EC adopts 'equivalence mechanism' for non-EU GAAPs
European parliament's favourable response paves way for EC to adopt third-country GAAP/IFRS equivalency
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