THE EU REGULATION ON IFRS

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THE EU REGULATION ON IFRS
BY ERNESTO GATTO
BUDAPEST 14 OCTOBER 2005
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STATE OF PLAY
FRAMEWORK
REGULATION 1725/2003
REGULATION 1606/2002
DIRECTIVE 2003/51
DIRECTIVE 2001/65
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FRAMEWORK
EXPLAINS BASIC CONCEPTS FOR BALANCE PREPARATION
PRESENTATION
DOESNT REPRESENT AN IFRS
DOESNT CONTAIN IFRS
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FRAMEWORK
TARGETS
HELP IASC BOARD TO DEVELOP NEXT IFRS
HELP IASC BOARD TO REVISE IN FORCE IFRS
HELP NATIONAL BOARDS TO ADOPT IFRS IN DOMESTIC
LAW
HELP IASC BOARD TO SUPPORT IFRS HARMONIZATION
HELP PROFESSIONALS TO ENFORCE IFRS IN BALANCES
HELP PROFESSIONALS TO MANAGE SUBJECTS NOT COVERED
BY IFRS
HELP AUDITORS TO JUDGE ABOUT BALANCE CONFORMITY
WITH IFRS
HELP GLOBAL PLAYERS TO INTERPRET BALANCE
INFORMATION
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FRAMEWORK
CONTENTS
BALANCE AIMS
ACCOUNTING CONCEPTS
CONCEPTS OF CAPITAL CAPITAL MAINTENANCE
ADJUSTMENT
DEFINITION, SURVEY EVALUATION OF BALANCE PARTS
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REGULATION 1606/2002
PREMISES
QUICKENS THE COMPLETION OF FINANCIAL SERVICES
INTERNAL MARKET
IMPROVES COMPARABILITY OF FINANCIAL STATEMENTS
EDITED BY LISTED COMPANIES
SUPPORTS ACCOUNTING STANDARDS CONVERGENCE TO
OBTAIN A SINGLE SYSTEM AT A WORLD LEVEL
FORCES LISTED COMPANIES TO APPLY THE SAME SYSTEM
OF IAS/IFRS
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REGULATION 1606/2002
CONTENTS
ART.1 ADOPTION AND UTILIZATION OF IAS IN THE EU
TO HARMONISE FINANCIAL REPORTING WITH THE AIM OF
SUPPLYING HIGH LEVEL OF TRANSPARENCY AND
COMPARABILITY OF BALANCES .
ART.2 THE REGULATION DEFINS AND STRESSES THAT,
ACCORDING TO IT, ONLY IAS, IFRS, SIC, IFRIC
IASB ARE VALID .
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REGULATION 1606/2002
CONTENTS

• ART.3
• THE COMMISSION DECIDES ABOUT ENFORCEMENT OF
  IAS/IFRS INSIDE THE EU
• IAS/IFRS MAY BE ADOPTED ONLY ACCORDING TO
  PREVIOUS DIRECTIVES 78/660 83/349
• IAS/IFRS MAY BE ADOPTED ONLY ACCORDING TO METHODS
  OF UNDERSTANDING, RELEVANCE RELIABILITY
  COMPARABILITY.

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REGULATION 1606/2002
WHAT ENTITIES IT APPLIES TO
EU LISTED COMPANIES
ART.4 OBLIGATION TO ADOPT IAS/IFRS FROM 1/1/2005
ONLY FOR CONSOLIDATED FINANCIAL STATEMENTS
ART.5 FACULTY FOR MEMBER STATES TO ALLOW OR TO
OBLIGE IAS/IFRS FOR FINANCIAL STATEMENTS
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REGULATION 1606/2002
WHAT ENTITIES IT APPLIES TO
OTHER EU COMPANIES
ART.5 FACULTY FOR MEMBER STATES TO ALLOW/TO
OBLIGE IAS/ IFRS FOR CONSOLIDATED AND SIMPLE
FINANCIAL STATEMENTS
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REGULATION 1606/2002
RATIFICATION PROCEDURE

• ART.6
• IAS/IFRS APPLICATION IS SUBORDINATED TO EUROPEAN
  COMMISSION DECISIONS
• COMMISSION MAY DECIDE ABOUT IAS/IFRS APPLICATION
  AFTER FAVOURABLE ADVICE BY ACR (Accounting
  Regulatory Committee) EFRAG (European Financial
  Reporting Advisory Group) .

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REGULATION 1606/2002
RATIFICATION PROCEDURE

• ART.6
• RATIFICATION DEFINITELY PROVIDES IAS/IFRS WITH
  LEGAL CONTENT IN DOMESTIC LAW SYSTEM OF EU
  MEMBER STATES

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REGULATION 1725/2003
IAS/IFRS ADOPTION

• TILL TODAY 31 IAS, 5 IFRS, 11 SIC 1 IFRIC
  HAVE BEEN ADOPTED WITH SUCCESSIVE REGULATIONS
• 2086, 2236, 2237,2238 OF 2004 AND 211 OF 2005.

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REGULATION
DIRECTIVE
ENFORCEMENT IS IMMEDIATELY COMPULSORY IN EVERY EU
MEMBER STATE
ENFORCEMENT IS SUBORDINATED TO ADOPTION BY EU
MEMBER STATES WITH A SPECIFIC DOMESTIC LAW
CHOICE OF REGULATION WARDS OFF VARIATIONS,
DELAYS INTERPRETATIONS
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DIRECTIVE MODIFICATIONS
DIRECTIVE 2003/51/EU
DIRECTIVE 2001/65/EU
NECESSITY OF PREVIOUS DIRECTIVES ADJUSTMENT TO
NEW IAS/IFRS
INTRODUCTION OF FAIR VALUE METHOD FOR FINANCIAL
INSTRUMENTS