Elements of history and reforms

Establishment of EFRAG

EFRAG membership is composed of 10 European Stakeholder organisations called "the Founding Fathers". (FEE (now Accountancy Europe), EFAA, UNICE (now BusinessEurope), ERT, EBF, EACB, ESBG, CEA (now Insurance Europe), EFFAS and FESE. ERT and FESE left the EFRAG membership in subsequent years.

The structure was composed of the EFRAG Supervisory Board (chaired by Göran Tidström, FEE (now Accountancy Europe), Sweden) responsible for governance and oversight of the organisation and of the EFRAG Technical Expert Group that was in charge of making decisions in all core activities of EFRAG. The EFRAG Supervisory Board members were representatives of EFRAG Member Organisations.

EFRAG TEG was composed of 11 independent members. The EFRAG TEG Chairman (Johan van Helleman, Academic, the Netherlands) was a part-timer free of charge. The executive responsibility rested with a Secretary General (Paul Rutteman). The EFRAG Consultation Forum of Standard Setters (EFRAG CFSS) was established at the outset also. No meeting was held in public at the time. On endorsement, EFRAG TEG could recommend endorsement if a simple majority in the group was in favour; EFRAG TEG could recommend to reject an IFRS only if a qualified majority of 2/3 supported the decision. The IASB and CESR (now ESMA) were observers in EFRAG TEG.

Main achievements:

• Assessing the compatibility of all existing IAS standards with the Accounting Directives

• Providing endorsement advice "en bloc", except for IAS 39 Financial Instruments

• Setting up EFRAG's due process (issuance of draft comment letters for public consultation)

First enhancement of EFRAG

A few changes are made in the governance: the Chairs of the National Standard Setters from France, Germany and the UK became non-voting members of EFRAG TEG. The EFRAG TEG Chairmanship becames a full time position, combined with the EFRAG CEO responsibility, however remains free of charge to EFRAG (Stig Enevoldsen). EFRAG TEG meets in public.

Main achievements:

• Building up EFRAG's technical credibility and visibility; creation of the Advisory Fora;

• All IFRS and amendments of IAS issued so as to support first-adoption of IFRS in the EU in 2005 are considered for endorsement advice;

• Signing the "Flandres Agreement" with the National Standard Setters of France, Germany and the UK to undertake the PAAinE activities (Pro-Active Activities in Europe). First joint Research projects are carried out with National Standard Setters in Europe;

• Acknowledged at international level as a key stakeholder in the IFRS financial reporting arena;

• Acknowledged as the official technical advisor of the European Commission in the Working Arrangement signed in 2006; EFRAG is entrusted with the responsibility for assessing IFRS for endorsement from a financial reporting perspective only;

• Creation of the first National Funding Mechanisms (i.e. voluntary cash contributions to EFRAG collected at national level).

• March 2006 signing of the Working Arrangements with the European Commission.

EFRAG "Plus" reform

The EFRAG "Plus" governance reform was designed so as to make EFRAG qualify for EU public funding by the European Commission. The EFRAG Supervisory Board Members are appointed as independent members and include four "Public policy" members nominated by the European Commission, one of which was appointed as the EFRAG Supervisory Board Chair (Pedro Solbes up to November 2012, Hans van Damme, Acting Chair thereafter). Partnership in Research Activities was officialised with the creation of the EFRAG Planning and Resource Committee (PRC) (composed in equal numbers of EFRAG Supervisory members and representatives of National Standard Setters in Europe and of the EFRAG TEG Chair). The EFRAG PRC took responsibility for making all agenda and resource allocation decisions for EFRAG ProActive (research) Activities. Majority rules were changed in EFRAG TEG, so that endorsement decisions are made, whether positive and negative, on the basis of simple majority. In April 2010, Stig Enevoldsen handed over the responsibility of EFRAG Chair and CEO to Françoise Flores. The Italian Standard Setter was appointed as non-voting member in EFRAG TEG. in addition to the German, French and UK Standard setters. First EU funding is granted from 2010 onwards.

Main achievements:

• Significant Research activity undertaken, after first EFRAG agenda consultation;

• Providing strong European input in all projects included in the IASB-FASB convergence program, from first exposure-draft stage until completion or suspension;

• Development of EFRAG's due process with outreach initiatives, field work policy and feedback statements;

• Launching of EFRAG's permanent outreach to users;

• Establishing permanent communication with the IASB so as to provide European views throughout the standard-setting process, including after a comment letter has been submitted;

• Becoming an active member of, and contributor to, the IASB Accounting Standard Advisory Forum;

• Active contributor to Philippe Maystadt consultation on how to best enhance the influence of Europe in the development of IFRS;

• Implementation of EFRAG "Maystadt" Reform with the reform becoming effective on 31st October 2014.

Maystadt reform

Philippe Maystadt was appointed by EU Commissioner Barnier as a special advisor on 19 March 2013 to set out recommendations to “reinforce the EU's contribution to International Financial Reporting Standards (IFRS), and to improve the governance of the institutions developing these standards.”  In his final report presented in November 2013, Philippe Maystadt recommended transforming EFRAG with a view to strengthening the EU’s influence in international accounting standard-setting.

For more detailed information please click here.

Main achievements:

• Implementation of EFRAG "Maystadt" Reform with the reform becoming effective on 31st October 2014 with the establishment of a new Board.

• EFRAG‘s mandate is widened to include economic policy and strategic considerations, whereas the 2006 working arrangement with the European Commission limited EFRAG’s remit to technical assessments

• EFRAG’s participation in the standard-setting process and advice on endorsement of IFRS also based on supplementary assessments of the IFRS proposals/requirements being conducive to the European public good. This includes the interaction with economic policy such as financial stability and economic growth.

• Full integration of National Standard Setters (NSS) in the EFRAG structure

• Eight National Organisations: Denmark, France, Germany, Italy, Luxembourg, Netherlands, Sweden and the UK joined the EFRAG membership

• EFRAG Board is taking all its decisions after having considered the expert advice provided by the EFRAG TEG and the results of EFRAG’s due process and made all decisions relevant from a wider economical perspective.

• EFRAG Board operates by consensus

•  EFRAG TEG taking up its advisory role recommending technical positions reached independently, assisted by its ad hoc working groups and advisory panels, albeit after having given due consideration to all input received through EFRAG’s due process

• EFRAG became a fully representative and all-inclusive organisation, strongly enhancing EFRAG‘s legitimacy and promoting cohesiveness among various financial reporting European stakeholders.

• Jean Paul Gauzès was nominated by the EC as EFRAG Boar President (and subsequently appointed by the EFRAG General Assembly)

• In October 2017 the Spanish Standard Setter joined the EFRAG membership and in  March 2021 the Austrian Group of standard setters joined the EFRAG membership.

Gauzès reform

On 25 June 2020, Executive Vice-President Valdis Dombrovskis has invited Jean-Paul Gauzès, on an ad-personam basis, to provide recommendations on potential changes to the governance and financing of EFRAG, in case it were entrusted with the development of possible EU non-financial reporting standards. After having carried out two public consultations, Jean-Paul Gauzès published his final report  on 4 March 2021 accompanied by a feedback statement summarising  the main feedback he received from his second public consultation. 

For more detailed information please click here.

The main elements of the governance reform included:

• Establishment of a new sustainability reporting pillar alongside the existing financial reporting pillar
•  EFRAG’s existing responsibilities linked to financial reporting standards will continue essentially unchanged in the financial reporting pillar.
• Extension of the membership of EFRAG (EFRAG General Assembly) with two new Chapters representing relevant European institutions, authorities and agencies, and civil society in addition to the existing European Stakeholders Organisations and National Organisations Chapters (the European institutions, authorities and agencies Chapter was never established since the relevant organisations declined full membership of EFRAG and opted for an observership role)
• Establishment of the EFRAG Administrative Board responsible for EFRAG’s organisation, administration, finance and due process. The President of the EFRAG Administrative Board is appointed by the EFRAG General Assembly.
• EFRAG ‘s technical work to be carried out under the responsibility of two separate Reporting Boards: EFRAG Financial Reporting Board and EFRAG Sustainability Reporting Board. Both Reporting Boards are responsible for all EFRAG’s technical positions
• The Chairs of the Reporting Boards will be nominated by the European Commission after consultation with the European Parliament and the Council, reflecting the nomination procedure for the Chair of the current EFRAG Board.
• Members of the Reporting Boards should commit to serve in the public interest and be free from conflicts of interest.
• Each EFRAG Reporting Board is assisted in its area of competence by a Technical Expert Group (TEG) and will appoint the members of its TEG.
• The EFRAG SRB and EFRAG SR TEG strive to contribute to sustainability reporting progress globally.