23 May 2006

FEE recommendations for developing standards for comfort letters

The FEE launched a set of recommendations for the development of guidance on comfort letters. This publication is relevant in relation to the European Prospective Directive which recently introduced major changes to prospectuses with regard to their contents, applicability and approval. The paper sets out the views of a number of respondents, including some banks and advisers, on the issues raised in the Discussion Paper 'Comfort Letters Issued in relation to Financial Information in a Prospectus' published in April 2005. It provides recommendations based on these comments and further reflections.

FEE sought to find consensus between divergent views on a number of issues. An example is the debate on whether the EU should use the IAASB assurance framework or adopt the existing US accounting standard for comfort letters, otherwise known as SAS 72, which is already common practice amongst many European companies due to the American interest in European public offerings. After careful analysis of current market practices, the comments received and the differing legal frameworks between Europe and the US, full implantation of SAS 72 was not favoured by FEE. Rather, current market practices should come into line with the IAASB assurance framework.

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