©2005 Deloitte & Touche LLP. Private and confidential 1 The role of a National Accounting Standard...

©2005 Deloitte & Touche LLP. Private and confidential 1

The role of a National Accounting Standard Setter in the EU

2 ©2005 Deloitte & Touche LLP. Private and Confidential

Agenda

• Working within Europe

• National standards

• Role of National Standard Setters

• Working with the IASB and international convergence

• National standards and convergence

• IASB Project for SMEs

• Urgent issues and interpretations

• Structure and resources


IFRS – Changing accounting

Two routes

EC RegulationNo 1606/2001 National GAAP

IFRS required for consolidated financial statements for listed securities companies

Based on EU 4th and 7th Company Law Directives –

subject to change via Directives

National jurisdictions could require/allow others (single companies or consolidated)

to move to IFRS

National jurisdictions may wish to move to

IFRS over time

A B


IFRS Volunteers – Single companies


IFRS banned for single companies


IFRS don’t knows


IFRS – Changing accounting

Two routes

EC RegulationNo 1606/2001 National GAAP

IFRS required for consolidated financial statements for listed securities companies

Based on EU 4th and 7th Company Law Directives –

subject to change via Directives

National jurisdictions could require/allow others (single companies or consolidated)

to move to IFRS

National jurisdictions may wish to move to

IFRS over time

A B


National standards

• Based on EC 4th/7th Directives

• Fair Value Directive 2001/65/EEC

• Modernisation Directive 2003/51/EC

• Designed to bring national law “in line with modern accounting practices”

• Removes all inconsistencies between EC and IFRS as at 1 May 2002


Role of National Standard Setters

• Those entities going directly to IFRS, where permitted or required

• Those entities affected by changes in national law and standard

i.e. A

i.e. B


Role of National Standard Setters

• Those entities going directly to IFRS, where permitted or required

• Those entities affected by changes in national law and standard

1) INFLUENCE IASB

2) INFLUENCE EFRAG/EC RE ADOPTION

i.e. A

i.e. B

3) ENSURE STANDARDS ARE UP TO DATE AND MEET EU REQUIREMENTS

4) CONVERGE NATIONAL STANDARDS TO IFRS BUT OVER WHICH PERIOD?


Working with the IASB

• From 2001 to date, IASB recognised- National Standard Setters (NSS)- World Standard Setters (WSS)

• NSS are- Australia and New Zealand - Japan- Canada - UK- France - US- Germany

• But this is changing

• IASB “Draft Memorandum of Understanding on the role of Accounting Standard Setters and their relationships with the IASB” (MoU)

• Issued Feb 2005, comments 29 July 2005


IASB Draft MoU – Standard Setters1. Work with national regulators / governments to promote

convergence and channel for information

2. Encourage constituents to comment to IASB

3. Use round-tables or other forums to encourage comments

4. Advise IASB a.s.a.p. of any technical differences of opinion

5. Undertake research for IASB and be involved in project teams

6. Comment directly on IASB papers

7. Monitor implementation and identify issues

8. Advise IASCF of educational needs


Influencing EFRAG/EC – Which standards to adopt?

Commission

ARC

Supervisory body

EFRAG

FEE UNICE Others

ASB


National standards and convergence

• UK allows almost all companies to use IFRS

• UK’s Accounting Standards Board (ASB) is committed to converging to IFRS

• ED “The role of the ASB” issued March 2005, comments 15 Sept 2005

• Backlash re lengthy and apparent US influenced IFRS


ASB Convergence Plans

• Changes to Directives meant ASB had to bring in– IAS 10 ‘Events after the balance sheet date’

– Part of IAS 32 ‘Financial Instruments’ on presenting debt/equity split

• Made single listed companies very similar to consolidated listed companies by requiring IFRS 2, IAS 32, IAS 39, IAS 21 and IAS 29

• Planned batches of changes from 2006 to 2008/9 but awaiting consultation results

• IASB Project for SMEs


IAS Project for SMEs

• Debate on type of entity– small/medium-sized, or

– non publicly accountable

• Will it result in a standalone standard or be a different way of using full IFRS?

• Taking time to develop. Considerable consensus in Working Group but IASB to be persuaded

• Possible ED in 2006


Interpretations

• IFRIC issues interpretations

• ASB / UITF will encourage IFRIC

• If no IFRIC, UITF may issue “non-mandatory UITF views”

• A European “issues” body is under consideration

• ASB will support this as appropriate


Structure and resources

Financial Reporting Council

Accounting Standards Board

Smaller Entities

Urgent Issues Task Force

Public Benefit Entities

Financial/Specialist Industries

UK independent regulator

2 full-time members8 part-time members

+ staff of 16 at a cost of £2.8m


National standard setter – summary• Important role as part of IASB network

• Varying role re national standards for non-listed groups in the EU


“© Deloitte & Touche LLP: The seminar and these accompanying handouts have been written in general terms and therefore cannot be relied on to cover specific situations; furthermore, responses given in the seminar to questions are based on only an outline understanding of the facts and circumstances of the cases and therefore do not form a substitute for considered specific advice tailored to your circumstances. Applications of the principles set out will depend on the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this seminar and these accompanying handouts. Deloitte & Touche LLP would be pleased to advise readers on how to apply the principles set out in this handout to their specific circumstances. Please feel free to contact any partner.

We would be pleased to advise you on the application of the principles demonstrated at the seminar to your specific circumstances but in the absence of such specific advice cannot be responsible or liable to you for the content of our presentation.

©2005 Deloitte & Touche LLP. Private and confidential 1 The role of a National Accounting Standard...

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