SEC and CESR launch financial reporting work plan

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03 Aug 2006

The US Securities and Exchange Commission and the Committee of European Securities Regulators (CESR) have released a joint work plan on financial reporting.

The main focus of the plan is the application by internationally active companies of International Financial Reporting Standards and US Generally Accepted Accounting Principles in the United States and the European Union, respectively. The plan envisions cooperation by the staffs of the SEC and CESR on the modernization of financial reporting and disclosure information technology, and regulatory platforms for risk management. The stated goal of the staff cooperation is to promote:
  • the development of high quality accounting standards;
  • the high quality and consistent application of IFRS around the world;
  • full consideration of international counterparts' positions regarding application and enforcement; and
  • the avoidance of conflicting regulatory decisions on the application of IFRS and US GAAP.

Regarding the use of IFRSs and US GAAP by internationally active issuers, plan plan envisions, among other things confidential protocols for timely alert and exchange of information between the SEC staff and CESR-Fin, as follows:

  • The SEC staff and CESR-Fin will share views on the future development of IFRS and US GAAP including priorities, timetables and developments related to convergence. Further, they will discuss perspectives and efforts to facilitate consistent interpretation and application of IFRS across jurisdictions.
  • The SEC staff will apprise CESR-Fin of policy developments related to the elimination of the need for foreign private issuers filing in the United States to reconcile IFRS financial statements to US GAAP by 2009 at the latest.
  • CESR-Fin will apprise the SEC staff of policy developments related to the acceptance of US and the other national GAAPs in the European capital markets under the EU Transparency and Prospectus Directives.
  • The SEC staff and CESR-Fin (or its relevant member) will exchange information relating to the topical areas within IFRS and US GAAP that their experiences and issuer review work have shown to be the most troublesome in terms of high quality and consistent interpretation and application.2 These matters may be candidates for referral items to IFRIC.
  • As needed, CESR-Fin may raise for discussion with the SEC staff issues arising in the US GAAP financial statements of non-US issuers whose securities are listed in the EU.
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