First Report to the European Securities Committee and to the European Parliament on convergence between International Financial Reporting Standards (IFRS) and third country national Generally Accepted Accounting Principles (GAAPs) {SEC(2007) 968}
Date: 2007-07-06
Institutions: European Commission
Subjects: accounting, accounting system, capital market, financial market, information, international standard, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 6.7.2007 
COM(2007) 405 final 

FIRST REPORT TO THE EUROPEAN SECURITIES COMMITTEE AND TO THE 
EUROPEAN PARLIAMENT 

on convergence between International Financial Reporting Standards (IFRS) and third 
country national Generally Accepted Accounting Principles (GAAPs) 

{SEC(2007) 968} 

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1. 

INTRODUCTION AND LEGAL BASIS 

This  report  focuses  on  the  respective  work  timetables  envisaged  by  national  authorities  of 
Canada,  Japan  and  the  USA  for  the  convergence  between  International  Financial  Reporting 
Standards  (IFRS)  and  their  national  Generally  Accepted  Accounting  Principles  (GAAPs).It 
also contains some preliminary information about the convergence efforts by some other third 
countries. 

This  report  on  the  work  timetables  for  convergence  is  required  by  the  two  legal  measures 
adopted  by  the  European  Commission  on  4  December  20061  in  relation  to  the  use  by  third 
country  issuers  of  information  prepared  under  certain  internationally  accepted  accounting 
standards.  

Under Regulation 1606/2002 of the European Parliament and of the Council of 19 July 2002 
(the  "IAS  Regulation")  companies  listed  on  a  regulated  market  of  any  Member  State  and 
governed by the law of a Member State of the European Union are required to apply IFRS as 
adopted  by  the  EU  ('endorsed  IFRS')  for  their  consolidated  accounts  for  financial  years 
starting from January 2005. 

The requirement to use endorsed IFRS in the European Union was extended to third country 
issuers  making  a  public  offer  of  securities  in  the  EU  by  the  Prospectus  Regulation2  and  to 
third  country  issuers  with  securities  traded  on  an  EU  regulated  market  by  the  Transparency 
Directive3.  Under  these  Directives  the  issuers  must  prepare  their  financial  information  in 
accordance  either  with  IFRS  or  with  a  third  country's  national  accounting  standards  (third 
country  GAAPs)  that  is  'equivalent'  to  endorsed  IFRS.  Those  requirements  were  initially 
subject to a transitional exemption until 1st January 2007. 

Subsequently, in the light of the efforts of the national accounting standard setters of Canada, 
Japan, the USA and other jurisdictions, and considering the positive efforts for convergence to 
IFRS already underway, it was agreed to postpone this date for a further two years. Therefore, 
on  4  December  2006,  the  Commission  adopted  the  two  legal  measures  mentioned  above 
under which third country issuers could continue using certain third country GAAPs, for the 
purposes of the Prospectus Regulation, in all prospectuses filed before 1st January 2009 and, 
for the purposes of the Transparency Directive, for all financial years starting before January 
20094. 

1 

2 

3 

4 

Commission Regulation (EC) No 1787/2006 of 4 December 2006 and Commission Decision (EC) No 
2006/891 of 4 December 2006 (the "Decision under the Transparency Directive"). 
Commission  Regulation  (EC)  No  809/2004  of  29  April  2004  (the  "Prospectus  Regulation").  This 
Regulation  implements  Directive  2003/71/EC  of  the  European  Parliament  and  of  the  Council  of 
4 November 2003 ('The Prospectus Directive'). 
Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  (the 
"Transparency Directive"). 
See Art. 1 of the Commission Decision 2006/891/EC and Art. 35(5A) of the Prospectus Regulation, as 
amended by Commission Regulation (EC) 1787/2006/EC. 

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During  the  period  leading  up  to  2009  the  Commission  is  required  by  Article  35  of  the 
Prospectus Regulation (as amended by Regulation (EC) No 1787/2006 and by Article 2 of the 
Decision under the Transparency Directive to inform the European Securities Committee and 
the European Parliament regularly about the progress on convergence and of progress on the 
elimination of reconciliation requirements that apply to EU issuers. 

2. 

DEFINITION OF EQUIVALENCE 

Establishing  a  suitable  definition  of  equivalence,  for  the  purpose  of  determining  whether  a 
third  country  GAAP  is  'equivalent'  to  IFRS,  is  a  crucial  element  of  the  work  in  this  area. 
Under  the  Prospectus  Regulation  and  the  Decision  under  the  Transparency  Directive,  the 
Commission  is  required  to  establish  a  definition  of  equivalence,  set  up  an  equivalence 
mechanism and then determine the equivalence of third country GAAPs in accordance with a 
specified timetable. These legal measures require the Commission to consult CESR on each 
of  these  issues.  Following  the  first  consultation,  the  following  definition  of  equivalence  has 
been proposed by CESR: 

For equivalence's purposes, investors should be able to make a similar decision irrespective 
of  whether  they  are  provided  with  financial  statements  based  on  IFRS  or  on  third  country 
GAAP. 

This  definition  is  derived  from  CESR's  advice  of  June  2005  on  the  equivalence  of  US, 
Canadian  and  Japanese  GAAPs.  In  that  advice,  CESR  explained  that  equivalent  does  not 
mean  identical.  CESR  envisaged  that  some  differences  between  third  country’s  GAAP  and 
IAS/IFRS  would  not  give  rise  to  differing  investment  decisions.  As  a  starting  point,  the 
Commission  considers  that  such  a  definition  provides  appropriate  criteria  for  defining 
equivalence. 

3. 

USE OF THIRD COUNTRY GAAPS IN THE EUROPEAN UNION 

CESR  has  listed  the  third  country  GAAPs  that  are  currently  used  by  the  issuers  whose 
securities  are  traded  on  a  regulated  market  in  the  EU.  According  to  CESR,  third  country 
issuers  using  a  third  country  GAAP  represent  around  5.8  %  of  the  total  number  of  issuers 
having their securities admitted to trading on EU regulated markets.  

In  preparing  the  following  table,  CESR  indicated  that  some  issuers  may  have  been  counted 
more than once if they have securities admitted in more than one country and/or if they have 
admitted different types of securities in the same or in several Member States. 

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National GAAP of: 

Number of third country issuers listed on a 
EU regulated market using this GAAP 

Argentina 

Australia 

Brazil 

Canada 

Chile 

China 

Columbia 

Egypt 

Hong Kong 

India 

Indonesia 

Israel 

Japan 

Lebanon 

Malaysia 

Mexico 

Morocco 

New Zealand 

Pakistan 

Peru 

Philippines 

Russia 

Singapore 

South Africa 

South Korea 

5 

17 

4 

45 

1 

20 

1 

10 

2 

70 

2 

8 

84 

3 

3 

2 

1 

2 

1 

3 

3 

14 

2 

9 

30 

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Switzerland  

Thailand 

Tunisia 

Turkey 

US 

Venezuela 

Zambia 

Zimbabwe 

Total 

Source: CESR 

4 

4 

1 

7 

233 

1 

1 

1 

594 

This information is not exhaustive, as CESR has not been able to obtain the relevant data for 
all EU regulated markets.5 

4. 

UPDATES  ON  THE  CONVERGENCE  OF  CANADIAN,  JAPANESE  AND  US  GAAP 
TOWARDS IFRS 

US GAAP  

The  elimination  of  the  reconciliation  requirement  to  US  GAAP  for  EU  issuers  is  a  major 
objective of the Commission. The SEC has developed a Roadmap setting out the steps leading 
to the ending of the reconciliation requirement and has indicted that, whilst some measurable 
progress on priority issues is important, a finite level of convergence is not required for the 
objective to be met. 

In  early  2006,  the  United  States'  Financial  Accounting  Standards  Board  (FASB)  and  the 
International  Accounting  Standards  Board 
(IASB)  concluded  a  Memorandum  of 
Understanding (MoU) that outlines a work programme for convergence between US GAAP 
and  IFRS.  The  MoU  divides  the  convergence  work  into  two  main  categories  depending  on 
their expected time frame for completion. In the short term the aim of the convergence work 
is to reach a conclusion by 2008 about whether major differences in a small number of key 
areas should be eliminated through one or more short-term standard setting projects, and if so, 
complete  or  substantially  complete  work  in  those  areas.  Overall  progress  seems  to  be 
advancing at a satisfactory pace. Beyond the short term, the MoU provides for the two Boards 
to work together and make significant progress by 2008 on other major areas where current 
practices are regarded as "candidates for improvement". Work on most of these seems to be 
progressing  at  the  pace  by  which  the  requirements  in  the  Roadmap  should  be  met  in  time. 
This includes the Consolidations project. 

5 

CESR  members  also  identified  around  130  third  country  issuers  currently  using  Member  States´ 
national GAAP (e.g. UK GAAP). 

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CESR  has  given  preliminary  information  on  the  progress  made  on  the  convergence  work 
programmes of Canada, Japan and the United States, using CESR's advice of 2005 as a basis 
and  indicating  both  the  current  situation  and  the  expected  developments  for  2007/2008. 
However  CESR's  report6  expressly  states  that  it  should  not  be  considered  as  providing  any 
evaluation  or  assessment  of  the  progress  in  convergence  at  this  stage  but  instead  gives  an 
indication of the current situation according to information obtained through public sources. 

The technical advice identified the main difference in the area of scope of consolidation (IAS 
27) where it proposed a supplementary statement as a remedy. The Consolidations project is 
included  in  the  convergence  programme,  with  a  discussion  paper  expected  in  summer  2007 
and exposure draft in the second half of 2008. 

Other  potentially  significant  differences  identified  by  the  technical  advice  (i.e.  differences 
where quantitative indication of the impact was proposed as a remedy) were related to: IFRS 
3  -  Business  combinations,  IAS  28  –  Investments  in  Associates  (Uniformity  of  Accounting 
policies),  IAS  36  –  Impairment  of  Assets,  IAS  38  –  Intangible  Assets  (Capitalisation  of 
development costs) and IAS 41 – Agriculture (Differences in fair value of specific agriculture 
items).  Business  Combinations  is  included  in  the  Convergence  work  programmes  and  the 
final  standards  are  expected  in  2007.  IAS  36  – Impairment  of  assets  and  IAS  38  Intangible 
assets are also included in the convergence work programmes, however they are currently at 
the  staff  research  stage  without  clear  indication  of  the  timetable.  IAS  28  –  Investment  in 
Associates  and  IAS  41  –  Agriculture  are  currently  not  included  in  the  convergence 
programme. 

In 2006 the SEC began reviewing the first filings of IFRS based financial statements by EU 
companies.  SEC  officials  have  since  been  describing  their  observations  as  "information 
seeking" where things were not clear to them. The questions have focused on the presentation 
and disclosure of the information in the financial statements. 

CESR and the SEC agreed on and published a joint Work Plan on 2 August 2006. This Work 
Plan is an important step in bringing about operational and supervisory cooperation between 
regulators  to  ensure  consistent  enforcement  of  IFRS  and  US  GAAP.  Furthermore,  the 
Financial  Reporting  Council  (FRC),  SEC  and  the  UK  Financial  Services  Authority  (FSA) 
signed on 25 April 2007 a protocol  for implementing this Work  Plan  between  the SEC and 
CESR as it relates to sharing information on the application of IFRS by issuers listed in the 
UK and the US. 

In April 2007,  in the  framework  of  the regular yearly EU-US Summit, both sides agreed to 
take steps towards the convergence, equivalence or mutual recognition, where appropriate, of 
regulatory standards based on high quality principles. In particular, the focus will be given on 
the  promotion  of  conditions  for  the  U.S.  GAAP  and  IFRS  to  be  recognized  in  both 
jurisdictions. As a confirmation of this agreement, the President of the USA, the President of 
the European Council and the President of the Commission signed on 30 April an agreement 
containing the following statement in relation to financial reporting: 

6 

CESR's advice to the European Commission on the work programmes of the Canadian, Japanese and 
US standard setters, the definition of equivalence and the list of third country GAAPs currently used on 
the EU Capital Markets (6 March 2007).  

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"Financial Markets. Promote and seek to ensure conditions for the U.S. Generally Accepted 
Accounting  Principles  and  International  Financial  Reporting  Standards  to  be  recognized  in 
both jurisdictions without the need for reconciliation by 2009 or possibly sooner.7 " 

Following a  press  statement in  April8,  the SEC,  on 20 June  2007 announced  its proposal to 
allow IFRS based financial statements of foreign issuers to be filed without any reconciliation 
requirement9. The comment period was set at 75 days from date of publication in the Federal 
Register. 

The same press statement had also indicated the possibility that the SEC could give US based 
companies the option of using IFRS for their financial statements instead of US GAAP.  

Japanese GAAP 

In  March  2005  the  Accounting  Standards  Board  of  Japan  (ASBJ)  and  the  IASB  launched  a 
joint  (convergence)  project  with  the  final  goal  of  achieving  convergence  between  Japanese 
GAAP and IFRS. During the course of this project the ASBJ has been accelerating its revision 
of  Japanese  accounting  standards  to  reduce  the  differences between  the  two  GAAPs.  Under 
this  approach  the  ASBJ  and  IASB  have  identified  “short-term  projects”  and  “longer-term 
projects”.  Short-term  projects  are  scheduled  to  be  concluded  by  the  beginning  of  2008.  For 
longer-term projects such as revenue recognition, performance reporting (financial statement 
presentation),  intangibles  (including  R&D  expenses),  the  scope  of  consolidation  (including 
Special  Purpose  Entities  "SPEs"),  impairment  of  fixed  assets  and  retirement  benefits,  the 
ASBJ has decided to initiate (research) projects in order to align the work with the projects 
run by the IASB and the FASB. 

Following  Commission's  request,  CESR  has  given  preliminary  information  on  the  progress 
made  on  the  convergence  work  programmes  indicating  both  the  current  situation  and  the 
expected  developments  for  2007/2008.  An  overview  of  issues  identified  by  CESR  or  on 
which there is a convergence project is given in annex 2 of this paper. 

Three  out  of  the  twenty  six  issues  identified  by  CESR  in  2005  were  classified  as  requiring 
supplementary  statements.  The 
their  expected  progress  regarding 
convergence are as follows:  

issues  and 

three 

(1) 

Business combinations (pooling-of-interest method) 

A Project Team was launched in December 2006. A research report should be issued in the 
third quarter of 2007. Depending on the discussion on this research report, a discussion paper 
may be issued in the fourth quarter of 2007. A recent analysis by the Tokyo Stock Exchange 
shows that the pooling-of-interest method was not used for any business combination during 
the first half financial year ended 30 September 2006.  

This fact should have an influence on the reconsideration of the pooling-of-interest method.  

7 

8 
9 

Framework For Advancing Transatlantic Economic Integration Between The European Union And The 
United States Of America - Annex 2 Lighthouse Priority Projects. 
SEC Press statement 2007-72 of 24 April 2007. 
SEC Open meeting 20 June 2007. 

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(2) 

Scope of consolidation (enhanced disclosure and consolidation of SPEs) 

A  technical  committee  was  established  for  this  issue  and  deliberations  thereon  have  been 
initiated.  

As  for  deliberations  of  the  disclosure,  the  ASBJ  released  the  "Guidance  on  Disclosure  of 
Certain  Special  Purpose  Entities"  on  23  March  2007  being  effective  for  financial  years 
beginning  on  or  after  1  April  2007.  As  for  deliberations  of  the  scope  of  consolidation,  a 
discussion paper will be released by the end of 2007. 

It has to be noted that convergence progress has been made in other areas too: 

•  In the area of IAS 2 Inventories and the question of the use of LIFO method (last-
in-first-out) the ASBJ has set up a project team in January 2007 with the aim to 
get a decision by the beginning of 2008. 

•  Regarding IAS 36 Impairment of Assets the ASBJ has launched a project team in 
January 2007. The project team aims at submitting a research report to the ASBJ 
Board by the end of 2007. 

•  Regarding  deliberations  on  IAS  38  Intangible  Assets  and  the  question  of 
capitalisation of development costs, ASBJ expects to issue a discussion paper by 
the end of 2007. 

(3) 

Uniformity  of  accounting  policies  (overseas  subsidiaries  and  associated 
companies) 

Following the release of Practical Issues Task Force (PITF) No. 18 (May 2006), accounting 
policies applicable to foreign subsidiaries will be unified substantially with those applicable to 
parent  companies.  PITF  No.  18  will  be  applied  from  April  2008  (earlier  application 
encouraged).  As  for  associated  companies,  the  ASBJ  launched  a  project  team  in  January 
2007. Based on the deliberations an exposure draft may be released by the end of 2007. 

In  the  first  two  accounting  sessions  between  experts  of  the  European  Commission  and  the 
Japanese FSA, the progress of the work program was discussed. According to the Project Plan 
in January 2008, 7 out of 16 projects or sub-projects will have reached the final project status 
and 2 (possibly 5) will be in the deliberating phase towards finalisation at the Board level. 

Canadian GAAP 

In  January  2006,  the  Accounting  Standard  Board  of  Canada  (AcSB)  decided  to  move 
financial  reporting  for  Canadian  publicly  accountable  enterprises  to  IFRS.  The  definition  of 
publicly accountable enterprises currently includes listed companies and entities which raise 
funds from the public, such as banks and insurance companies. 

The AcSB's Implementation Plan for incorporating IFRS into Canadian GAAP published on 
30 June 2006 assumes that IFRS will be implemented as from 1 January 2011. This timeline 
should be finalised by 31 March 2008 following a progress review currently underway. 

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5. 

CONVERGENCE WORK BY OTHER THIRD COUNTRIES 

Chinese GAAP 

In  February  2006,  the  Ministry  of  Finance  of  the  People's  Republic  of  China  (the  'MoF') 
formally  announced  the  issuance  of  the  Accounting  Standard  for  Business  Enterprises 
('ASBE'). These ASBEs cover nearly all topics under current IFRS, though some exceptions 
to  IFRSs  are  noted.  These  standards,  which  became  effective  from  1  January  2007,  are 
mandatory for all listed Chinese enterprises. Other Chinese enterprises are also encouraged to 
apply these standards.  

The MoF and the IASB have acknowledged that convergence is an ongoing process. The MoF 
identified  a  number  of  accounting  issues  that  might  help  to  provide  input  for  the  IASB  in 
finding  solutions  for  IFRS  projects  currently  undertaken  in  the  area  of  disclosure  of  related 
party  transactions  -  particularly  the  'state  controlled  enterprises  exemption'  -  (the  IASB 
published an Exposure Draft on 22 February 2007), business combinations of entities under 
common control, and fair value measurement.  

In  November  2006  the  Ministry  of  Finance  of  China  has  issued  limited  implementation 
guidance  on  32  of  the  38  Accounting  Standards  for  Business  Enterprises  (ASBEs)  that  it 
adopted  in  February  2006,  effective  for  2007  financial  reports  of  Chinese  listed  companies. 
The MOF guidance is currently available only in Chinese. 

Indian GAAP 

In  March  2006,  the  Indian  Prime  Minister  announced  that  his  government  will  introduce 
comprehensive  new  company  legislation  that  will  include  aligning  Indian  accounting 
standards with IFRS. The new law will replace the existing 50-year-old Indian companies law 
and has the objective of promoting greater transparency and efficient governance. 

The Institute of Chartered Accountants of India (ICAI) has set up a task force to explore the 
possibility  of  fully  adopting  all  International  Financial  Reporting  Standards,  without 
modification,  as  Indian  standards.  It  will  develop  a  concept  paper  on  adoption  of  IFRS  in 
India.  

Russian GAAP 

The Government decision for Russian listed Companies to move towards IFRS was taken in 
2002. Under this plan, the listed companies in Russia were required to prepare consolidated 
financial statements using IFRS starting in 2004. The individual company financial statements 
of members of the group would continue to be prepared using Russian GAAP. For banks, also 
individual  banks  were  required  to  prepare  IFRS  financial  statements  in  addition  to  Russian 
GAAP statements. Currently, only banks are required to prepare their consolidated accounts 
under IFRS and the individual accounts under the local GAAP. There has been no progress 
since 2005 as regards the requirement for listed companies to prepare accounts under IFRS; 
the  companies  are  preparing  their  accounts  under  the  local  (Russian)  GAAP,  which  still 
contains  certain  differences  from  the  IFRS.  In  addition  to  the  statutory  GAAP,  some  listed 
companies report also under IFRS (or US GAAP) on a voluntary basis. 

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6. 

CONCLUSIONS  

In this first report the Commission draws encouragement from each of the timetables of the 
authorities  of  Canada,  Japan  and  the  US  in  respect  of  the  work  being  carried  out  under  the 
convergence programmes. 

With  regard  to  the  US,  the  Commission  takes  note  of  the  progress  on  convergence. 
Furthermore the Commission welcomes statements made by SEC officials which explain that 
they are "not seeking to dictate interpretations of IFRS"10 and notes that their reviews of the 
first year's filings of IFRS financial statements by European issuers have centred on matters of 
presentation and disclosure. Further to the understanding reached between the US and the EU 
on  30  April,  the  Commission  also  welcomes  the  SEC's  announcement  of  proposed  rule 
changes  to  allow  IFRS  based  financial  statements  to  be  filed  without  any  reconciliation 
requirement. The Commission attaches great importance to the SEC's work on its Roadmap 
for the removal of the reconciliation requirement to US GAAP and this will be a key focus of 
the  Commission's  report  in  April  2008.  With  the  EU  and  US  timetables  for  equivalence 
having  now  been  aligned,  both  have  the  possibility  to  monitor  closely  developments  in  the 
other jurisdiction. In this context, there is a clear need to deepen the co-operation between the 
European Commission and the SEC. There should be regular meetings between Commission 
and SEC officials to establish staging posts and take stock of developments. 

Equally,  steady  progress  towards  eliminating  the  need  for  reconciliation  depends  to  a 
significant degree on the trust and communication that exist among regulators. Co-operation 
and information-sharing among regulators needs to be enhanced, and thus Commission fully 
supports  the  work  plan  of  the  SEC  and  CESR,  which  includes  dialogue  about  the 
implementation  of  IFRS.  Recognizing  that  IFRS  are  principles-based  standards,  regulators 
should  give  full  consideration  to  the  positions  of  their  international  counterparts  regarding 
application  and  enforcement  of  IFRS,  and  seriously  endeavour  to  avoid  conflicting 
conclusions. 

Regarding Japan, the release in October 2006 of the "ASBJ Project Plan” focusing on projects 
specifically related to convergence is welcome. In releasing the ASBJ Project Plan, primary 
emphasis has been placed on mapping out the work to be completed by the end of 2007, and 
also  on  clarifying  the  prospects  of  convergence  status  as  of  the  beginning  of  2008.  Priority 
was given to initiatives related to the 26 issues for which the remedies were advised by CESR 
in their advice to the Commission in 2005. The Commission is encouraged by these positive 
developments but stresses that it is necessary to keep up the pace of,(and in certain areas even 
accelerate, convergence activities. In order to achieve the objectives as defined by the work 
program the Japanese authorities have to keep the level of convergence activity very high and 
provide  accurate  and  complete  information  on  progress,  including  any  delays  if  they  arise.. 
The program is ambitious but achieving itsobjectives is an important basis for the equivalence 
decision. 

The Commission welcomes the Canadian announcement, in 2006, on the adoption of IFRS for 
financial reporting for Canadian publicly accountable enterprises and the indication of the 1 
January 2011 as that date for such a changeover. The Commission trusts that this or even an 
earlier  date  and  timeline  for  moving  to  IFRS  for  incorporating  IFRS  into  Canadian  GAAP 
will be confirmed in 2008. 

10 

Speech by John A. White, Director, Division of Corporate Finance (SEC), London, 15 January 2007 

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As  regards  China,  the  issuance  of  the  ASBEs  which  cover  nearly  all  topics  under  existing 
IFRS (though some exceptions to IFRSs are noted) is seen as a positive step. The Commission 
encourages  the  Chinese  authorities  to  continue  work  on  convergence  and  would  welcome  a 
detailed timetable setting out the key stages envisaged to be reached in the near future. 

In India, the decision to align Indian accounting rules with IFRS coupled with a newly created 
task  force  to  explore  the  possibility  of  adopting  of  IFRS  in  full  is  encouraging.  The 
Commission  would  welcome  further  information  on  these  plans  for  adopting  IFRS  without 
modifications and especially with regards to the timeframes for reaching any key stages which 
might be envisaged in the near future.  

As  regards  Russia,  recent  discussions  with 
that 
the Government decisions for Russian listed Companies to move towards IFRS and to bring 
Russian GAAP in line with international standards are still on the agenda. The Commission 
hopes that the current obstacles which have slowed down this work will soon be resolved. The 
Commission  would  welcome  further  clarifications  as  regards  the  possibilities  for  quickly 
resuming the work and, once work has restarted, timeframes for bringing Russian GAAP in 
line with IFRS. 

the  Russian  authorities  confirm 

The  Commission  will  continue  to  closely  monitor  and  regularly  inform  the  European 
Securities  Committee  and  the  European  Parliament  about  the  progress  in  convergence  as 
regards Canadian, Japanese and US GAAP, as required by Article 35(5A) of the Prospectus 
Regulation and Article 2(2) of the Decision under the Transparency Directive. Issues related 
to  convergence  feature  in  the  discussions  in  the  Regulatory  Dialogues  and  there  are  regular 
staff  level  contacts  between  the  Commission  and  the  authorities  of  the  third  countries 
concerned. The Commission will also regularly keep the European Securities Committee and 
the European Parliament informed as regards the development of regulatory discussions and 
the  amount  of  progress  in  the  convergence  to  IFRS  of  other  third  countries  referred  to  in 
Article  35  (5A(c))  of  the  Prospectus  Regulation  and  Article  1  (c)  f  the  Decision  under  the 
Transparency Directive. Such regular information is an obligation under Article 35(5B) of the 
Prospectus Regulation and Article 2(3) of the Decision under the Transparency Directive. 

The  EU  is  the  largest  jurisdiction  making  use  of  IFRS  and  has  a  strong  interest  in  moving 
forward  towards  worldwide  standards.  The  Commission  therefore  welcomes  all  initiatives 
which pave the way for IFRS to become the global standards. 

Annexes:  IASB  -  FASB  Roadmap,  Project  plan  concerning  the  development  of  Japanese 
Accounting Standards, Canadian convergence work programme. 

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