©2005 Deloitte & Touche LLP. Private and confidential 1 The role of a National Accounting Standard Setter in the EU

©2005 Deloitte & Touche LLP. Private and Confidential 2 Agenda Working within Europe National standards Role of National Standard Setters Working with the IASB and international convergence National standards and convergence IASB Project for SMEs Urgent issues and interpretations Structure and resources

©2005 Deloitte & Touche LLP. Private and Confidential 3 IFRS – Changing accounting Two routes EC Regulation No 1606/2001 National GAAP IFRS required for consolidated financial statements for listed securities companies Based on EU 4 th and 7 th Company Law Directives – subject to change via Directives National jurisdictions could require/allow others (single companies or consolidated) to move to IFRS National jurisdictions may wish to move to IFRS over time AB

©2005 Deloitte & Touche LLP. Private and Confidential 4 IFRS Volunteers – Single companies

©2005 Deloitte & Touche LLP. Private and Confidential 5 IFRS banned for single companies

©2005 Deloitte & Touche LLP. Private and Confidential 6 IFRS don’t knows

©2005 Deloitte & Touche LLP. Private and Confidential 7 IFRS – Changing accounting Two routes EC Regulation No 1606/2001 National GAAP IFRS required for consolidated financial statements for listed securities companies Based on EU 4 th and 7 th Company Law Directives – subject to change via Directives National jurisdictions could require/allow others (single companies or consolidated) to move to IFRS National jurisdictions may wish to move to IFRS over time AB

©2005 Deloitte & Touche LLP. Private and Confidential 8 National standards Based on EC 4 th /7 th Directives Fair Value Directive 2001/65/EEC Modernisation Directive 2003/51/EC Designed to bring national law “in line with modern accounting practices” Removes all inconsistencies between EC and IFRS as at 1 May 2002

©2005 Deloitte & Touche LLP. Private and Confidential 9 Role of National Standard Setters Those entities going directly to IFRS, where permitted or required Those entities affected by changes in national law and standard i.e. A i.e. B

©2005 Deloitte & Touche LLP. Private and Confidential 10 Role of National Standard Setters Those entities going directly to IFRS, where permitted or required Those entities affected by changes in national law and standard 1)INFLUENCE IASB 2)INFLUENCE EFRAG/EC RE ADOPTION i.e. A i.e. B 3)ENSURE STANDARDS ARE UP TO DATE AND MEET EU REQUIREMENTS 4)CONVERGE NATIONAL STANDARDS TO IFRS BUT OVER WHICH PERIOD?

©2005 Deloitte & Touche LLP. Private and Confidential 11 Working with the IASB From 2001 to date, IASB recognised - National Standard Setters (NSS) - World Standard Setters (WSS) NSS are - Australia and New Zealand- Japan - Canada- UK - France- US - Germany But this is changing IASB “Draft Memorandum of Understanding on the role of Accounting Standard Setters and their relationships with the IASB” (MoU) Issued Feb 2005, comments 29 July 2005

©2005 Deloitte & Touche LLP. Private and Confidential 12 IASB Draft MoU – Standard Setters 1.Work with national regulators / governments to promote convergence and channel for information 2.Encourage constituents to comment to IASB 3.Use round-tables or other forums to encourage comments 4.Advise IASB a.s.a.p. of any technical differences of opinion 5.Undertake research for IASB and be involved in project teams 6.Comment directly on IASB papers 7.Monitor implementation and identify issues 8.Advise IASCF of educational needs

©2005 Deloitte & Touche LLP. Private and Confidential 13 Influencing EFRAG/EC – Which standards to adopt? Commission ARC Supervisory body EFRAG FEEUNICEOthers ASB

©2005 Deloitte & Touche LLP. Private and Confidential 14 National standards and convergence UK allows almost all companies to use IFRS UK’s Accounting Standards Board (ASB) is committed to converging to IFRS ED “The role of the ASB” issued March 2005, comments 15 Sept 2005 Backlash re lengthy and apparent US influenced IFRS

©2005 Deloitte & Touche LLP. Private and Confidential 15 ASB Convergence Plans Changes to Directives meant ASB had to bring in –IAS 10 ‘Events after the balance sheet date’ –Part of IAS 32 ‘Financial Instruments’ on presenting debt/equity split Made single listed companies very similar to consolidated listed companies by requiring IFRS 2, IAS 32, IAS 39, IAS 21 and IAS 29 Planned batches of changes from 2006 to 2008/9 but awaiting consultation results IASB Project for SMEs

©2005 Deloitte & Touche LLP. Private and Confidential 16 IAS Project for SMEs Debate on type of entity –small/medium-sized, or –non publicly accountable Will it result in a standalone standard or be a different way of using full IFRS? Taking time to develop. Considerable consensus in Working Group but IASB to be persuaded Possible ED in 2006

©2005 Deloitte & Touche LLP. Private and Confidential 17 Interpretations IFRIC issues interpretations ASB / UITF will encourage IFRIC If no IFRIC, UITF may issue “non-mandatory UITF views” A European “issues” body is under consideration ASB will support this as appropriate

©2005 Deloitte & Touche LLP. Private and Confidential 18 Structure and resources Financial Reporting Council Accounting Standards Board Smaller Entities Urgent Issues Task Force Public Benefit Entities Financial/ Specialist Industries UK independent regulator 2 full-time members 8 part-time members + staff of 16 at a cost of £2.8m

©2005 Deloitte & Touche LLP. Private and Confidential 19 National standard setter – summary Important role as part of IASB network Varying role re national standards for non-listed groups in the EU

©2005 Deloitte & Touche LLP. Private and Confidential 20 “© Deloitte & Touche LLP: The seminar and these accompanying handouts have been written in general terms and therefore cannot be relied on to cover specific situations; furthermore, responses given in the seminar to questions are based on only an outline understanding of the facts and circumstances of the cases and therefore do not form a substitute for considered specific advice tailored to your circumstances. Applications of the principles set out will depend on the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this seminar and these accompanying handouts. Deloitte & Touche LLP would be pleased to advise readers on how to apply the principles set out in this handout to their specific circumstances. Please feel free to contact any partner. We would be pleased to advise you on the application of the principles demonstrated at the seminar to your specific circumstances but in the absence of such specific advice cannot be responsible or liable to you for the content of our presentation.