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EFRAG – European Financial Reporting Advisory Group - was set up in 2001 to assist the European Commission in the endorsement of International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB) by providing advice on the technical quality of IFRS. EFRAG is a private sector body set up by the European organisations prominent in European capital markets, known collectively as the ‘Founding Fathers’ or Member body organisations.

In the IAS Regulation (N° 1606/2002) that requires all European listed companies to apply IFRS from 2005 in their consolidated financial statements, there is reference to the European Commission seeking advice from a technical committee prior to endorsing standards. EFRAG fulfils the role of that technical committee. In addition to obtaining advice from EFRAG, the European Commission seeks advice from Member states through the Accounting Regulatory Committee (ARC), wherein  EFRAG participates as an official observer.

In March 2006, EFRAG's role was formalised in a Working Arrangement with the European Commission, which states that 'EFRAG will provide advice to the Commission on all issues relating to the application of IFRS in the EU.'

The work of EFRAG is overseen by a Supervisory Board drawn from the Member body organisations of EFRAG and chaired by Pedro Solbes Mira. The European Commission is an observer at the Supervisory Board Meetings.

EFRAG operates through a Technical Expert Group (TEG), which makes its decisions independently of the Supervisory Board and all other interests. The 11 voting members of TEG were selected from throughout Europe and come from a variety of backgrounds. The chairmen of the French, German and UK Standard Setters are non-voting members of TEG, and representatives of the European Commission and CESR attend TEG meetings as observers.

The chairman of TEG – Stig Enevoldsen, auditor from Denmark – is full time, and the other voting members devote 30 to 50% of their time to EFRAG. All the members of TEG as well as the working groups provide their time without charge to EFRAG.

TEG has set up Working Groups to provide it with technical advice on the following specialist areas:

• Insurance Accounting
• Financial Instruments
• Joint Venture Accounting
• Small and Medium sized Entities (SMEs)

EFRAG is  staffed by a Secretariat which prepares papers and provides technical support to the TEG members.

EFRAG’s role is both proactive and reactive. In particular it:

• Provides advice to the European Commission on the endorsement of new or amended IFRSs and IFRIC interpretations;

• Comments on proposed IFRSs and IFRIC interpretations, IASB discussion papers and other consultative documents;

• Attends various IASB Working Group meetings as observers;

• Maintains regular contacts with the IASB through meetings with its chairman. IASB Board members and senior staff participate in each TEG meeting;

• Works closely with European National Standard Setters (NSS) on various activities designed to encourage debate in Europe on accounting matters, in order to develop European views on issues of importance and  enhance  the quality of Europe's input to the IASB (see also section on PAAinE);

• Meets quarterly with the European National Standard Setters (NSS) to exchange views;

• Meets quarterly with European User representatives in the EFRAG User Panel;

• Participates in the World Standard Setters meetings (organised by the IASB);

• Participates in the meetings of the former IASB liaison standard setters where technical issues of a proactive nature are discussed.

In addition EFRAG has recently been invited by the IASB to provide input to the IASB/FASB convergence work.

EFRAG has been granted observer status in the IASB working groups on:

• Financial Instruments
• Insurance Accounting
• Performance Reporting
• SME Accounting
• Leasing
• Employee Benefits Working Group

EFRAG maintains contacts with the European Commission directly as well as indirectly, through Commission representatives participating as observers in all TEG meetings and working groups and by holding regular meetings.

The members of TEG are appointed by the Supervisory Board, with the assistance of a Nominating Committee, following an open call for candidates. The Supervisory Board looks primarily to the qualifications of the TEG candidates in terms of knowledge and experience and endeavours to ensure a broad geographical balance together with experience from preparers, the accounting profession, users and academics.

In the same way, members of working groups are appointed following a call for candidates published on our website with the aim of ensuring an appropriate professional and geographical balance.

Due process and transparency are important features of EFRAG’s work. For example, the monthly meetings of TEG are open to the public. In addition, when preparing comment letters on exposure drafts, discussion papers and other consultative documents and when preparing endorsement advice to the European Commission, EFRAG seeks - via our website - input from organisations, companies and the public on TEG's draft views.

In 2005, EFRAG reached an understanding with the European national standard setters that EFRAG and the national standard-setters should work much more closely together to improve the input from Europe to the global standard-setting process. It was also agreed to pool resources on the proactive work in order to stimulate, carry out and manage proactive development activities designed to encourage the debate in Europe on accounting matters and designed to enhance the quality of the proactive input to the IASB.

The 'Proactive Accounting Activities in Europe' (PAAinE) is coordinated by a Coordinators committee consisting of the chairmen from the Dutch, French, German, Polish, Spanish, Swedish and UK standard setters with EFRAG as chair. 

EFRAG has set up the following PAAinE working groups on:

• Conceptual Framework
• Business Combinations under Common Control