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IFRS Enforcement and Governance

IFRS Enforcement and Governance. Leo Goldschmidt Director of ECGI (European Corporate Governance Institute) www.ecgi.org OECD - Russian Corporate Moscow Governance Roundtable 11 November 2004. Enforcement. Broad and narrow definitions

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IFRS Enforcement and Governance

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  1. IFRS Enforcementand Governance Leo Goldschmidt Director of ECGI (European Corporate Governance Institute) www.ecgi.org OECD - Russian Corporate Moscow Governance Roundtable 11 November 2004

  2. Enforcement • Broad and narrow definitions • Prevention and then identification /correction of errors /omissions • Investigation of non compliance and its causes • Disciplining and sanctioning malfunction and fraud

  3. Levels of enforcement of IFRS • Internal • Self enforcement (preparers) • Audit (internal) • Oversight / Assessment /Approval (audit committee / board / AGM) • External • Audit • Oversight / Assessment /Sanction (official / market/ press)

  4. Primacy of Company • 1st level of responsibility • Other levels : failsafe Companies must have mechanisms in place to exercise that responsibility = Corporate Governance

  5. Corporate Governance • Set of principles, structures, mechanisms • To ensure • Companies are properly run Based on • Integrity • Fairness • Accountability / transparency

  6. IFRS related CorporateGovernance (1) • Structures and mechanisms • Systems, infrastructure : organised, resourced departments • Accounting • Control • Internal audit

  7. IFRS related Corporate Governance (2) • Structures and mechanisms • Managerial and oversight organs : aware, responsible and active • Management • Audit committee • Board • AGM

  8. IFRS related Corporate Governance (3) • Structures and mechanisms • Procedures / Responsibilty : decision making, assessment, sign off • Authority : powers, reporting lines

  9. IFRS related Corporate Governance (4) • Conflicts of interest • Where possible : avoid and minimise • Where they subsist : manage & foster independence

  10. IFRS related Corporate Governance (5) Tools : Examples • Separation of functions • Incompatibilities – criteria • Definition of reporting lines / Chinese walls • Disclosure (substance, process) • Whistle-blowing procedures

  11. Other levels of enforcement • Same principles

  12. Conclusions • Governance issues : Nothing new – same principles • IFRS related Governance is relevant • both internally and externally to the company • both as framework and in concrete applications • Primary aim of enforcement : to prevent, detect and correct errors in corporate financial reporting • Primary responsibility for IFRS implementation and compliance lies with the company • Corporate governance is not only relevant to IFRS, it is essential

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