Stig Enevoldsen has been the face of financial reporting in Europe for the past six years. With his term as chair of the European Financial Reporting Advisory Group recently completed, he speaks with Carolyn Canham about the triumphs, challenges and what it is like to leave the group behind.
As chair of the European Financial Reporting Advisory Group (EFRAG), Stig Enevoldsen spent six years travelling the length and breadth of Europe, speaking at events, gathering opinions and seeking a united European view to present to the likes of the European Commission and the International Accounting Standards Board (IASB).
He has dealt with the long hours and budget travel requirements of working for a low-resource organisation, faced unreasonable criticism and attacks, and navigated the politics of 27 countries. But most of all, Enevoldsen has enjoyed the ride.
Looking back, Enevoldsen sees two major achievements from his time as chair – growing EFRAG into a high-quality, technical organisation and implementing the proactive programme.
“When I took over as chair, EFRAG was two people and a secretary, it was very, very tiny,” Enevoldsen explains.
“One major achievement was we grew EFRAG into a technically high-quality organisation, our comment letters to the IASB were at a very high level.
“We built it up to be well known as a spokes group for Europe on accounting issues and respected not only in Europe but around the world. This was mainly due to the skills and hard work of Paul Ebling, the technical director whom I got hold of shortly after taking office.”
One notable indicator of the quality of EFRAG’s technical work was the recent admission by IASB member Jim Leisenring that EFRAG’s comment letters were “thoughtful”. Enevoldsen says that meeting Leisenring’s notoriously high standards is better than being honoured by the Queen of England.
It was Enevoldsen’s idea to introduce EFRAG’s proactive work in 2005. The Proactive Accounting Activities in Europe programme has dual objectives.
“It has the objective to influence the IASB, but it also has the objective of creating debates in Europe. There was previously not a lot of debate on the continent, but I think our papers helped get those debates going and getting a better understanding of the issues before the IASB invited comments on the same subjects. It enhanced Europe’s and EFRAG’s standing around the world as well.”
Enevoldsen says particularly successful projects include a revenue recognition paper, a pensions paper, a performance reporting paper and an equity/liability paper – all prepared in partnership with the UK and German standard setters.
Co-operation with the national standard setters has been vital for EFRAG, as it has always been a struggle to find enough resources to achieve the work on its agenda.
“We were always under staffed and under funded in relation to the ambitions we had and the expectation people had,” Enevoldsen explains.
“We created some expectations and others created expectations for us so it was quite difficult to manage. We had a very good staff, everyone worked extremely hard and we succeeded.”
During the past couple of years, EFRAG received significantly increased funding and from this year the EC will fund 50% of its expenses. Enevoldsen says this is satisfying recognition of the group’s work over the years.
The hardest task
Enevoldsen says the difficulties associated with working for an under-resourced organisation, such as working long hours and budget travel throughout Europe did not bother him at all. The one thing he did find hard was dealing with unreasonable and hidden opposition.
“The more influence we got and the more important we became, the more opposition we were exposed to,” he explains. “Sometimes we had to react to completely unreasonable criticism and attacks from envious people who thought we achieved too much and therefore they went for us. That was disappointing.
“To me what was important was improving accounting in Europe and I wanted co-operation of the European players to archive that. I also accepted we needed give up certain ground in order to co-operate. I thought it was nonsense when people didn’t want to co-operate because EFRAG was too powerful, because to improve accounting in Europe, you need to get the best possible input to the IASB.
“I didn’t want to fight with other Europeans, I wanted to co-operate and work together.
“I couldn’t care less about having to work 10 hours extra or travelling monkey class, but things like that, that really was hard for me. That could irritate my weekends.”
But for every unreasonable opponent, there were many more valuable supporters.
“Göran Tidström, the chairman of EFRAG’s supervisory board, was my biggest supporter,” Enevoldsen says. “He was fantastic to work with, gave me freedom to improve things and we shared the vision for EFRAG and that was fantastic.”
Françoise Flores, who was Enevoldsen’s deputy chair and has now succeeded him, was another great support, as was Ebling. The Federation of European Accountants (Fédération des Experts Comptables Européens – FEE) has also been a vital contributor to EFRAG’s work.
“FEE has always been an important pillar among our members,” Enevoldsen says. “They were a major basis for us achieving what we have achieved.”
Enevoldsen says what he enjoyed most about chairing EFRAG were the technical debates, meeting interesting people when travelling Europe and giving presentations.
He also enjoyed working towards a united European view.
“It was fascinating trying to get the various views in Europe to meet and try to find a common view going forward,” he explains.
“We have come from a background of Europeans from different countries all thinking ‘what I do is right’ but by working together we have actually achieved adoption of IFRS. We disagree on certain points, but we are much closer than we were five years ago.”
Enevoldsen has also enjoyed witnessing an “enormous improvement” to European accounting. The introduction of IFRS in Europe was one obvious milestone.
“IFRS has meant comparability and transparency for accounting in Europe,” he explains. Before, you had 27 different accounting languages that were not at all similar and not very transparent. Suddenly you have got the same type of accounting for listed companies, it is very transparent.
EFRAG has a good relationship with the IASB and Enevoldsen says he also has a positive personal relationship with David Tweedie.
“EFRAG sees itself as a supporter of the IASB. We are friends who come up with positive, constructive input to the debate.
“David has been very supportive of EFRAG and I appreciate that and I appreciate the good co-operation we have had in those 10 years. David is probably the best chairman the world could have for the IASB. He has done a magnificent job.”
In recent years the IASB has begun working more closely with the US Financial Accounting Standards Board (FASB). Enevoldsen believes this means the rest of the world, including Europe and Japan, will have to work together to ensure the IASB comes to conclusions that are satisfactory on the technical level to the entire world.
“EFRAG may have to influence the FASB more because they now work so closely with the IASB,” he explains. “That will be a different challenge and more demanding because of the different accounting literature. When we respond to the IASB, we know the entire set of rules. So therefore it is a bigger challenge to be involved with the FASB because you don’t necessarily know the background and all the details of the US standards.”
Time to go
Enevoldsen completed his term as EFRAG chair at the end of March. He will remain involved with some of EFRAG’s proactive projects, including chairing a new disclosure framework working group and acting as vice chair of a working group on SME accounting in Europe.
Enevoldsen says it is impossible to say at this stage what direction SME accounting in Europe will take.
“It is extremely political, very difficult to predict. But my personal view is the internal market in Europe deserves improvement in accounting either through the accounting directives or the use of IFRS for SMEs because there is so much trade between countries, we cannot just have national GAAPs anymore, we must have something we use in Europe, or at least what we use must be improved and more converged.”
Despite retaining some connections to EFRAG, Enevoldsen says it feels strange that for the most part he is leaving the group behind.
“In some respects it is like when your grown-up child moves away. I spent 130% of my time there and suddenly I am completely out and there is nothing I can do about it.
“I am happy to leave a strong EFRAG, but of course I miss it because it was something I enjoyed very much. I am also lucky to have a good successor. Françoise Flores is very committed and will be a very good chairman so in that respect I am happy.”
While Enevoldsen plans to continue supporting EFRAG in any way he can, he also has another interesting and ambitious new project.
“I would like to modernise accounting,” he explains.
“Accounting has improved in the way we have refined the line items in the financial statements, but they are all still on paper. The modern world is not on paper so that is what I would like to work on.”
He explains it is about ensuring that accounting is keeping up with the times.
“We must ensure we are not reporting as we did 100 years ago and only refining measurement and recognition,” Enevoldsen explains. “We must ensure accounting is seen as a modern thing, which was part of my philosophy at EFRAG. I wanted to have a modern organisation, expressed by having a young, dynamic organisation with colourful offices. When you see photos in the annual review, people always smile because we like what we do, it is fun, accounting is fun”.
Enevoldsen recently turned 60 and he says the modernisation project will be his last challenge.
“I have always done a lot of things people didn’t believe possible. I was part of starting accounting standards in Denmark, I was part of the IASC, I was the last full term chairman before it became the new IASB and we achieved something important – not me per se, but the group.
“And then EFRAG was built up and everybody was saying that was impossible.
“It is the same with this next challenge, people say ‘you are an idiot, it is impossible’, but I don’t think it is.”