1. 1 SESSION 4: HOW SHOULD IFRS BE ENFORCED? THE EXPERIENCE OF TURKEY November 11, 2004-Moscow Dr. A.R. Zafer SAYAR Head of Accounting and Auditing Standards Department Capital Markets Board of Turkey Vice Chairman Turkish Accounting Standards Board RUSSIAN CORPORATE GOVERNANCE ROUNDTABLE MEETING

2. 2 CAPITAL MARKETS BOARD OF TURKEY   Regulatory and supervisory authority in the capital markets.   Capital Markets Law (CML) enacted in 1981.   MISSION STATEMENT: “to take the necessary measures for fostering the development of capital markets, and hence to contribute to the efficient allocation of financial resources in the country while ensuring investor protection”   Establishment of accounting and auditing standards in capital markets in harmonization with international standards   Membership to the IOSCO the relationships with the relevant groups in the OECD and EC are continued.

3. 3 IMPROVEMENTS IN TURKISH CAPITAL MARKETS ACCOUNTING (IFRS) CORPORATE GOVERNANCE AUDITING (SARBANES- OXLEY)  European Commission  IMF and WorldBank  Inflationary Accouting  Consolidated Financial Statements  Ethical Standards  Independence of Auditors  Corporate Governance  Corporate Responsibility  Restored Confidence in Capital Markets  IFRS  Turkish Accounting Standards Board

4. 4 NEW ACCOUNTING STANDARDS   Moved Closer to Anglo-Saxon Model (IFRS)   An important step on the road to ensuring fair presentation of financial statements (2003); “Inflation-adjusted consolidated financial statements” “Inflation-adjusted financial statements”

5. 5 WHAT ABOUT IFRS IN TURKEY?   All EU companies listed on a regulated market to use IFRS from 2005 onwards and allowed Member States to extend this requirement to all companies.   Existing regulations have been made harmonious with IFRS. Consists 33 IFRS.Newly issued IFRS will be adopted immediately. Required for all listed companies by the year 2005 Until then, IFRS may be applied.   Today, we have many listed companies applying IFRS (%75 of market capitalization in Istanbul Stock Exchange)

6. 6 TURKISH GAAP   A single robust general-purpose system in compliance with IFRS.   Turkish Accounting Standards Board (1999) Sets uniform national accounting standards compatible with IFRS. Has its own public legal entity and administrative and financial autonomy, CMB supports TASB. Formal relationship with IASB.

7. 7 ENFORCEMENT OF IFRS   Making regulations would mean nothing unless effective implementation and enforcement exist in the market.   Enforcement of standards is vital for global capital markets   We need convergence in; Accounting Auditing Disclosure-Corporate Governance

8. 8  Existing regulations have been revised in accordance with Sarbanes-Oxley Act:  A project: the full revision of existing auditing standards compatibly with International Standards on Auditing.  CMB Corporate Governance Code has been promoted ( OECD principles )  Rating agencies can rate the level of corporate governance of companies under “Corporate Governance Practices” of Capital Markets Board of Turkey. AUDITING AND CORPORATE GOVERNANVE PRINCIPLES IN TURKEY

9. 9 ROLE OF NATIONAL STANDARD SETTER  We need to work to continue to enhance cooperation and consistency in regulatory review and enforcement, and to improve training and interpretive mechanisms as well.  We have to work to develop processes that would encourage consultation amongst regulators, thereby reducing the chances for multiple interpretations.