CSSF Releases Its Enforcement Priorities

In accordance with the enforcement priorities published by the European Securities and Market Authority (ESMA) in October 2017, the Commission de Surveillance du Secteur Financier (CSSF) has now communicated as well on what its main areas of focus will be during its enforcement campaign.

Particular focus will be put on the law of 23 July 2016 and IFRS 8—more details below.

In its press release, the CSSF highlights the priorities as defined by ESMA:

disclosure of the expected impact of implementation of major new IFRS standards in the period of their initial application specific measurement and disclosure issues stemming from IFRS 3 Business Combinations specific issues related to IAS 7 Statement of Cash Flows For more on the first priority, read our blog post about ESMA's enforcement priorities.

IFRS 3 Business Combinations

One of the CSSF's priorities will be consistency between the assumptions applied to the fair valuation of intangible assets to allocate the purchase price in a business combination, and the assumptions used for both impairment testing and useful life determination.

The Luxembourg regulator will also monitor whether the following items are made clear, as required by IFRS 3 (also as highlighted by ESMA):

any adjustments to the fair value during the measurement period where issuers have to disclose that fair value and to provide provisional amounts the nature and number of any measurement period adjustments recognised during the reporting period any bargain purchase situation, and, for such situations, the steps to be performed before a gain can be recognised what analysis is needed to identify whether part of the consideration received in a business combination qualifies as contingent consideration or as remuneration for post-combination services The CSSF will focus on compliance with the above-mentioned aspects on IFRS 3, including but not limited to monitoring the estimates, judgements, and relevant disclosures made by the management.

Additional information on cash flows

Amendments to IAS 7 have been effective since 1 January 2017, and the CSSF will focus on these changes which concern, in particular, additional disclosures on the changes arising from cash and non-cash transactions.

In addition to the priorities identified and released by ESMA, the CSSF will review the compliance of issuers on IFRS 13, IFRS 8, and the requirements of the Law of 23 July 2016.

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