• CA, JP, US work plans. The work plans and timetables of the Canadian, Japanese, and US accounting standard setters toward convergence with IFRSs. CESR did not evaluate the progress toward convergence but, rather, collected information "available from public sources".

• Equivalence definition. A recommended definition of equivalence. CESR concludes that "he criteria for deciding equivalence should be that investors should be able to make a similar decision irrespective of whether they are provided with financial statements based on IFRSs or on third country [non-EU] GAAP". However, CESR notes that the definition is only one part of the framework for assessing equivalence. Equivalence also requires reliable (a) "filters at country levels for ensuring market confidence", (b) audit assurance, and (c) enforcement to ensure that the non-EU GAAPs are applied and complied with properly.
• Use of 'third country' GAAPs. A summary of which third country (non-EU) GAAPs are currently used in the EU regulated markets. CESR found that at least 33 different non-EU national GAAPs are used on EU regulated exchanges. Click for Table Derived from CESR Report (PDF 17k). CESR also identified around 130 non-EU issuers using Member States' GAAPs, such as UK GAAP. CESR did not find any legal requirements in EU Member States to reconcile non-EU GAAPs with IFRSs.

Monitoring developments and the enforcement of accounting standards

IOSCO closely monitors the developments in International Financial Reporting Standards (IFRSs), comments on proposed changes and routinely discusses standard-setting work with representatives of the International Accounting Standards Board (IASB). IOSCO encourages a reduction in the complexity of accounting standards and in the number of exceptions to principles. It also calls for an appropriate balance between the costs and benefits of accounting standards.

IOSCO has always stressed the importance of implementing IFRSs consistently throughout the world. In order to support this objective, the TC has developed the IOSCO IFRS Regulatory interpretation and Enforcement Database. Access to this database is available to securities regulators that have signed a participation agreement and is designed for sharing regulatory interpretation and enforcement decisions related to IFRSs. The IOSCO database is compatible with a similar database maintained by CESR and has been operational since January 2007.

Click for Full Text ((PDF 95k).

The main changes from the 2006 Bound Volume are the inclusion of:

• IFRS 8 Operating Segments
• Four new Interpretations:
  • IFRIC 9 Reassessment of Embedded Derivatives
  • IFRIC 10 Interim Financial Reporting and Impairment
  • IFRIC 11 IFRS 2–Group and Treasury Share Transactions
  • IFRIC 12 Service Concession Arrangements
• Amendments to other IFRSs resulting from these pronouncements
• The Due Process Handbook for the IASB, which was published in April 2006
• A brief history of each pronouncement, which has been added to its title page

I must, however, focus on one curious aspect of the roadmap in practice, which is the lack of foreign private issuers filing audited financial statements with the SEC that either use or are compliant with IFRS in the manner in which it is issued by the IASB. We had expected to see approximately 300 or so companies file their 2005 financial statements prepared using IFRS. Instead, we received only about 40 filings – hardly a critical mass. This fact is perplexing, given that the early goal is – to quote the roadmap itself – 'to see convergence in action.' So, the question is: why did only 40 companies so file?

The answer is that there are likely a number of different reasons, and our Deputy Chief Accountant Julie Erhardt discussed the possibilities in a speech she gave at the AICPA conference last December. I want to focus on just one of the reasons here, which is that, in many cases, financial statements prepared in accordance with home country adaptation of IFRS did not also contain a reference by both the company and its auditor that the financial statements also complied with IFRS in the form issued by the IASB. Indeed, the roadmap contemplated that we would see filings of financial statements prepared using IFRS as promulgated by the IASB. However, various jurisdictions have not accepted IFRS exactly as promulgated by the IASB, and have instead made various changes thereto. Consequently, as Julie noted, we have seen filings containing financial statements based upon national jurisdictional adaptations of IFRS. In and of themselves, these financial statements certainly fit within the SEC's filing requirements, but without the reference to IFRS as promulgated by the IASB, they do not appear to be financial statements that fit under the one set of global accounting standards that we wrote about in the roadmap.

Now, we certainly understand why a jurisdiction may wish to adopt its own version of IFRS. However, one goal of the roadmap was to allow the elimination of the reconciliation requirement, and as a consequence, have two versions of robust standards developed by independent standard setters in the U.S. capital markets, not thirty different versions. The question then occurs: how do we reach the 'critical mass' – to use a term from the roadmap – of filers using IFRS as promulgated by the IASB? What will happen this year – year two of the roadmap? While the answer is not clear at this time, I think that serious discussion by issuers with their auditors may be necessary. I am hopeful that auditors could prepare opinions stating that the audited financial statements were prepared according to IFRS as promulgated by the IASB, and not solely the 'Jurisdiction X IFRS'. In any event, we need to get to the bottom of this issue, and see more companies filing audited financial statements in the manner contemplated by the roadmap. My bottom line, though, is that the roadmap is going well overall and that we will achieve our objectives.

Click for Full Text (PDF 73k).