European authorities took actions against 299 companies for not following international financial reporting standards in 2019

April 2, 2020

The European Securities and Markets Authority (ESMA) has revealed that European enforcement authorities took action against 299 companies in 2019 for failing to comply with financial reporting requirements.

In total, European enforcers examined around 950 financial statements drawn up under international finance reporting standards (IFRS). This represented roughly 17% of issuers listed on EU regulated markets. Of those, about a third led to enforcement actions against companies after the authorities noticed material departures from the standards.

ESMA also noted that more authorities are becoming increasingly serious about businesses’ environmental, social and governance (ESG) disclosures. have become more important. The regulator noted that European enforcers ramped up their enforcement activities on non-financial information in 2019.

This led to them examining 937 non-financial statements or 35% of the total estimated number of issuers required to publish a non-financial statement, up from the 819 examinations undertaken in 2018.These examinations brought about 95 enforcement actions, constituting an action rate of 10%.

“A harmonised European approach to the application of IFRS is key to ensuring that investors receive high quality and relevant financial information,” said Steven Maijoor, chair of ESMA. “In 2019, ESMA and European enforcers focused on the new accounting standards to ensure a convergent application and this effort will continue in 2020.

“Investors are also increasingly demanding reliable and relevant disclosure on ESG factors. Examinations of non-financial statements during 2019 show that further efforts are needed from European issuers. Together with national enforcers, ESMA will continue its focus on this area to ensure that investors are provided with high-quality ESG information.

“To support this work ESMA is ready to assist the European Commission, as part of its review of the Non-Financial Reporting Directive, to ensure that appropriate standards for non-financial reporting are established.”