In March 2022, the European Securities and Markets Authority (ESMA) published the report 2021 Corporate Reporting Enforcement and Regulatory Activities¹. The report provides an overview of the ESMA-coordinated activities in 2021 of European national accounting enforcers. The report is more clearly divided into three parts than before: enforcement of financial reporting (including IFRS enforcement and enforcement of alternative performance measures), enforcement of non-financial information, and ESEF reporting. On these, ESMA provides recommendations to companies, their audit committees and auditors on how they can improve future financial reporting by assessing how they have complied with IFRS, non-financial information regulations and ESMA’s Guidelines.

In 2021, ESMA and European financial reporting enforcers continued their regular IFRS enforcement measures. During the year, European enforcers undertook 711 examinations of listed companies’ financial statements or interim reports. These led to enforcement actions against 250 companies, which represents 40% of the companies reviewed. As in previous years, enforcers identified most shortcomings in the same areas, namely in accounting for financial instruments, impairment of non-financial assets and presentation of financial statements. These highlighted the need for transparency and entity-specificity of information, which is particularly important in financial statements prepared in the uncertain market situation of the COVID-19 pandemic. In addition, a number of material departures continued to be identified with regard to issues related to revenue recognition, even though IFRS 15 Revenue from Contracts with Customers has already been applied for three years.

European enforcers also examined non-financial information disclosed by 711 companies. This represents around 36% of companies required to provide this information. Enforcement actions were taken in relation to 72 companies.

In addition, European enforcers examined 537 management reports to assess compliance with ESMA’s APM Guidelines. Based on these, enforcement actions were taken in relation to 97 companies, constituting an action rate of 18%.

In 2021, ESMA also promoted the development of financial reporting through many actions. These actions included:

• ESMA’s letter to the European Commission regarding the reform of the Transparency Directive following the 2020 Wirecard case²
• ESMA’s report on the application of standards regarding consolidated financial statements (IFRS 10, IFRS 11 and IFRS 12)³
• ESMA’s report on compliance with IFRS (IFRS 7 and IFRS 9) regarding banks ECL disclosures⁴
• ESEF XBRL taxonomy files for 2021⁵.

For further information, please contact:

Nina Lindeman, Senior IFRS Accounting Expert, nina.lindeman(at)fiva.fi

¹ ESMA32-63-1249 2021 Corporate Reporting Enforcement and Regulatory Report.
² ESMA32-51-818 Letter to the European Commission.
³ ESMA32-67-716 Report on the application of IFRS 10-11-12
⁴ ESMA32-339-169 Report on the application of the IFRS 7 and IFRS 9 requirements regarding banks expected credit losses
⁵ ESMA32-60-727 Final report draft rts amending rts on esef 2021