overview on eu accounting issues moscow – 27 february 2008 jeroen hooijer head of accounting unit,...
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Overview on EU Accounting issues
Moscow – 27 February 2008
Jeroen Hooijer
Head of accounting Unit, EU Commission
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IAS Regulation (1606/2002/EC)• Directly applicable in all EU member states (MS) - 2005• No national variations• All EU companies that are listed in the EU use endorsed
IAS/IFRS for consolidated accounts • Non-EU issuers outside the scope
• MS Option to extend the scope to:– unlisted companies (authorized by many MS)– individual accounts (authorized by few MS)
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Major challenges faced in 2005
• International system• First-time application• Principles based – Professional judgment required• Complex - Integration of risk and financial analysis• Replace 25 national accounting legislation transposing
Directives and application practices• Experience of users• Scope of application
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The EU endorsement process
• political and legal endorsement of IFRS• Criteria
– IFRS not contrary to “true and fair view” principle of Accounting Directives
– IFRS must be conducive to public good (competitiveness and convergence)
– IFRS must be understandable, relevant, reliable and comparable
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Endorsement process
IASB
EFRAG
EuropeanCommission
ARC(Accounting RegulatoryCommittee
European Parliament
Interest groups
SARG
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IASB
approval
EFRAG
advice
EU Institutions
ARC opinion
EU review
EU-Parliament
Endorsed by EC
2 m 0,75m 2 m + 3m
Translations
Time-line of endorsement
SARG advice
0,75m
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Endorsement – state-of play
• All IAS and SIC, except some provisions of IAS 39, are endorsed- (a few provisions of IAS 39 related to hedge accounting
are carved out)
• New IFRS and IFRIC endorsed • New standards in the pipeline: i.a. BUSCOM - II
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Need for coherent application
• clear standards• monitoring• Learning from preparers’ experience• Need for interpretations/guidance• Role of auditors and other enforcers• Studies (ICAEW, CESR): ”challenging but
successful”
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Equivalence / Convergence
EU
« Equivalence »
US
« acceptance of IFRS »
IASB / FASB
« Convergence »
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US “acceptance of IFRS”
• SEC ”road map” with 2007-2009 time frame:– Removal of the reconcilation requirement for EU
issuers registered with the SEC– Required:
• Progress on convergence of standards
• Consistency of application of IFRS across countries and industries
– SEC Rule of 15 Nov. 2007- IFRS recognized.– Concept release: Also US issuers to use IFRS?
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US - continued
• - Application for 2007• - IFRS as adopted by the IASB• - IAS 39 – reconciliation to IFRS – (one company)• - 2 years period
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Governance IASB
• Press-release 8 November 2007• US-SEC, FSA- Japan, EU Commission and
IOSCO• Independent oversight;• Monitoring body• Due process, impact assessments• Nomination process
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European Structure
• Early, upstream input towards IASB• Coherent and convincing European positions• Need for strong European presence, - not a new
standard setter• How?
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EU “equivalence”
• Foreseen by Transparency and Prospectus Directives
• Commission to assess whether third country GAAP’s are ”equivalent” to IFRS
• Equivalence mechanism adopted in December 2007
• Decision on GAAP’s before 2009
• Further transition-period for those converging - 2011
• Reciprocity
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IFRS Global framework – EU perspective
IFRS Global framework – EU perspective
IASB
ASBJ
NSS NSS NSS
Transatlantic dialogue
Other countries
CESR EFRAG
COMMISSION
EC EPFASB
SEC
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The EU approach in an international context
• The EU supports worldwide use of IFRS• IFRS has speeded up accounting reforms in major
markets • IFRS often integrated into national GAAPs• Mutual recognition in the US
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Contact
• DG Internal Market & Services website:http://europa.eu.int/comm/internal_market/en/index.htm