The European Commission will be preparing a first report for the European Securities Committee and the European Parliament on the definition it will use to assess equivalence of Third Country GAAP and will also report on progress made by Canada, Japan and United States towards convergence with IFRS, for submission on 1 April 2007. CESR was therefore asked by the European Commission, on 22 February, to provide some advice on three aspects:
Firstly to provide a description of the work timetable of Canadian Japanese and US Standard setters on the convergence between IFRS and the respective GAAP’s of these countries. It should be noted that this is not an evaluation or assessment of the progress in convergence, but rather, a collection of the facts available from public sources.
Secondly, in relation to the definition of equivalence, CESR provides a definition (in line with that set out its advice to the European Commission in June 2005 Ref.CESR/05-230b ) i.e. that the 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 IFRS or on third country GAAP. CESR also considers that a determination that third country GAAP are equivalent to IFRS, must also be based on the presumption that filters at country level (as described in the paper in Section IV of this paper), audit assurance and enforcement on entity levels are sufficient for investors to rely on. CESR supports the Commission’s view that it should publish the basis upon which it will assess equivalence as soon as possible and by 1 July 2008.
Thirdly, the Commission asked CESR to map in broad terms all the third country GAAP’s which are currently used in the EU regulated markets. This list is included in section V of this advice.
CESR submitted its advice on 6 March 2006. To view this advice, please access the section Operational Groups/CESR-Fin/Equivalence, or click here.
