Following a favourable opinion by the European Parliament, the European Commission (EC) has adopted Regulation (EC) No 1569/2007 which sets out the method for EC to assess the equilvalency of 'third-country' (non-EU) GAAPs to IFRSs as adopted by the EU.

The GAAP of a third country may be considered equivalent to IFRS if the GAAP financial statements of the third country concerned enable investors to make a similar assessment of the assets and liabilities, financial position, profit and losses and prospects of the issuer as IFRS financial statements.

If a non-EU GAAP is deemed equivalent, foreign companies which have securities trading in EU markets, would be permitted to use that GAAP in Europe without providing a reconciliation to IFRSs.

The commission would determine the equivalence of a non-EU GAAP on its own initiative if requested, either by an EU member state or on application from an authority responsible for a non-EU country's accounting standards or market supervision.

Further reading:

EU may have to accept US GAAP next year

SEC scraps IFRS-GAAP reconciliation rule