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EC begins study of equivalence of national GAAPs to IFRSs

  • European Union (old) Image

30 Jun 2004

The Accounting Regulation adopted by the European Union requires that European companies listed in a regulated European securities market must prepare their financial statements in conformity with International Financial Reporting Standards starting in 2005. Subsequent legislation provides that non-European companies whose securities are listed in a regulated European securities market must also follow IFRSs starting in 2007 unless the Commission has agreed, prior to 1 January 2007, to recognise financial statements prepared in accordance with "third country GAAP" (a non-European national GAAP) as being equivalent to those prepared in accordance with IFRSs.

The European Commission has asked the Committee of European Securities Regulators (CESR) to assess the IFRS-equivalence of the following GAAPs by June 2005: US-GAAP, Japanese GAAP, and Canadian GAAP.

Click to download the full EC Formal Mandate to CESR regarding CESR's assessment (PDF 32k). The mandate states that:

 

In giving its advice, CESR should take full account of the following key objectives:

  • When assessing as to whether financial statements prepared under third country GAAP provide a true and fair view of the issuer's financial position and performance, the priority should lie on assuring the protection of investors;
  • A global and holistic assessment of the quality of the financial information provided by the accounting system in question should be carried out from a technical point of view and independently from any international convergence project aiming at a single set of accounting standards, such as the project currently conducted by the International Accounting Standard Board and the US Financial Accounting Standard Board.
  • The global and holistic assessment should be based on the entirety of the third country GAAP in force as of 1 January 2005. The assessment should focus only on the significant differences between IAS/IFRS as endorsed at EU level and the third country GAAP in question.
  • The assessment should not relate as to whether the third country GAAP in question might be conducive to the European public good. This is a criterion for endorsing IAS/IFRS at European level pursuant to Article 3(2) of the IAS Regulation, but not for assessing equivalence.
  • The assessment should also be carried out independently of whether the third country concerned already recognises IAS/IFRS as equivalent to their domestic GAAP.

 

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