Concept Paper on how CESR intends to measure equivalence between Third Country GAAP and IAS/IFRS

Both the newly adopted Prospectus Regulation and the Transparency Directive state that third country issuers (non-EU issuers), who have their securities admitted to trading on an EU regulated market, or who wish to make a public offer of their securities in Europe, will be required, as from 1st January 2007, to prepare and present the financial statements that they publish on the basis of EU endorsed IAS/IFRS accounting standards or, on the basis of the third country's national accounting standards if they have been declared as equivalent to IAS/IFRS. In particular, the Prospectus Regulation and Transparency Directive require the European Commission to establish a mechanism and to take the necessary decision as to whether a given third country GAAP is equivalent to IAS/IFRS. For this reason, the European Commission has requested CESR to prepare technical advice which will assist them in reaching the final assessment of US, Canadian and Japanese GAAP. As a first step towards an assessment of third country GAAP, CESR is publishing for consultation a concept paper which will set out the various principles by which CESR will assess equivalence of third country GAAP. The impact of CESR's final advice and the European Commission's final decision will be that where a third country GAAP is not found to be equivalent, the third country issuer will be asked to either restate their accounts in accordance with IAS/IFRS, or to take some remedial action. The purpose of this measure is to ensure that EU investors can reach similar investment decisions whether the information has been prepared on the basis of IAS or third country GAAP.
Responses to the Concept Paper are welcomed by 22 December 2004 and can be submitted online via CESR's website under the heading