstreams on standards for small, medium 
enterprises (‘SMEs’). The first one stems from the CSRD to develop a simplified standard for 
listed SMEs, small banks and captive insurers (together “LSME”). The second workstream is 
outside the CSRD mandate and was triggered by market needs for a voluntary sustainability 
reporting standard for non-listed SMEs and micro-entities to support them with ESG requests 
from banks or value chain partners. 

The  EFRAG  Digital  Reporting  Team  has  also  started  the  XBRL  taxonomy  implementation 
project  in  November  2022.  The  goal  is  to  deliver  a  complete  ESRS  XBRL  taxonomy  that 
enables  digital  tagging  of  the  ESRS  statements  and  enable  users  of  the  reports  to  consume 
machine-readable ESG data sets, as foreseen in the CSRD.  

3.3. 

TRANSPARENCY AND ACCOUNTABILITY 

3.3.1  TRANSPARENCY RULES 

EFRAG  has  a  transparent  public  due  process.  Moreover,  since  March  2022,  EFRAG 
established a DPC that supports the Administrative Board in monitoring that the EFRAG FRB 
and EFRAG SRB comply with EFRAG’s due process procedures and internal rules. EFRAG’s 
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 Accounting Standards and the development of ESRS.  

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 FRB and EFRAG SRB, EFRAG FR TEG and EFRAG SR TEG and 
EFRAG  Consultative  Forum  of  Standard  Setters  (EFRAG  CFSS)  are  held  in  public.  The 

8 

 
 
agendas, supporting agenda papers and summaries of the meetings are published on EFRAG’s 
website. Since March 2018, the meetings can also be watched online and recordings remain 
online for several months.  

EFRAG maintains a public transparency register, which covers the meetings of the  EFRAG 
FRB and EFRAG SRB Chairs, EFRAG FR TEG and EFRAG SR TEG Chairs and the EFRAG 
CEO. 

3.3.2 

REPRESENTATION AND ACCOUNTABILITY  

EFRAG strives for a proper geographical, professional background and gender balance in its 
Financial 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 FRB and SRB and their TEGs 
with the same nationality and there are rules on professional background and gender balance.  

EFRAG Board members  are nominated by the EFRAG Member Organisations. The gender 
balance and geographic  representation  of the  Financial and Sustainability Reporting Boards 
and corresponding TEGs was further improved during 2022.  

3.3.3 

PREVENTION OF CONFLICT OF INTERESTS 

EFRAG  has  a  conflict  of  interest  policy  to  underpin  its  public  interest  mandate,  which  is 
published on EFRAG’s website.16 EFRAG Board members and EFRAG staff confirm yearly 
their independence in a signed declaration.  

3.3.4  CONTACTS WITH THE EUROPEAN PARLIAMENT AND MEMBER STATES 

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

For 2022, EFRAG’s total operating costs were EUR 11 million, which included an estimated 
EUR 3.9 million contributions in kind funded by third parties. The funding fell EUR 50,000 
short of the expenses. A loss was therefore deducted from the EFRAG’s retained earnings of 
EUR 4.6 million as at end 2021.  

The received contributions in kind include the time of members of the EFRAG FRB and SRB, 
the EFRAG FR and SR TEGs (only the chairs are paid), as well as temporary secondments to 
the EFRAG secretariat.  

16 www.efrag.org.  

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In 2022, the Commission funded a maximum 60% of EFRAG’s eligible costs.  In 2022, the 
Commission grant was EUR 3.97 million. Other cash contributions on financial reporting came 
from  European  stakeholder  organisations  (EUR  615,000)  and  national  stakeholder 
organisations  (i.e.  France,  Germany,  UK,  Italy,  Netherlands,  Denmark,  Spain,  Sweden  and 
Luxembourg) (EUR 1.525 million). 

On  sustainability  reporting,  European  stakeholder  organisations  funded  EUR  0.248  million, 
national  sustainability  organisations  EUR  0.44  million  and  civil  society  organisations  EUR 
0.054 million. In addition, EFRAG received EUR 0.178 million ad hoc funding inter alia from 
the  French  standard  setter  and  the  European  Contact  Group  of  large  audit  firms  and 
Accountancy Europe.  

Ad hoc financing and reliance on contributions in kind are not a sustainable funding model 
commensurate  with  EFRAG’s  sustainability  standard  setting  activities.  Therefore,  the 
Commission will for 2023 optimise the EU contribution within the confines on the EU budget 
and budget rules by splitting the operating grant into two activity grants for financial reporting 
and  sustainability  reporting  activities  with  a  significant  higher  co-funding  percentage  for 
sustainability reporting activities. This will contribute to satisfy EFRAG’s structural funding 
needs.  

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.  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. 

Within the context of implementation of the 2020 Monitoring Group reform17, the IAAS and 
IESBA have been moved to  a new legal  entity,  the International  Foundation  for Ethics and 
Audit (IFEA) independent from the International Federation of Accountants IFAC. The IFEA 
is  incorporated  in  the  US,  state  of  Delaware.  IFEA  has  become  operational  at  the  end  of 
November 2022, with a Board of Trustees consisting of six members. The PIOB continues to 
operate from Madrid and appoints four of these, including the Chair.18 

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 PIOB members (including 
the Chair). 

4.2  

ACTIVITIES 

17 https://www.iosco.org/about/monitoring_group/pdf/2020-07-MG-Paper-Strengthening-The-International-Audit-And-
Ethics-Standard-Setting-System.pdf.  
18 See www.ethicsandaudit.org. 

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The  PIOB  reviewed  and  approved  that  the  IAASB  and  the  IESBA  followed  due  process 
effectively  and  with  proper  regard  for  the  public  interest  in  the  standard-setting  activities, 
including the approval of 3 standards and the IAASB 2022-2023 Work Plan. Following the 
PIOB’s establishment in November 2021 of the SSB Nominations Committee, the first cycle 
of  applications  and  appointments  to  the  IAASB  and  IESBA  was  completed  in  2022.  The 
Committee submitted its recommendations in summer 2022 which were approved by the PIOB 
in October. 

On 7 October 2022, the PIOB held its 3rd Public Interest Workshop in Madrid for participants 
involved in sustainability reporting, providing assurance, use of non-financial reports -specially 
the investor community- regulatory bodies and standard-setters.19 

On  29  June  2023,  the  PIOB  published  its  18th  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  accounting 
profession in fact and in appearance. However, since its creation in 2005 and until 2010 when 
the Community funding programme established by Decision 716/2009/EC became operative, 
the PIOB was financed exclusively by IFAC. Since 2010, the European Union has been the 
second  biggest  donor.  In  2022,  PIOB’s  income  amounted  to  EUR  2,191,120.  The  EU 
contribution  was EUR 350,000 (or 15.97%), whereas  IFAC contributed  EUR 1,392,754 (or 
63.56%), 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  UK  Financial  Reporting  Council  (FRC),  the  Swiss 
Federal Audit Oversight Authority, the Financial Supervisory Commission of Taiwan, while 
the  Spanish  government  provides  the  Madrid  office  free.  Further  diversification  of  funds 
remains necessary, and together with the PIOB, the Monitoring Group is seeking other sponsors 
to further reduce the funding from the accounting profession, in particular the IFAC.  

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  IFRS  Accounting 
Standards. The EU funding also was essential for EFRAG to serve the European public interest 
by developing and promoting European views in the field of financial reporting and to develop 
European Sustainability Reporting Standards as technical advice to the European Commission. 
Finally, the EU funding helped the PIOB to safeguard the public interest in setting International 
Standards on Auditing.  

19 See https://piobworkshop.org. 
20 https://ipiob.org/  

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