CESR published for consultation its draft technical advice on equivalence of Canadian, Japanese and US
GAAP to the European Commission. The advice finds Canadian, Japanese and US Generally Accepted Accounting Practice (GAAP), taken as a whole, to be equivalent to International Financial Reporting Standards, subject to a number of additional disclosures. The draft advice includes a description of the enforcement mechanisms which are in place in each country.
CESR’s assessment of equivalence is subject to the following:
That companies which have subsidiaries such as Special Purpose Entities (SPEs) which are not consolidated for third country GAAP purposes, but are required to be consolidated for the purposes of IFRS, report a pro-forma balance sheet and profit and loss account on their local GAAP basis, but including the unconsolidated subsidiaries.
That companies reporting under Japanese GAAP which have either accounted for mergers by the pooling of interest method and/or have consolidated subsidiaries on the basis of GAAPs which are not consistent with either IFRS or any of the third country GAAPs, report a pro-forma balance sheet and profit and loss account on the basis of IFRS covering business combinations and consistent accounting policies, respectively.
That Japan and the US adopt accounting policies for the expensing of stock options on a basis equivalent to IFRS, for implementation on or before 1 January 2007.
That in respect of certain specified IFRS standards there may be additional disclosures of sometimes a descriptive nature and sometimes a quantitative nature.
However, the draft advice emphasises that an assessment of these standards alone will not be sufficient to afford appropriate protection of investors.
Deadline for comments is 27 May 2005. The final advice is requested by 30 June 2005. An open hearing will be held on 18 May in Paris.
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© CESR - Committee of European Securities Regulators
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