The European Union Endorsement Process for International Financial Reporting Standards: A Telos-Based Analysis

The paper discusses the process for the endorsement of an IFRS in the European Union with regard to its compliance with teleological principles and with regard to the true and fair view. It begins with an exposition of the teleological principle under Roman law and its relationship to the true and fair view override, as known in the UK and in the EU. We then discuss firstly the telos-based criteria against which a new Standard is appraised during the endorsement process, and secondly the application of the true and fair view principle to the issue of which criteria an EU-endorsed IFRS should be appraised against as regards its application, using IFRS 3 as a specific illustration. The teleological principle is a crucial element in our conclusions. We show that this principle can be used, and in the EU is being used, to bypass democratic processes. The issues raised by this paper concern the operation of regulations designed to be, at least theoretically, context-neutral, within a specific legal and operational framework, that is, the European Union. But similar issues are likely to require consideration in other geographical areas, outside the European context.