All 25 responses to a public consultation on plans to triple the
annual operating budget of the Brussels-based European Financial
Reporting Advisory Group (EFRAG) were in favour of the move.
One of EFRAG’s primary remits is co-ordinating Europe’s input to
the International Accounting Standards Board (IASB) in terms of
advice on standard setting. The reason for the proposed EFRAG
expansion is fear that the EU could fall further from its position
of influence with the IASB now that the US is firmly on track for
IFRS and Japan is looking likely to follow suit.
Under EFRAG’s expansion plan, its budget is intended to rise
from €2 million ($2.5 million) to €6 million by 2010. This assumes
agreement from funding institutions including national sources and
the EC.
The new budgets will allow staffing to increase from eight to
25, which would include 20 technical and five administrative staff.
Also, it will permit the chair of its technical expert group to be
paid, instead of being subsidised by the commercial world. Other
developments would include the addition of a communications
manager.
A typical warm welcome for the proposals came from Pierre de
Lausun, of the Fédération Bancaire Française, a professional body
representing 450 banks operating in France, who stated: “It is a
pragmatic approach to see the project ‘EFRAG Plus’ through
successfully.”
Other supporters included Deloitte, KPMG, the European
Federation of Accountants and Auditors for SMEs, the Chartered
Financial Analyst Institute, the Accounting Standards Committee of
Germany, the British Association of Chartered Certified Accountants
and European insurance federation CEA.
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By GlobalDataAn EU official tells The Accountant that the increase
in strength of EFRAG will bring it on par with what its US
counterpart, the Financial Accounting Standards Board (FASB),
devotes to similar activity. EFRAG says that the total operating
budget of the US standard setter is about €25 million. However,
FASB, being a standard setter, has a broader role to play.
EFRAG states that recruitment may be slower than planned, but in
the longer term the institution may require additional resources,
up to €7.5 million. This extra would enable it to be active in
operations such as field-testing, work on feedback statements and
public hearings.
A three-tier funding system is envisaged, with input from
European organisations, national funding mechanisms and from the
EC. In the short-term (2009), funding is to be €1 million from
European member organisations and €2 million from national funding
mechanisms. The EC has indicated a willingness to consider
contributing up to 50 per cent of the budget, provided that certain
reforms are carried out. Commission funding would not be available
until 2010.
Saskia Slomp, technical director of the European Federation of
European Accountants (Fédération des Experts comptables
Européens – FEE), who was part of the advisory team when EFRAG
was originally established, follows the European Parliament
line.
“If we don’t expand EFRAG, or find another mechanism in Europe,
the US and other players will become so influential that they will
dominate completely the IASB. The enhancement of EFRAG to enable
closer co-ordination with National Standard Setters is
essential.”
Henri Olivier, secretary general of FEE, reflects an optimistic
view in Brussels that funding for the EFRAG enhancement, which is
planned to come from a range of sources, including national funding
mechanisms, will indeed be forthcoming.
BELGIUM
Good starting point
EFRAG deputy chair Françoise Flores told The Accountant
the relationship between the group and the IASB is pretty good and
if it is moving in any direction, it is a direction for the
better.
“One thing the IASB often mentioned as a difficulty was that in
Europe it was almost impossible to have an expression of convergent
European views, because there were different views all over the
place,” Flores said.
“The stronger co-ordination we have in Europe between national
standard setters and EFRAG, the more cohesive the European views
may be. That is the direction EFRAG is taking with that
reform.”
EMPLOYMENT
Belgium’s high cost of employment
Based on an assumption that of EFRAG’s proposed €6 million
($7.52 million) budget, €5 million will go on salaries, this works
out at an average of €200,000 per head per year.
However bodies in Belgium that fall outside the special status
of being EU institutions, including EFRAG, have to cope with the
fraught problem of the high Belgian income tax, which peaks at 50
percent. This can result in exceptional difference between gross
and net salaries.
On top of that is another real killer to employment in Belgium:
the contribution to the Belgian national social security fund. For
this, employees face a 12 percent charge on their nominal salary.
Above that, employers have to top-up with another 33 percent.
Understandably this phenomenon tends to be kept under the carpet
in a country that supports seven government ministers to cover
health alone.
Brussels itself, home to one million people, is administered via
19 different local authorities known as communes. Each has its own
full-blown town hall, salaried mayor, and so on. Further public
costs are due to the fact that citizens over 55-years-old may take
retirement on the pre-pension system, to which employers
contribute.
In practice, things might not be as bad as they appear. Belgian
tax lawyer Marc Quaghebeur says that while it takes some planning,
expats working for multinational companies, and other specified
types of organisations, can obtain a range of valuable tax
benefits. These can include accommodation allowances, company cars
and school fees.
However, one potential EFRAG recruit estimates that the
standard-setting qualified employee, who might expect an annual
salary of €100,000 to €150,000 at project manager level, calculates
that as an ex-pat, after deductions, he would take home about
one-third of the total cost of his employment. Unsurprisingly, this
individual sought and found employment elsewhere.
Generally, recruitment of financial personnel to Brussels from
London, which is the largest pool of highly qualified potentials,
is rare.
Jeremy Woolfe
