EU sees world accounts rules aligning

EU sees world accounts rules aligning

By Tobias Buck in Brussels

Published: July 13 2007 03:00 | Last updated: July 13 2007 03:00

The accounting rules used by US, Japanese and Canadian groups are moving closer to the reporting standards employed in the European Union, according to a report by the European Commission yesterday.

The finding will be welcome news to foreign groups listed in the EU, as it now looks likely they will not be subjected to the costly burden of having to file separate accounts for their home market and Europe.

The Brussels-based regulator and the US Securities and Exchange Commission are already committed to accepting each other's accounting regimes by 2009. For other jurisdictions such as Japan, however, there was greater doubt over the EU's intentions.

The Commission's goal is to achieve convergence between the International Financial Reporting Standards applied in the EU and national regimes. It wants investors to be in a position to compare companies' performance regardless of their accounting regime.

For the moment, EU countries accept US Generally Accepted Accounting Principles (GAAP) as sufficiently similar to their own rules, but that situation is under review.

Brussels must decide before the end of next year whether other reporting rules are "equivalent" to the IFRS regime. The international reporting rules are drafted by the London-based International Accounting Standards Board but are applied across the EU and in many other jurisdictions around the world.

Should the Commission conclude that the discrepancies between the regimes are too great, US or Japanese groups listed in Europe would be forced to file a second set of accounts based on IFRS, raising fears that some groups would leave the EU market altogether.

But Charlie McCreevy, the EU internal market commissioner, indicated yesterday that Europe's main trading partners were all moving in the right direction: "I draw encouragement from the progress made in these important partner countries. It shows that we are on the right track."

The Commission report said 594 foreign groups were listed on European stock exchanges, or about 5.8 per cent of total issuers. US groups form by far the largest contingent, with 233 listings, followed by Japan with 84 and Canada with 45.

One lingering conflict concerns the fact the EU has decided to implement IFRS with minor alterations, meaning US acceptance of the international standards would not automatically remove the need to file a second set of accounts. The Commission yesterday sent a clear signal to the US that it must address this issue, saying the SEC should accept "IFRS as adopted by the EU".