CESR final concept paper on equivalence between GAAP and IAS/IFRS

03 February 2005

CESR published the final concept paper which sets out the principles it will use to guide them in establishing the equivalence between third countries GAAP and IAS/IFRS. The concept paper sets out the basis upon which CESR will approach the analysis of equivalence. CESR has engaged the relevant third countries’ standard setters and regulatory agencies. The information gathered during the assessment will also serve to develop a descriptive paper on the enforcement mechanism also requested by the European Commission.

In particular, CESR indicates that the approach to the Mandate will predicate on the basis that the investor’s decision should be unaffected by the use of different accounting standards when assessing whether or not to invest in any given product. In receiving financial information based on third country GAAP, investors should be enabled to make similar decisions as when they had received financial information based on IAS/IFRS.

In CESR's view, this assumption is the basis for the global assessment. The objective of the review of the general principles is to compare third country GAAP's and IAS/IFRS with regard to the underlying principles of financial reporting. Additionally, CESR proposes to conduct a technical assessment of significant differences in accounting standards of third country GAAP's compared to IAS/IFRS.

The consequences of the conclusions reached of both assessments of the third country GAAP may vary from the introduction of a requirement for third country issuers to undertake a complete restatement to the acceptation of third country GAAP’s when both accounting standards are equivalent.

Finally, CESR’s advice to the Commission will also include advice on the implementation of early warning mechanisms to ensure that future changes in third country GAAP can be taken into account. The advice will also include a description of the enforcement mechanisms in the considered third countries.

Press release
Final concept paper
Feedback statement

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