Overview on EU Accounting issues Moscow – 27 February 2008 Jeroen Hooijer Head of accounting Unit, EU Commission

IAS Regulation (1606/2002/EC) Directly applicable in all EU member states (MS) No national variations All EU companies that are listed in the EU use endorsed IAS/IFRS for consolidated accounts Non-EU issuers outside the scope MS Option to extend the scope to: –unlisted companies (authorized by many MS) –individual accounts (authorized by few MS)

Major challenges faced in 2005 International system First-time application Principles based – Professional judgment required Complex - Integration of risk and financial analysis Replace 25 national accounting legislation transposing Directives and application practices Experience of users Scope of application

The EU endorsement process political and legal endorsement of IFRS Criteria –IFRS not contrary to “true and fair view” principle of Accounting Directives –IFRS must be conducive to public good (competitiveness and convergence) –IFRS must be understandable, relevant, reliable and comparable

Endorsement process IASB EFRAG European Commission ARC (Accounting Regulatory Committee European Parliament Interest groups SARG

IASB approval EFRAG advice EU Institutions ARC opinion EU review EU-Parliament Endorsed by EC 2 m0,75m2 m+ 3m Translations Time-line of endorsement SARG advice 0,75m

Endorsement – state-of play All IAS and SIC, except some provisions of IAS 39, are endorsed -(a few provisions of IAS 39 related to hedge accounting are carved out) New IFRS and IFRIC endorsed New standards in the pipeline: i.a. BUSCOM - II

Need for coherent application clear standards monitoring Learning from preparers’ experience Need for interpretations/guidance Role of auditors and other enforcers Studies (ICAEW, CESR): ”challenging but successful”

Equivalence / Convergence EU « Equivalence » US « acceptance of IFRS » IASB / FASB « Convergence »

US “acceptance of IFRS” SEC ”road map” with time frame: –Removal of the reconcilation requirement for EU issuers registered with the SEC –Required: Progress on convergence of standards Consistency of application of IFRS across countries and industries –SEC Rule of 15 Nov IFRS recognized. –Concept release: Also US issuers to use IFRS?

US - continued - Application for IFRS as adopted by the IASB - IAS 39 – reconciliation to IFRS – (one company) - 2 years period

Governance IASB Press-release 8 November 2007 US-SEC, FSA- Japan, EU Commission and IOSCO Independent oversight; Monitoring body Due process, impact assessments Nomination process

European Structure Early, upstream input towards IASB Coherent and convincing European positions Need for strong European presence, - not a new standard setter How?

EU “equivalence” Foreseen by Transparency and Prospectus Directives Commission to assess whether third country GAAP’s are ”equivalent” to IFRS Equivalence mechanism adopted in December 2007 Decision on GAAP’s before 2009 Further transition-period for those converging Reciprocity

IFRS Global framework – EU perspective IASB ASBJ NSS Transatlantic dialogue Other countries CESR EFRAG COMMISSION ECEP FASB SEC

The EU approach in an international context The EU supports worldwide use of IFRS IFRS has speeded up accounting reforms in major markets IFRS often integrated into national GAAPs Mutual recognition in the US

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