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EFRAG comments on CESR 'equivalence' assessment

  • EFRAG (European Financial Reporting Advisory Group) (dk green) Image

04 Jan 2005

The European Financial Reporting Advisory Group (EFRAG) has submitted its letter to the Committee of European Securities Regulators (CESR) in response to CESR's October 2004 Concept Paper on Equivalence of Certain Third Country GAAP and on Description of Certain Third Countries' Mechanisms for Enforcement of Financial Information.

CESR had developed the paper in response to a request from the European Commission for advice on equivalence of Canadian, Japanese, and United States GAAPs with IFRSs. The EC also asked CESR to describe the mechanisms existing in those countries and others for the enforcement of standards for financial information. The concept paper sets out the basis on which CESR will approach its analysis. EFRAG's response expresses support for CESR's objectives but also notes that:

The meaning of 'significant differences' in accounting standards could be clarified by improving the definition in the concept paper. We believe it is important to find and evaluate all existing differences between IAS/IFRS and third country GAAP, to be able to conclude whether these can result in 'significant differences'. Differences may have very different impacts on different entities within one industry and may also have different impacts on entities in different industries. We understand the practical difficulties, but we are concerned that equivalence may be assessed at a too high level and therefore differences that might lead to significant differences may not be assessed at all. We therefore recommend a more thorough analysis of the differences.

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