EU-US cooperation in financial reporting and auditing

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27 Nov 2007

Charlie McCreevy, European Commissioner for Internal Market and Services, spoke today on EU-US Cooperation on Reporting Standards, Audit Oversight, and Regulation at the European Federation of Accountants' Conference on Audit Regulation in Brussels.

Among other things, Commissioner McCreevy:
  • took a strong stand against future EU 'carve-outs from IFRSs';
  • suggested that further changes in IASB governance and processes are needed, but with those changes there should be no need for the EU to 'endorse' each IFRS for use in Europe;
  • said that the pace of change in IFRSs should be slowed;
  • opposed requiring US GAAP companies trading in EU securities markets to present a reconciliation from US GAAP figures to IFRS amounts; and
  • urged the EU and the US to rely on each other's enforcement, supervision, and inspections of audit firms.
Presented below are several excerpts from Mr McCreevy's remarks. Click to Download the Commissioner's Entire Presentation (PDF 72k).

On whether the SEC should accept IFRSs 'as adopted in the EU' And still I hear some voices who say this is a poor outcome [SEC dropping the reconciliation for those who use IFRSs as adopted by the IASB]. They think the SEC should have accepted an EU brand of IFRS along with IFRS as adopted by the International Accounting Standards Board or IASB. I am not sure if these critics suffer from amnesia. Let us not forget the facts here. We in Europe have decided to go for IFRS because we rightly believed in the virtues of having a single accounting language. And when I say 'we' I mean all of us, including the Council of Ministers and the European Parliament. We have been preaching this gospel to our US counterparts for the last five years – asking them with indefatigable stamina to accept IFRS. And we have been very successful apostles indeed. Not only has the US decided to accept IFRS for our firms, they even envisage allowing their firms to use them. So let us be serious here. We have got what we have been asking for. One hundred per cent.

On IASB governance and eliminating the need for EU 'endorsement' of IFRSs I spent the first 18 months in office fighting against those who wanted an EU standards setter because they were so unhappy with the IASB. Members of Parliament were lobbied in order to modify proposed standards. That is how we ended up with the carve-out for IAS 39. Since then, there have been improvements in IASB governance and more is needed.

One of the cornerstones of my strategy is that we must be able to accept any future standards without any serious problems. The endorsement of accounting standards needs to disappear from the political limelight. It should not necessarily be a high profile political issue. Therefore, we must make sure that the new standards reflect the real needs of stakeholders. In more concrete words, we need to have a close look at the standard setting process by the IASB: more transparency, better consultations, impact analyses at an early stage, thorough field-testing of any new standards to avoid unwanted or even unexpected consequences. But above all new standards only where they are really necessary – I shall be very vigilant on that in the future.

On acceptance of US GAAP in EU securities markets without reconciliation to IFRSs Now it will be Europe's turn to accept accounts in US GAAP. This decision will have to be taken next year. And it is certainly my intention to propose that no reconciliation to IFRS will be needed for companies filing their accounts under US GAAP. This is the only sensible way forward.


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