Commission Regulation (EC) No 1787/2006 of 4 December 2006 amending Commission Regulation (EC) 809/2004 implementing Directive 2003/71/EC of the European Parliament and of the Council as regards information contained in prospectuses as well as the format, incorporation by reference and publication of such prospectuses and dissemination of advertisements
Date: 2006-12-04
Institutions: European Commission
Subjects: approximation of laws, dissemination of information, publication, securities, stock-exchange listing

5.12.2006

EN

Official Journal of the European Union

L 337/17

COMMISSION REGULATION (EC) No 1787/2006

of 4 December 2006

amending Commission Regulation (EC) 809/2004 implementing Directive 2003/71/EC of
the
European Parliament and of the Council as regards information contained in prospectuses as well
as the format, incorporation by reference and publication of such prospectuses and dissemination of
advertisements

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

not drawn up in accordance with such standards it must
be presented in the prospectus in the form of restated
financial statements.

Having regard to the Treaty
Community,

establishing the European

Having regard to Directive 2003/71/EC of
the European
Parliament and of the Council of 4 November 2003 on the
prospectus to be published when securities are offered to the
public or
and amending Directive
2001/34/EC (1), and in particular Article 7(1) thereof,

admitted to trading

Whereas:

(1)

(2)

international

Regulation (EC) No 1606/2002 of
the European
Parliament and of the Council of 19 July 2002 on the
accounting standards (2)
application of
requires companies governed by the law of a Member
State, whose securities are admitted to trading on a
regulated market of any Member State, to prepare their
consolidated accounts in accordance with adopted inter-
national accounting standards, now commonly referred
to as International Financial Reporting Standards (IFRS),
for each financial year starting on or after 1 January
2005.

by

the

reference

publication

2003/71/EC of

Regulation (EC) No 809/2004 of 29 April 2004 imple-
menting Directive
European
Parliament and of the Council as regards information
contained in prospectuses as well as the format, incor-
poration
such
and
prospectuses and dissemination of advertisements (3)
requires
information
provided by third country issuers in prospectuses for
offer of securities to the public or the admission of secu-
rities to trading on a regulated market be prepared in
accordance with IFRS adopted pursuant to Article 3 of
Regulation (EC) No 1606/2002 or with the national
accounting standards of a third country equivalent to
information was
these standards.

If historical

historical

financial

financial

that

the

of

(1) OJ L 345, 31.12.2003, p. 64.
(2) OJ L 243, 11.9.2002, p. 1.
(3) OJ L 149, 30.4.2004, p. 1; corrected by OJ L 215, 16.6.2004, p. 3.

(3)

(4)

(5)

transitional

provisions which,

However, Article 35 of Regulation (EC) No 809/2004
contains
in certain
limited cases, exempt third country issuers from the obli-
information which
gation to restate historical financial
was not drawn up in accordance with either IFRS or
accounting standards of a third country equivalent to
IFRS. Under those transitional provisions, the obligation
to restate historical financial information does not apply
to any prospectus filed before 1 January 2007 by a third
country issuer which has either prepared its historical
financial information in accordance with internationally
accepted standards, or which has prepared its historical
information in accordance with the national
financial
accounting standards of a third country and has securities
admitted to trading on a regulated market before that
date. In the latter case,
infor-
mation does not give a true and fair view of the assets
and liabilities, financial position and profit and loss of
the issuer, that information must also be supplemented
by such more detailed or additional
information as is
necessary to ensure that a true and fair view is given.

if the historical financial

Under Regulation (EC) No 809/2004 as currently drafted,
those transitional exemptions will no longer apply in
respect of prospectuses filed from 1 January 2007, and
historical financial information which is not presented in
accordance with either IFRS or equivalent third country
accounting standards will have to be restated.

truly

global

Since the adoption of Regulation (EC) No 1606/2002
many countries have adopted IFRS directly into their
national accounting standards. This clearly demonstrates
that one of the aims of this Regulation — namely to
encourage the increasing convergence of accounting
standards so that IFRS are accepted internationally and
are
fulfilled.
Accordingly, it is appropriate that third country issuers
should be exempt from the obligation to restate historical
information prepared in accordance with
financial
national accounting standards, or to provide a narrative
description of differences as
referred to in Article
1(2)(5A) hereof, if, in accordance with IAS 1 Presentation
of Financial Statements,
they contain an explicit and
unreserved statement that they comply with IFRS.

standards — is being

(6)

(7)

(8)

(9)

L 337/18

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Official Journal of the European Union

5.12.2006

In its advice delivered in June 2005, the Committee of
European Securities Regulators (CESR), established by
Commission Decision 2001/527/EC (1), considered that
the Generally Accepted Accounting Principles (GAAP)
of Canada, Japan and the United States, each taken as
a whole, are equivalent
to
Article 3 of Regulation (EC) No 1606/2002, subject to
remedies, such as additional disclosures and in some
instances supplementary financial statements.

to IFRS adopted pursuant

differences, for a further maximum two year period while
standard setters and regulators pursue an active dialogue,
the convergence process continues and the progress
report is completed.

the

and

(ASBJ)

In January 2006,

In January 2005,
the Accounting Standards Board of
International Accounting
Japan
Standards Board (IASB) announced their agreement to
launch a joint project
to reduce differences between
IFRS and Japanese GAAP and launched a joint work
programme in March 2005 towards the convergence of
Japanese GAAP with IFRS.
the
Accounting Standards Board of Canada publicly stated
its objective to move to a single set of globally
accepted high-quality standards for public companies
and concluded that this objective is best accomplished
by converging Canadian accounting standards with IFRS
within five years. In February 2006, the IASB and the US
Financial Accounting Standards Board published a
memorandum of understanding which outlines a work
programme for convergence between IFRS and US GAAP
with a view to fulfilling one of the US Securities and
Exchange Commission's (SEC) conditions that need to
be met before it will lift the reconciliation requirement
for foreign issuers using IFRS that are registered with the
SEC, by 2009 at the latest.

It is important, however, that the quality of the principle-
based IFRS financial reporting is preserved, that the IFRS
standards are consistently implemented, that appropriate
legal certainty is provided for companies and investors
and that equal treatment of financial statements on a
worldwide basis is offered to EU companies. The future
assessment of equivalence should be based on a detailed
technical
the differences
between IFRS and third country accounting standards,
these
as well as on the concrete implementation of
GAAPs
the
compared to IFRS. The progress of
convergence process should be closely examined before
any decision on equivalence is taken.

and objective

analysis of

In light of the efforts of the accounting standard setters
in Canada, Japan and the United States to converge with
IFRS, it is appropriate to grant the transitional provisions
provided for
in Article 35 of Regulation (EC) No
809/2004 to exempt third country issuers from an obli-
information which
gation to restate historical financial
was drawn up in accordance with the accounting
standards of Canada, Japan or the United States, or (as
the case may be) to provide a narrative description of

(1) OJ L 191, 13.7.2001, p. 43.

the

case may be)

(10) Whilst many countries have adopted IFRS directly into
their national GAAP, other countries are converging
national GAAP to IFRS over a period of time. In the
light of this, it is appropriate, for a maximum two year
transitional period, also to exempt such third country
issuers from restating historical financial information or
from providing a narrative
(as
description of differences, provided that
the national
authority responsible has made a public commitment
In
to this effect and established a work programme.
order to ensure that the exemption is available only in
cases where these conditions are satisfied,
the third
country issuer should be required to provide evidence
that satisfies the competent authority that the national
authority has made a public statement and established a
work programme. To ensure consistency within the
Community, CESR should coordinate the competent
authorities' assessment as to whether those conditions
are satisfied in respect of individual third country GAAPs.

also closely monitor

(11) During that two year period, the Commission should not
only pursue an active dialogue with the relevant third
authorities but
country
the
progress
in the convergence between IFRS and the
GAAPs of Canada, Japan, the United States, and other
third countries
that have established a convergence
programme,
in order to ensure that it is in a position
to take a decision on equivalence at least six months
before 1 January 2009.
the Commission
will actively monitor ongoing progress in the work by
the relevant third country authorities to eliminate any
requirement
the
financial markets of
third country to reconcile
financial statements prepared using IFRS. At the end of
the additional
the
Commission will have to be such that community and
non-EU issuers should be on equal footing.

transitional period,

for Community

the decision of

In addition,

accessing

issuers

a

(12)

The Commission should keep the European Securities
regularly
and the European Parliament
Committee
informed of the progress made towards the elimination
of reconciliation obligations and of the process towards
convergence. Accordingly, the Commission shall report
to the European Securities Committee and the European
Parliament before 1 April 2007 on the timetable
envisaged by national accounting authorities of Canada,
Japan and the United States for the convergence.
In
addition, before 1 April 2008 and after consulting
CESR, the Commission should report to the European

5.12.2006

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Official Journal of the European Union

L 337/19

Securities Committee and the European Parliament on
the evaluation of the GAAPs of third countries used by
issuers which are not required to restate historical infor-
mation or (as the case may be) to provide a narrative
description of differences included in a prospectus filed
with a competent authority before 1 January 2009.
Lastly, before 1 January 2008, and after appropriate
consultation with CESR, the Commission should ensure
that there is a definition of equivalence which is used for
the determination of the equivalence of third country
GAAP, on the basis of an equivalence mechanism set
up to that end.

accounting standards adopted under Regulation (EC) No
1606/2002 and the accounting principles in accordance
with which such information is drawn up,
included in a
prospectus
filed with a competent authority before 1
January 2009, where one of the following conditions is met:

(a)

the notes to the financial statements that form part of
the historical financial
information contain an explicit
and unreserved statement that they comply with Inter-
national Financial Reporting Standards in accordance
with IAS 1 Presentation of Financial Statements;

(13) Accordingly,

differences

description of

(as the case may be)

it is appropriate to amend Article 35 of
third country
Regulation (EC) No 809/2004 so that
financial
issuers are not required to restate historical
to provide a
information or
narrative
cases
in the
described during a maximum period of two years so
that further dialogue can take place. In all other cases,
third country issuers should be subject to the obligation
to restate
information in
accordance with adopted IFRS, or (in appropriate cases)
to provide a narrative description of differences, in any
prospectus filed with a competent authority on or after 1
January 2007.

their historical

financial

(14)

The measures provided for in this Regulation are in
accordance with the opinion of the European Securities
Committee,

HAS ADOPTED THIS REGULATION:

Article 1

Article 35 of Regulation (EC) No 809/2004 is amended as
follows:

1. Paragraph 5 is replaced by the following:

‘5.
Subject to paragraph 5A, from 1 January 2007, third
country issuers referred to in paragraphs 3 and 4 shall
information in accordance
present their historical financial
with international accounting standards adopted under Regu-
lation (EC) No 1606/2002 or a third country's national
accounting standards equivalent to those standards. If such
historical financial information is not in accordance with any
such standards, it must be presented in the form of restated
financial statements.’.

2. The following paragraphs 5A, 5B, 5C, 5D and 5E are

inserted:

Third

issuers

subject

country

are not

‘5A.
to a
item
requirement, under Annex I,
13.1; Annex VII, item 8.2; Annex X, item 20.1 or Annex
XI, item 11.1, to restate historical financial information or to
a requirement under Annex VII, item 8.2.bis; Annex IX, item
to provide a narrative
11.1; or Annex X,
international
between
description

item 20.1.bis,
differences

item 20.1; Annex IV,

the

of

(b) the historical

financial

information is prepared in
accordance with the Generally Accepted Accounting
Principles of either Canada, Japan or the United States
of America;

(c)

financial

the historical
information is prepared in
accordance with the Generally Accepted Accounting
Principles of a third country other than Canada, Japan
or the United States of America, and the following
conditions are satisfied:

(i) the third country authority responsible for
accounting standards

the
in question has
national
made a public commitment, before the start of the
financial year in which the prospectus is filed, to
converge
International
those
Financial Reporting Standards;

standards with

(ii) that authority has established a work programme
which demonstrates
intention to progress
the
towards convergence before 31 December 2008;
and

(iii) the

issuer provides

the
competent authority that the conditions in (i) and
(ii) are met.

evidence

satisfies

that

By 1 April 2007, the Commission shall present to the
5B.
European Securities Committee and the European Parliament
a first report on the work timetable of
the authorities
responsible for national accounting standards in the US,
Japan and Canada for the convergence between IFRS and
those
the Generally Accepted Accounting Principles of
countries.

The Commission shall closely monitor, and regularly inform
the European Securities Committee and the European
Parliament about the amount of progress in the convergence
between International Financial Reporting Standards and the
Generally Accepted Accounting Principles of Canada, Japan
and the United States of America and of progress on the
elimination of
reconciliation requirements that apply to
Community issuers in those countries. In particular, it shall
inform the European Securities Committee and the European
Parliament immediately if the process is not proceeding satis-
factorily.

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Official Journal of the European Union

5.12.2006

The Commission shall also regularly inform the
5C.
European Securities Committee and the European Parliament
about the development of regulatory discussions and the
amount of progress in the convergence between Interna-
tional Financial Reporting Standards and the Generally
Accepted Accounting
countries
Principles
mentioned in paragraph 5A(c) and progress towards the
elimination of any reconciliation requirements. In particular,
the Commission shall
inform the European Securities
Committee and the European Parliament immediately if the
process is not proceeding satisfactorily.

third

of

5D.
In addition to the obligations under paragraphs 5B
and 5C, the Commission shall engage in and maintain a
regular dialogue with third country authorities and, before
1 April 2008 at the latest, the Commission shall present a
report to the European Securities Committee and to the
European Parliament on the progress in convergence and
the elimination of any reconciliation
progress
requirements that apply to Community issuers under the
rules of a third country covered by paragraph 5A (b) or

towards

(c). The Commission may request or
person to prepare the report.

require another

At

least six months before 1 January 2009,

5E.
the
Commission shall ensure a determination of the equivalence
of the Generally Accepted Accounting Principles of third
countries, pursuant to a definition of equivalence and an
equivalence mechanism that it will have established before
1 January 2008 in accordance with the procedure referred to
in Article 24 of Directive 2003/71/EC. When complying
with this paragraph, the Commission shall first consult the
Committee of European Securities Regulators on the appro-
priateness of the definition of equivalence, the equivalence
mechanism and the determination of the equivalence that is
made.’

Article 2

This Regulation shall enter into force on the third day following
its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 4 December 2006.

For the Commission

Charlie McCREEVY
Member of the Commission