1. Advanced Program in Accounting and
Auditing Regulation
EU – IFRS and issuers
Kristjan-Erik Suurväli
Head of Market Supervision Division

4. Capitalization of share issuers
Mln Eur

5. Capitalization of bond issuers
Mln Eur

6. Tallinn Stock Exchange turnover and TALSE index

7. Legislative environment for IFRS Accounting Act
§ 17 (2) The accounting policies and presentation formats used in the preparation of financial statements by ..a company, the shares or other securities issued by which are quoted on a stock exchange in Estonia or a member state of the European Union, shall be in accordance with international financial reporting standards.
( )
Wording was changed to Regulation 1606/2002/ ( )

8. TSE Listing Rules

9. TSE Requirements for issuers

10. Prospectus directive PD was implemented from 1.11.2005
We have no actual practice until now
But IAS standards has been applicable from 1997

11. Issuers supervision in EFSA
EFSA uses three step procedure
Entry to the market
Public issuers which are not applying for listing
Public issuers which are applying for listing
Secondary market for listed issuers
Exit
De-listing
Takeover bids

12. 1 - EFSA has the right to:
obtain information, documents and explanations from any natural or legal person and from government agencies, supervisory bodies and state and local government databases free of charge
Summon persons to EFSA
conduct distance interrogations/hearings
Use evidences collected according to foreign law
carry out on-site inspection of an issuer whose securities are traded on a regulated market or whose securities are subject to a public offer or have been subject to a public offer during the past five years

13. In course of on-site inspection EFSA has right to
Enter into all premises of issuer
Use necessary rooms and conditions for co supervision
Without any limitations to investigate documents and data carriers and make copies, transcripts of those
Monitor working processes
Obtain oral and written explanations from personnel
Issuer under on.site inspection has to appoint competent person to assist EFSA
EFSA may delegate foreign authority to carry out on-site inspection in issuer

14. 2 - EFSA has the right to: Order assessment by expert
Order extraordinary audit
Issue precepts
Ask for removal of auditors
Make a statement on shareholders meeting

15. Listed - Q reports Issuers are divided into assessment categories
Q reports are check-listed
Issues are grouped
Issuer specific questions
Sector wide issues
Issues are managed according to seriousness

16. Example of check-list

17. Example of check-list

18. Process Q reports published on TSE
EFSA Check-lists & compares as well with news issued
Case closed or
Query to issuer
Meeting with auditors & TSE is informed
EFSA a) makes on-site inspection
b) issues precept
c) starts misdemeanor procedure - fine
d) agrees with TSE on contractual fine
e) files application to start criminal prosecution

19. case – Issuer K in the nutshell 1
Issuer K makes series of announcements on TSE, changes the dates of financial year, does not have proper organizational structure, insider lists and procedures –
EFSA suspects K is not transparent and its financial reports are inaccurate ( month report and 2002/2003 A report)
& FSA on-spot control in issuer
Step 1
EFSA prepares action plan
Step 2
Analysis of information in hand, identifying further need for information, meeting with auditors
Step 3
Issuing on-site inspection letter

20. case – Issuer K in the nutshell 2
Step 4
Issuing on-site inspection letter
Step 5
On-site inspection and writing the report
Step 6
Issue of preliminary report for comments
Step 7
analysis of comments and EFSA board takes decision on report

21. case – Issuer K in the nutshell 3
Step 7 elaboration - on-site findings
Option contract or real estate IAS 39 (43) vs IAS 18 (14) (IAS 1 § 20 (ii) and 40)
Connected persons IAS 1 and IAS 24
Dissemination of information
EFSA issues precept
Step 8
Amongst other things - EFSA orders K to eliminate discrepancies IAS 2003 A Report IAS 8 p 34
option contract on real estate IAS 39;
IAS 1 and 24 information on off-balance sheet item against company X;
IAS 24 information on with connected persons.

22. case – Issuer K in the nutshell 4
TSE application to EFSA for information
Step 9
EFSA submits information to TSE
Shareholder of K complaint to TSE and FSA
Step 10
FSA issues precept to K to publish extraordinary audit report (agreement with K)
Listing and supervisory committee decision
Step 11
FSA starts misdemeanor procedure and issues fine – grounds in on-site inspection

23. case – timeline
1) & FSA on-site control in issuer,
2) FSA issues precept
3) TSE application to FSA for information
4) FSA submits information to TSE
5) % shareholder complaint to TSE and FSA
5) FSA issues precept
6) Listing and supervisory committee decision
7) FSA starts misdemeanor procedure and issues fine
8) Decision is appealed and Tallinn City Court satisfies appeal (but no decision on IAS)
9) EFSA appeals to Supreme Court but do not get permission