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EU Parliament will vote on 'equivalence'

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13 Nov 2007

The European Parliament will vote on Wednesday 14 November 2007 on a draft resolution that would amend the European Accounting Regulation to allow a non-European company listed on a European regulated securities market to continue to use its national GAAP ('third country' GAAP) through 2011, rather than IFRSs, in either of the following two cases:

  1. the third country authority responsible for the national accounting standards concerned has made a public commitment before 30 June 2008 to converge those standards with International Financial Reporting Standards before 31 December 2011 and both the following conditions are met:
    1. the third country authority responsible for the national accounting standards concerned has established a convergence programme before 31 December 2008 that is comprehensive and capable of being completed before 31 December 2011;
    2. the convergence programme is effectively implemented, without delay, and the resources necessary for its completion are allocated to its implementation.
  2. the third country authority responsible for the national accounting standards concerned has made a public commitment before 30 June 2008 to adopt International Financial Reporting Standards before 31 December 2011 and effective measures are taken in the third country to secure the timely and complete transition to International Financial Reporting Standards by that date, or have reached a mutual recognition agreement with the EU before 31 December 2008.
The decision on equivalence of a country's GAAP to IFRSs will be made by the Commission on a country by country basis, but a further condition is imposed: "The decision of the Commission will have to imply in all cases the right for EU issuers to use in any third-country IFRS as adopted in the EU." Thus it would seem, based on this Resolution, that US companies listed in Europe could not continue to use US GAAP unless the US SEC allows European companies to use 'IFRSs as adopted in the EU'. As of March 2007, the equity securities of 102 US companies and the debt securities of 131 US companies traded in European regulated securities markets.
Click to view the Draft Resolution (PDF 121k).

 

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