Key points
- EFRAG's endorsement advice is the technical filter between the IASB and the European Commission for every IFRS standard used in the EU.
- No IFRS standard becomes EU law until the Commission adopts it through a delegated regulation, which relies on EFRAG's prior assessment.
- EFRAG submitted final endorsement advice on IFRS 18 (Presentation and Disclosure) in May 2025 and on IFRS 19 (Subsidiaries without Public Accountability) in September 2025.
- Endorsement assessment tests whether the standard is conducive to the European public good and compatible with the true and fair view principle.
Why EU endorsement catches teams off guard
At least once a year we see an engagement team assume that an IASB effective date means the standard is live in Europe. It does not. Regulation (EC) No 1606/2002 Article 3 requires each standard to be endorsed before EU-listed entities can (or must) apply it, and the gap between IASB issuance and EU adoption has exceeded 18 months for several standards. On IFRS 18 alone, the lag created a full reporting cycle where teams could not early-adopt even though the IASB permitted it.
EFRAG's Financial Reporting Board (FRB) runs the technical assessment. It evaluates whether the standard meets the endorsement criteria in Regulation 1606/2002 Article 3(2): no conflict with the true and fair view principle in the Accounting Directives, and conducive to the European public good. Technical quality (understandability, relevance, reliability and comparability) forms part of that public-good test.
EFRAG publishes draft endorsement advice for public comment, then issues a final letter to the Commission. The Commission submits a draft endorsement regulation to the Accounting Regulatory Committee (ARC), which votes. If approved, the standard becomes binding EU law through a Commission regulation. Expect 12 to 24 months from IASB issuance to EU adoption.
Beyond endorsement, EFRAG contributes proactively to the IASB's agenda by publishing discussion papers and comment letters reflecting a European perspective on proposals before the IASB finalises them. It also conducts field tests to quantify the impact on European preparers. This upstream influence is distinct from the downstream endorsement function. EFRAG's comment letter on the IASB's IFRS 18 exposure draft shaped several aspects of the final standard before endorsement advice was even required.
Worked example: Schäfer Elektrotechnik AG
Client: German electronics manufacturer, FY2026, revenue €310M, IFRS reporter. Schäfer's reporting team needs to determine whether IFRS 18 (Presentation and Disclosure in Financial Statements, replacing IAS 1 ) applies to its December 2026 year-end financial statements.
Step 1: check the IASB effective date
IFRS 18 has an IASB effective date of 1 January 2027, with early application permitted. Schäfer's FY2026 (year ending 31 December 2026) falls before mandatory application.
Step 2: verify EU endorsement status through EFRAG
EFRAG submitted final endorsement advice on IFRS 18 to the European Commission on 5 May 2025, recommending adoption without modification. As of the reporting date, the Commission's endorsement regulation had not yet been published.
Step 3: assess early application feasibility
Because the EU endorsement regulation is pending, Schäfer cannot early-adopt IFRS 18 for FY2026 even though the IASB permits it. IAS 1 continues to govern presentation for the December 2026 FS. If the endorsement regulation is published before the financial statements are authorised for issue, the team will reassess.
Step 4: plan the IFRS 18 transition
A gap analysis comparing IAS 1 presentation requirements to IFRS 18 's new operating-investing-financing categorisation of the income statement should already be in progress. Audit planning for FY2027 should include an assessment of management's category classifications under IFRS 18.47 and the related disclosure of management-defined performance measures.
Schäfer's approach is defensible because it ties the application decision directly to the EU endorsement status (not merely the IASB effective date) and preserves a reassessment trigger for the period before financial statements are authorised for issue.
Practical risks we see on engagements
Verifying the EU endorsement regulation number (not just the IASB effective date) when confirming the applicable framework is not a tick box exercise. We have seen engagement teams quote an IASB effective date in the basis-of-preparation note without checking whether the Commission had actually endorsed the standard. On one engagement the review partner caught it two days before signing. That is the kind of near-miss that keeps you up at night.
Firms occasionally treat EFRAG's draft endorsement advice as a reliable indicator of the final outcome and begin implementing a standard before the Commission adopts it. EFRAG has rarely recommended against endorsement, but the Commission has endorsed standards with carve-outs in the past (the IAS 39 macro hedge accounting carve-out remains the most prominent example). Relying on draft advice bypasses the ARC vote and the possibility of modification.
EFRAG (standard-setting) vs. EFRAG (sustainability reporting)
| Dimension | Financial reporting pillar | Sustainability reporting pillar |
|---|---|---|
| Legal basis | Regulation (EC) No 1606/2002 (IAS Regulation) | Directive (EU) 2022/2464 (CSRD), Article 49(3b) |
| Function | Assesses and advises on endorsement of IASB-issued IFRS standards | Drafts the ESRS content submitted to the Commission for adoption |
| Governing board | EFRAG Financial Reporting Board (FRB) | EFRAG Sustainability Reporting Board (SRB) |
| Output | Endorsement advice letters to the Commission | Draft standards (ESRS Set 1, simplified ESRS, sector standards) |
| Relationship to global setter | Advisory and influencing role toward the IASB; does not set the standards | Drafts EU-specific standards separate from the ISSB's IFRS S1/S2 |
Both pillars share EFRAG's administrative structure and funding, but their technical governance is separate. An auditor dealing with an IFRS 18 transition question routes through the FRB's output. An auditor working on ESRS disclosure requirements routes through the SRB. Conflating the two leads to incorrect conclusions about applicable timelines and legal authority.
Related terms
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Frequently asked questions
How long does EFRAG's endorsement process take?
The timeline varies. From IASB issuance to EU adoption, the process typically runs 12 to 24 months. EFRAG's own assessment phase (from draft endorsement advice through public consultation to final letter) accounts for roughly half of that period. The remaining time covers the Commission's internal review and the ARC vote, followed by European Parliament and Council scrutiny per Regulation 1606/2002 Article 6.
Can an EU company apply an IFRS standard before EFRAG issues endorsement advice?
No. Regulation 1606/2002 Article 3 requires EU endorsement before any IFRS standard is applied by EU-listed entities. Even if the IASB permits early adoption, an EU entity cannot use the standard until the Commission's endorsement regulation is published in the Official Journal. This applies to both new standards and amendments to existing standards.
Does EFRAG ever recommend against endorsing an IFRS standard?
Outright rejection is rare, but EFRAG has flagged concerns that led to modifications. The most significant precedent is IAS 39, where the EU adopted the standard with a carve-out for certain macro hedge accounting transactions because EFRAG's analysis identified provisions that conflicted with European banking practices. EFRAG's current assessment of IFRS 18 recommended endorsement without modification.