CESR unveils draft proposals for transition to IAS in 2005

The Capital Market Commission (CMC) has advised Greek listed firms to apply as soon as possible, preferably within 2003, a Draft Recommendation of proposals for consultation regarding International Accounting Standards (IAS), prepared by the Committee of European Securities Regulators (CESR). The proposals include a series of transitional provisions for 2004, the final year of preparation for the adoption of IAS in bookkeeping, according to Greek legislation. In a statement yesterday, the CESR said the transition to IAS in 2005 poses an important challenge for about 7,000 listed firms in the European Union, bound to significantly change the presentation of their financial situation. The transition must be carefully monitored, CESR said, so as to ensure that listed companies observe obligations as regards transparency. Likewise, investors are advised to bring themselves to understand the effect of new models on the compilation of financial statements and evaluate the economic position of listed firms that publish their results according to the new specifications. With Regulation 1606/2002 of July 2002, the European Commission established that European companies, securities of which are traded on regulated markets, have to introduce International Financial Reporting Standards (IAS/IFRS) to prepare their 2005 consolidated financial statements. Listed firms are urged to implement a phased transition process so that each is able to assess the economic consequences for itself and appropriately plan for the application of International Accounting Standards. Investors, on the other hand, will be at the receiving end of financial data that will have to be easily understood. Phased strategy It is considered that it will be easier for listed firms to provide such data if, according to the CESR’s draft recommendations, they implement a phased communication plan, with the use of important innovations in the drafting of financial statements. The CESR recommends: – First, that firms issuing securities announce with financial statements for 2003 that they intend to apply the transition to IAS, and explain in a comprehensible form the basic differences in the new accounting method. — Second, that at the end of 2004, issuing companies are encouraged to provide quantitative data on the material difference which the application of IAS has made on that fiscal year’s financial statements. For such purposes, where periodic financial statements are published either according to national legislation or voluntarily, the CESR recommends that it become mandatory for issuing firms to apply as of January 1, 2005 IAS 34 on the «Compilation of Periodic Financial Statements,» which sets obligations for high-standard transparency. CESR also recommends that comparative data on prior quarterly and half-yearly financial statements be provided and reformulated according to IAS by using the same accounting rules as those that will be used for the respective periods of 2005. The CESR welcomes comments and contributions from all interested parties on the Draft Recommendation. The deadline for submitting responses is November 20 2003. Responses should be addressed to Mr Fabrice Demarigny, Secretary-General, CESR, by e-mail at [email protected]