EC Extends Use Of Non-EU Accounting Standards

by Ulrika Lomas, for LawAndTax-News.com, Brussels

08 December 2006

Following a positive vote of the European Securities Committee and a strong endorsement from the European Parliament on 24 October 2006, the European Commission on Wednesday adopted measures extending by two years the transitional exemption granted to foreign companies presenting financial statements prepared in accordance with national accounting standards for the issuing of securities on EU stock markets.

A decision on the equivalence of third-country Generally Accepted Accounting Principles (GAAPs) with International Financial Reporting Standards (IFRS) is expected to take place before the end of 2009.

Internal Market and Services Commissioner McCreevy announced that:

"The decision to give ourselves and our major partners a bit of time before taking a final decision on equivalence is the right approach. It is the most efficient way to promote the use of IFRS. It gives us leverage in our efforts to obtain the removal of reconciliation requirements for EU issuers abroad. It ensures that EU markets remain attractive to foreign issuers. I am confident that the framework which the texts put in place will allow us to come to the right decision for the benefits of EU investors and issuers alike.”

The decision taken by the Commission on the equivalence of third-country GAAPs will allow for work on elimination of reconciliation requirements for EU issuers abroad to be actively pursued with third-country authorities.

The United States Securities and Exchange Commission (SEC) reiterated its firm and unequivocal commitment to work towards eliminating the need for reconciliation between IFRS and US GAAP and has published a Roadmap to achieve this objective by 2009. Postponing the equivalence decision therefore aligns the EU timetable with the SEC's timeline.

It will allow EU and US authorities to work in parallel towards common agreed objectives.

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