The Accounting Policy & Practice Report ® provides financial accounting policy makers, advisors, and practitioners with the latest news, expert insights, and guidance on emerging, evolving,...
Medium and small-sized companies in Europe might find it easier—and cheaper—to attract investors in coming years under a European Commission effort to attract buyers for their stocks and bonds.
The EC, the administrative arm of the European Union, wants feedback on its plan for promoting listings by small and medium-sized enterprises (SMEs), including assessing whether obstacles—such as accounting practices—hamper institutional and retail investments in SME shares and bonds, the professional organization Accountancy Europe said Jan. 2.
The commission said it welcomes in particular the views of “stock exchanges, institutional investors, consumer and investor organisations, brokers specialised in SMEs,” and advisers that support SMEs’ initial public offerings.
The EU defines SMEs as companies with an average market capitalization of less than 200 million euros ($240.4 million).
The project includes questions on whether differences in national accounting standards hinder investments across EU national borders.
Respondents are asked to rate the importance of national accounting standards on an ascending scale of one to five—from “completely irrelevant” to “highly relevant—in deterring investments across jurisdictions.
The questions form part of the EC’s efforts to create a regulatory system for SME listings as part of its 2015 action plan to forge a Capital Markets Union (CMU).
The drive to create the CMU is assuming greater urgency as the U.K. prepares to divorce the EU next year, a June 2017 review of the CMU effort said.
The CMU aims to establish a single market for capital spanning EU national borders by 2019. Responses to the EC questions might help determine if the EU needs to help reconcile cross-border accounting rules.
Though the EU as a whole implements international financial reporting standards for large domestic and foreign listed companies as issued by the International Accounting Standards Board, it hasn’t adopted IASB’s standard for SMEs because it conflicts with the EU’s 2013 directive on financial reporting.
“The IFRS for SMEs Standard was assessed to be incompatible with the EU Accounting Directive in a few respects,” so the EU didn’t adopt it, IASB said in a notice on its web site.
SMEs admitted to trading on multilateral trading facilities (MTFs)—self-regulated trading arenas in Europe that operate outside traditional stock markets. They typically supply financial information based solely national accounting standards, according to the 2015 CMU action plan.
This information could prove insufficient, though, to meet the needs of international investors, the plan said, because it lacks comparability across EU member states’ differing accounting requirements.
IFRS prohibits listed companies—those trading on either a regulated market or an MTF—and financial institutions from using IFRS for SMEs.
EU policy-makers must do more to boost public listings of SMEs, as the amounts raised on markets dedicated to SMEs have dropped by 9 million euros compared to levels before the 2008 financial crisis, the June 2017 CMU review found.
“Particular challenges are faced by small and medium-size companies seeking to raise less than EUR 100 million through public issuance,” the review said, as “the current regulatory environment may discourage these firms from raising capital on public markets.”
The CMU could give SMEs better access to public markets—especially risk finance—by knocking down barriers to cross-border investments, as well as encouraging investors to assume stakes in smaller companies and giving banks fresh lending opportunities, the review said.
The Commission, as part of the CMU Action Plan, is committed to review the regulatory barriers to small firms for their admission to trading on public markets and to ensure that the regulatory environment for the SME Growth Markets is fit for that purpose, the European Securities and Markets Association, an independent EU authority overseeing financial markets, said in a November 2017 report.
“The CMU Action Plan stressed the need to ensure that the SME Growth Markets strike the right balance between providing sufficient investor protection and avoiding unnecessary administrative burden,” the EC said
The EU expects to issue new rules in the second quarter of 2018 designed to make SME listings simpler and cheaper.
Response to the EC questions must be received by Feb. 26, 2018.
The list of EC questions on SMEs is available at https://ec.europa.eu/info/sites/info/files/2017-barriers-listing-smes-consultation-document_en.pdf
Copyright © 2018 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)