1 CESR-Fin Standing Sub–Committee on Enforcement Lars Østergaard Chairman of SCE/EECS World Bank Conference Advanced Program in Accounting and Auditing Regulation 8. November 2005

2 Overview EU-regulation on IAS and enforcement CESR Standard no. 1 on Enforcement CESR Standard no. 2 on Coordination of Enforcement CESR Guidance Paper on Coordination European Enforcement Coordination Sessions (EECS) Other work on enforcement

3 EU Regulation on IAS recital no. 16: – A proper and rigorous enforcement regime is key to underspinning investors´confidence in financial markets. Member States, by virtue of Article 10 of the Treaty, are required to take appropiate measures to ensure compliance with international accounting standards. The Commision intends to liaise with Member States, notably through the Committee of European Securities Regulators (CESR), to develop a common approach to enforcement.

4 CESR on Financial Information CESR CESR-fin ATFSCESISE EECS

5 SCE CESR Members – assisted by a technical advisor A forum for exchange of views and experiences on methods for supervising the listed issuers Instrumental in establishing standards Support CESR–Fin in its role designated by the EU– Commission concerning enforcement of IAS/IFRS

6 Standard no. 1 March principles – definition of enforcement – enforcers – issuers and documents – methods of enforcement including selection – actions – coordination of enforcement – reporting

7 Definition of enforcement Principle 1: –purpose: to protect investors and promote market confidence Principle 2: –monitoring compliance with reporting framework –taking measures if infringements

8 Enforcers Independent from markets and government Necessary powers and resources Different models possible – securities regulators – review panels – other bodies

9 Actions To achieve appropiate disclosure Where relevant, public correction Material and non-material infringements Actions versus sanctions Similar actions where similar infringements

10 Coordination Coordination will take place Material controversial issues will be conveyed to other bodies No general application guidance

11 Standard no. 2 April 2004 Existing precedents should be taken into account Where practicable discussion with other enforcers before decision Details of decisions should be made available to other enforcers Confidentiality regime European Enforcers Coordination Sessions

12 Guidance Paper October 2004 European Enforcers Coordination Sessions (EECS) –all enforcers whether or not CESR-members shall be members of EECS –main functions analyse and discuss decisions taken or to be taken identify issues not covered by standards share and compare experiences provide advice on enforcement issues advice on public disclosure –agenda group

13 Decisions Ex-ante as well as ex-post Non-actions as well as actions Opinions if represent the official view (pre–clearances) Conclusion that a treatment adopted is OK constitutes a decision

14 Consultation Consultation of the database is mandatory If apparently contradicting decisions: normally discussion with enforcer who took the earlier decision If apparently contradicting decisions: information of the agenda group

15 The Database Criteria –a material misstatement –cross border listings –apparently contradicting decisions –potential impact on European financial reporting –of interest to other enforcers –risk of significantly different treatments –significant impact on other issuers –taken on the basis of IAS 1 and 8 (no specific standard adresses the issue) –overruled by an appeals committee or court

16 The Database (cont.) Input –dates –financial reporting period –type of document –enforcer –issuer –issue –standard or requirement involved –description of treatment –rational for decision –details of action taken and effect –outcome of EECS discussion –status of decision –cross reference to precedents –auditor opinion –audit firm (optional)

17 The Database (cont.) Confidentiality –omitting the name of the issuer and its group, capitalisation and details of sector In English Summary details Relevant facts and circumstances No deadline (“a reasonable time”)

18 Meetings of EECS Started in January 2005 This year 7 meetings So far mostly discussed decisions to be taken 29 issues have been discussed -from 9 different countries -issues related to 17 different IAS/IFRS Standards and the Framework

19 Other work on enforcement Publication of enforcement decisions Guidance paper on selection Third country issuers Powers Co-operation with US-SEC