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January 2003: European Parliament Approves Amended Accounting Directives
The European Parliament has approved amendments to the European Accounting Directives that would complement the Accounting Regulation adopted in June 2002. The Regulation requires virtually all 7,000 listed European companies to follow IFRS starting in 2005. The amended Directives would remove inconsistencies of the existing Directives with IFRS and would address accounting by the estimated 5 million European companies that are not subject to the IFRS Accounting Regulation. The amended directives are scheduled for final vote by the Council of Ministers in March. Click for EC Press Release.
March 2003: Progress Report on EU Financial Services Action Plan
Click to download a Progress Report (PDF 48k) on the EU's Financial Services Action Plan as of 25 February 2003. The report notes that 32 measures have been completed, including Regulation (EC)1606/2002 of the European Parliament and of the Council on the Application of International Accounting Standards, adopted on 19 July 2002. The report also notes that a revised Directive modernising the accounting provisions of the 4th and 7th Company Law Directives is "expected to be adopted in March 2003." (click for More Information).
March 2003: Proposed EC "Transparency" Directive for Listed Companies
On 26 March 2003, the European Commission published, and sent to the European Parliament and Council of Ministers, a proposed Directive that would upgrade the current level and frequency of the mandatory financial information that publicly traded companies must provide to the markets throughout the financial year. Among the proposed requirements:
All securities issuers must publish:
- An audited annual financial report (financial statements based on International Accounting Standards) and a management report, within three months of the end of each financial year.
- A half-yearly condensed financial report based on IAS 34 as well as an update of the last annual management report.
Share issuers must also publish:
- A less extensive quarterly financial report for the first and third quarters of a financial year, including turnover and profit and loss before or after tax.
Companies that issue only debt securities:
- These companies are currently not subject to any interim reporting requirement at all.
- Under the proposal they would be required to issue half-yearly financial reports for the first six months of a financial year.
All interim information must be published within 60 days after the end of the period. Click to download EC Press Release (PDF 89k) or Full Text of Proposed Directive (PDF 179k).
March 2003: EU Securities Regulators Adopt Accounting Enforcement Standard
The Committee of European Securities Regulators (CESR) has published its Standard No. 1, Enforcement of Standards on Financial Information in Europe. This standard is aimed at developing and
implementing a common approach to the enforcement of International Financial Reporting Standards (IFRSs) throughout the EU. The document sets out 21 high level principles that define enforcement and describes the principles that EU member states should adopt in enforcing IFRS, including structure of their enforcement authority; selection of financial information to be reviewed for enforcement purposes; actions available to enforcers (including, in particular, asking for public correction); cross-border coordination; and reporting by enforcement agencies. The standard was issued along with a Press Release and a Statement summarising the responses to CESR's earlier consultation.
May 2003: EU Approves Amended Accounting Directives
The European Union's Council of Ministers has approved the amended EU accounting directives (the 4th and 7th Company Law Directives), bringing them into law. The directives had been approved by the European Parliament in January 2003. The revised directives complement the IAS Regulation, adopted in June 2002, that requires all listed EU companies to use IFRS from 2005 onwards and allows member states to extend that requirement to all companies. The amended directives allow member states that choose not to apply IFRS to unlisted companies to move towards similar, high quality financial reporting, and could therefore affect up to five million companies. Among the changes:
- All inconsistencies of the old directives and IFRS have been removed.
- Companies' ability to keep liabilities off the balance sheet by using special purpose vehicles is restricted.
- Disclosures about risks and uncertainties are required in annual reports.
- Audit reports are made more consistent across the EU.
Click for EC Announcement (PDF 71k).
May 2003: EC Will Request Modifications of IFRSs for Use in Europe
The European Commission has published its Internal Market Strategy 2003-2006 (PDF 220k), a ten-point plan to make the Internal Market work better. Point 6 – improving conditions for business – states that the European Commission will request "appropriate modifications" to certain existing IASs before they will be endorsed for use in Europe. An EC Accounting Regulatory Committee has been established for that purpose:
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"A recently adopted Regulation requires all EU-listed companies to prepare their
consolidated accounts in accordance with International Accounting Standards (IAS) from
2005. This will bring transparency and greater comparability between the consolidated
financial statements of EU listed companies, hence better capital allocation and possibly a
reduction in the cost of capital. IAS are established by the International Accounting Standards
Board, an independent international accounting standard-setting organisation. In order to
ensure appropriate political oversight, the Regulation stipulates that IAS to be applied in the
EU will also have to be endorsed into Community law. Existing IAS will be endorsed during
2003, provided that, for some of them, the appropriate modifications are made."
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21 May 2003: European Commission Sets Out Priorities to Improve Audit Quality
The European Commission has published a 10-point plan for improving and harmonising the quality of independent audits throughout the EU. Approximately two million European companies are required by statute to have an annual audit. To implement the plan, existing European legislation (particularly the 8th Directive) will be revised and extended. The plan is divided into short and medium-term priorities:
Click for EC Announcement (PDF 79k) and Full Text of Plan (PDF 82k)
July 2003: Actions of ECOFIN and ARC
The recognition of IFRS for financial reporting by listed companies in Europe was discussed by two key European Commission groups at meetings in Brussels in mid-July 2003:
ECOFIN
At their meeting on 15 and 16 July, the EU Council of Finance Ministers (ECOFIN) discussed implementation measures for the IAS Regulation 1606/2002 adopted by the European Union in June 2002. The Background Paper (PDF 159k) for the meeting notes that the Council's discussion is at the request of the French delegation. France has recently circulated a paper setting out what it considers to be problematic issues with regard to IAS 32 and 39. Following ECOFIN's discussion of measures for implementing the IAS Regulation 1606/2002, ECOFIN issued a public announcement suggesting that IAS 32 and IAS 39 might not be adopted immediately in Europe:
The Council asks the Commission to request the IASB to continue its dialogue with representatives of
European industries in order to find a satisfactory and timely solution for the revised IAS 32
and 39 in view of their envisaged application. . . .
The Council agrees with the Commission regarding the importance of an immediate adoption
of all existing IAS, with IAS 32 and 39 as soon as possible thereafter. The adoption of future
standards must respect the quality criteria set out in the IAS Regulation and be conducive to the
European public good.
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Click for Full Text of ECOFIN Announcement (PDF 207k). The IAS discussion is on pages 14 and 15.
EC Accounting Regulatory Committee
The second meeting was that of the EC's Accounting Regulatory Committee (ARC), which is charged under the IAS Regulation with "endorsing" IFRS for use in Europe. The ARC has already met several times and met again on 16 July. At its 16 July meeting, by unanimous vote, the ARC endorsed all extant International Accounting Standards for use in Europe other than IAS 32 and IAS 39 and related SIC Interpretations 5, 16, and 17. The IASB is currently deliberating amendments to those two standards, and – as noted above the EC wants to consider the revised standards for endorsement. Click for ARC Meeting Summary (PDF 21k). The ARC recommendation does not cover IFRS 1, First-Time Adoption of IFRS, which will be considered separately by the ARC at a future meeting.
July 2003: Europe Adopts a Single Prospectus
The European Parliament and Council of Ministers have approved a new Directive 2003/71/EC on prospectuses, which will simplify the process of raising capital in the EU. A "single passport" approved by the regulatory authority in one member state will be valid throughout Europe. The Directive covers only initial disclosure requirements at the time of capital raising. Conditions for admission to listing and ongoing financial reporting remain subject to existing European and national requirements. The Directive empowers the Commission to adopt implementing regulations. Click for:
September 2003: European Endorsement of Most Existing IFRSs Is Completed
The European Commission formally adopted a regulation endorsing IFRS and related interpretations, as Recommended by the Commission's Accounting Regulatory Committee in July. The endorsement confirms that IFRS must be followed under the terms of the general IAS Regulation adopted by the European Parliament and the Council in 2002. The Commission's endorsement covers all existing IASB standards and interpretations except for IAS 32 and IAS 39 and related SICs 5, 16, and 17. IAS 32 and 39, which deal with the accounting and disclosure of financial instruments, are not included because they are currently being revised by the IASB. The EC has also announced that the endorsed IFRS will shortly be published in the official EU languages in the Official Journal of the EU. In total, there are at present 34 existing IASs (including IAS 32 and IAS 39) and 31 existing interpretations (including SICs 5, 16, and 17), which cover about 1,500 pages. Click for EC Press Release (PDF 69k).
October 2003: CESR Proposals on IFRS Disclosure and Enforcement
Disclosing the impact of adopting IFRSs in Europe
The Committee of European Securities Regulators has invited comments on a draft recommendation on how companies should communicate the impact of the transition to IFRS in 2005. Comments are requested by 20 November 2003. The draft recommendation includes CESR's proposed responses to the following questions:
- What information should companies publish before 1st January 2005, the most common
effective date of transition to IFRS, to explain to investors the potential impact of the
new standards?
- Which accounting rules should be adopted by issuers for preparing quarterly (where
applicable) and half-year interim financial data that will be released in 2005?
- How can comparability be achieved between interim or annual financial information for 2005 and
earlier equivalent periods, to ensure investors can effectively interpret the development of the
companies financial position?
Click to download the:
Enforcing IFRS in Europe
The Committee of European Securities Regulators has invited comments on its draft Standard No. 2 Financial Information - Co-ordination of Enforcement Activities. The draft proposes greater co-ordination among supervisors of financial information in Europe. It also proposes a set of standards on enforcement activities to accomplish this, including co-ordination on a pan-European level. CESR will hold an open hearing on the proposal on 12 November 2003 at CESR's office in Paris. Written comments on the proposal are requested by 7 January 2004. Click to download the:
October 2003: Endorsed IFRSs Published in All Official Languages
The complete endorsed IFRS have been published in each of the official languages of the European Community in the Official Journal of the European Communities on October 13, 2003. All existing IASs and SICs, except for the financial instruments standards (IAS 32 and 39) and their related interpretations (SIC 5, 16 and 17) because they are currently being revised by the IASB, are included. The text of all IASs and SICs adopted in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the EU in all EU languages (ISSN 1725-2555, L 261, Volume 46, 13 October 2003).
November 2003: EC Comments on the IAS Regulation and Accounting Directives
The European Commission has published the final version of a document interpreting aspects of the EU's IAS Regulation and the interaction of the Regulation with the Accounting Directives. The formal title of the document is a long one: Comments Concerning Certain Articles of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the Application of International Accounting Standards and the Fourth Council Directive 78/660/EEC of 25 July 1978 and the
Seventh Council Directive 83/349/EEC of 13 June 1983 on Accounting. Click here to Download the Entire Document (PDF 176k).
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Table of Contents
1. INTRODUCTION
2. THE IAS REGULATION
2.1. Article 3: Adoption and use of international accounting standards
2.1.1. Endorsement criteria of IASs
2.1.2. Languages and availability of IASs
2.1.3. IASs not yet endorsed and IASs rejected by the EU
2.1.4. Statement in the accounting policies
2.1.5. Status of the IASB Framework, the Appendices to IASs and the Implementation
Guidance to IASs
2.2. Article 4: Consolidated accounts of publicly traded companies
2.2.1. Definition of "companies"
2.2.2. Definition of "consolidated accounts"
(a) General requirement
(b) Exemptions from the preparation of consolidated accounts
(c) Exclusions from consolidation
2.2.3. Interim reporting requirements
2.3. Use of IASs before 2005
2.4. Clarification of Article 9
3. THE INTERACTION BETWEEN THE IAS REGULATION AND THE ACCOUNTING DIRECTIVES
3.1. Annual and consolidated accounts of listed EU companies
3.2. Annual and consolidated accounts of unlisted companies
3.3. Articles of the transposed Accounting Directives still applying to companies after the IAS Regulation
3.4. IASs as part of national accounting law
4. DISCLOSURE ISSUES
4.1. Member State requirements of additional disclosures above IASs
4.2. IASs formats and a chart of accounts
5. ANNEX
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December 2003: Update on Integration of European Capital Markets
An inter-agency monitoring group within the European Commission has published its second interim report on progress toward regulating European securities markets at the EU level. Currently, those markets are generally regulated at the member state level, though steps have already been taken to centralise the regulatory process. Adoption of IFRS in Europe is part of the centralisation programme. Click to Download the Report (PDF 156k).
December 2003: CESR Recommendations on Transition to IFRS
The Committee of European Securities Regulators (CESR) has published recommendations on how listed European companies can effectively communicate to investors the financial impact of transitioning to IFRS in 2005. The recommendations identify four milestones in the transition process, as follows:
- Publication of the 2003 annual report (including the 2003 financial statements). Companies should explain (a) how they intend to carry out the transition to IAS/IFRS (plans and degree of achievement for the transition) and (b) the key differences between their present accounting policies and the ones they know with sufficient certainty they will have to apply under IAS/IFRS.
- Publication of the 2004 annual report (including the 2004 financial statements). As soon as a company can quantify the impact of the change to IAS/IFRS on its 2004 financial statements in a sufficiently reliable manner, it should disclose the relevant quantified information.
- 2005 interim financial reports (half-yearly and quarterly financial reports). In interim financial reports for 2005, listed companies should start applying as of 1 January 2005 either IAS 34, Interim Financial Reporting, or, if this is not possible, at least the IAS/IFRS recognition and measurement principles that will be applicable at year end.
- 2005 annual financial statements. For most listed companies in Europe, these will be the first complete set of financial statements presented under IAS/IFRS. CESR does not propose a requirement for more than one year of comparatives (2004) under IAS/IFRS. But if, because of national regulation or choice, a company presents three successive periods but has not restated under IAS/IFRS the earliest period presented (2003), CESR proposes a format ("the bridge approach") for presenting comparative figures (2004 and 2003).
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