The European Commission, the European Parliament and EU Member States deserve much credit for providing the impetus to our efforts. Your choice of an international approach to accounting standards over a national and regional approach for Europe is a model for others. At the same time, if we are to achieve truly global standards and all the benefits that they will bring, accounting convergence must necessarily involve the United States, which accounts for nearly half of the world's total market capitalisation.

We believe it is very important that the Board develops a set of financial reporting standards for SMEs as soon as possible. Many jurisdictions around the world currently have differential reporting regimes. Full IFRS, with their focus on providing information for making economic decisions in the context of developed capital markets, may not be suitable for SMEs simply because they are not designed to meet the needs of this particular sector. In our experience, users of SMEs' financial statements are looking for standards which result in financial reporting which is likely to be meaningful and comprehensible to them. Standards that provide the least cumbersome method of achieving the accounting treatment and/or disclosure that is not complex are sought. Standards are wanted that provide guidance that is widely relevant to the transactions of SMEs and that are written in terms that can be understood by such businesses. We hope that the outcome of this project will be a simplified accounting regime which provides entities with a means of communicating financial information to their stakeholders in a manner appropriate to that entity's nature.

In our comment letter we have detailed a number of accounting choices which we believe should be left open for SMEs. We note that where an SME chooses a particular accounting model, that decision ought to be treated as an accounting policy choice and applied consistently by that SME in respect of all similar transactions.

• Half-yearly reporting. CESR proposes that the minimum content of half-yearly financial statements not prepared in accordance with IFRSs should be defined by reference to the principles of IAS 34 Interim Financial Reporting. Further, CESR proposes that in half-yearly reports, the definition of 'related party transactions' in IAS 24 Related Party Disclosures should apply both when an issuer prepares consolidated accounts and when it does not.
• Equivalence of third countries' disclosure requirements. This part of the paper develops the concepts that CESR will use to establish equivalence. CESR's intends to test equivalence by (a) looking first at the key principles and objectives of the different disclosure requirements of the EU Transparency Directive and then (b) establishing what a third country's framework has to include in order to be deemed to be equivalent. CESR notes that "the requirements of the third country do not need to be identical; equivalence can be declared when general disclosure rules provide investors with understandable information which will lead to a broadly equivalent assessment of the issuer's position."