The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published its 2021 Corporate Reporting Enforcement and Regulatory Report. ESMA makes recommendations to issuers and auditors to improve future financial and non-financial reports, by assessing how issuers comply with International Financial Reporting Standards (IFRS) and non-financial reporting obligations and adhere to ESMA’s recommendations.
The Report, with the aim of promoting investor protection, provides transparency and accountability to the market with an overview of the activities carried out by ESMA and enforcers on financial and non-financial information.
- 711 examinations of financial statements drawn up under IFRS, covering approximately 17% of issuers listed on European Union (EU) regulated markets. The examinations led to enforcement actions against 250 issuers in order to address material departures from IFRS, representing an action rate of 40%;
- 537 management reports were examined to assess whether the presentation and disclosure of alternative performance measures (APM) complied with ESMA’s APM Guidelines, covering 13% of all IFRS listed issuers in the EU. Based on these examinations, enforcement actions were taken in relation to 97 issuers, constituting an action rate of 18%; and
- European enforcers examined non-financial statements of 711 issuers, 36% of the total estimated number of issuers required to publish a non-financial statement, to assess disclosures in non-financial statements. Related enforcement actions against 72 issuers represented an action rate of 10%.
The majority of the enforcement actions concerned disclosures to be corrected in the future financial statements.
ESMA expects issuers, audit committees and auditors to consider the conclusions and recommendations of the report when preparing and auditing financial reports. In 2022, ESMA and the European enforcers will focus on ensuring that adequate transparency is provided regarding the enforcement priorities outlined in its 2021 European Common Enforcement Priorities Statement.