In the field of accounting and auditing, the focus of the simplification plans lies on the possibilities of reducing costs for SMEs. The existing requirements entail administrative work which companies, and particularly small and medium-sized ones, often find unnecessarily burdensome. This has to improve.

The International Accounting Standards Board (IASB) has recently developed a draft accounting regime for SMEs. We have repeatedly emphasised that accounting for SMEs must be simple and reflect the nature of the business of small companies. The feedback we have received from Member States, the European Parliament and stakeholders is that the current IASB draft is not simple enough to be applicable for the bulk of SMEs in the EU. At this stage, therefore, I do not intend to propose that the IASB draft be endorsed for application in the EU.

Could Member States, nonetheless, allow their SMEs to apply the IASB draft standard? The starting point, in EU law, is that Member States have to follow the Accounting directives (the so-called 4th and 7th directives). It is not clear that the current IASB draft is in line with the existing EU accounting directives. Since there seems, at present, to be very little support from Member States and the European Parliament for the IASB draft, the Commission has no plans to propose changes, either to the existing Directives or to the IAS Regulation. If there are Member States and other interested parties who want to allow application of the IASB draft, then I would like to hear from them.

EITF Snapshot explains the three issues on which the EITF reached a tentative conclusion at this meeting:

• Issue 07-1 Accounting for Collaborative Arrangements (for the development and commercialisation of resource-intensive, and generally uncertain, products.)
• Issue 07-4 Application of the Two-Class Method Under FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships
• Issue 07-6 Accounting for the Sale of Real Estate When the Agreement Includes a Buy-Sell Clause

The main focus of the proposals is on the two aspects of the current accounting for joint arrangements that the IASB considers are an impediment to high quality reporting:

• The current accounting for joint arrangements follows the legal form in which the activities take place. This does not always reflect the contractual rights and obligations agreed to by the parties. Shifting the focus to these rights and obligations will provide a more realistic reflection of the joint arrangement in the financial reports of the parties involved.
• The existing standard gives preparers a choice when accounting for interests in jointly controlled entities (equity method and proportionate consolidation), making it difficult to compare financial reports. The IASB proposes to remove that choice by requiring parties to recognise both the individual assets to which they have rights and the liabilities for which they are responsible, even if the joint arrangement operates in a separate legal entity. If the parties only have a right to a share of the outcome of the activities their net interest in the arrangement will be recognised using the equity method.

I am therefore pleased to present our 'Analysis of Potential Effects' on the introduction of IFRS 8 in the EU. Our report is based on a wide-ranging consultation to which more than 200 organisations replied. It focuses on the issues discussed in ECON last April.

The report concludes that adoption of IFRS 8 would have positive cost-benefit effects. This is in line with the clear majority of answers to our consultations and with most views expressed in discussions with stakeholders. In particular, the report concludes that:

1. The use of the 'management approach' in IFRS 8 has an overall positive effect on the quality of segment information, whose usefulness and relevance would increase.
2. The increased usefulness and relevance of segment information based on the management approach outweigh concerns expressed about the comparability of financial reports.
3. IFRS 8 appropriately addresses the global needs of users of financial statements' for geographical disclosures and, in practice, would not reduce this information by comparison with the 'old standard' IAS 14.
4. IFRS 8 does not create problems relating to corporate governance in the EU.
5. IFRS 8 provides appropriate segment reporting rules for smaller listed companies. It is in the interest of smaller listed companies to provide the same information as larger companies as the information needs of investors are do not substantially differ according to company size.