Co-ordination of IFRS in EU (CESR-Fin) and in the UK

1. Co-ordination of IFRS in EU(CESR-Fin) and in the UK Carol Page Secretary, Director, Panel Operations The Financial Reporting Review Panel (FRRP) Part of the Financial Reporting Council (FRC) REPARIS Workshops on Accounting and Audit Regulation, Vienna, Thursday March 15, 2006

2. FRC Council Accounting Standards Board Auditing Practices Board Professional Oversight Board for Accountancy Financial Reporting Review Panel Accounting Investigation and Discipline Board FRC Organisational diagram • FRC established in 1990, to improve the quality of financial reporting in the UK • FRRP established in 1991 to enforce accounting standards

3. FRRP • Consensual approach to enforcement • Peer review by financial reporting community • Single power to go to court to revise defective accounts – never utilised • Established as a reactive agency • Private organisation – funded by: government, accounting profession, listed companies • Communicate directly with company Chairman • Panel members –volunteers from across the financial community- lawyers, auditors, finance directors • Strong deterrent effect • 12 years of operation: over 70 actions resulting in voluntary correction of accounts

4. Role of FRRP reconsidered • Post Enron • In light of IFRS Regulation 1606/2002 Recital 16 “The Commission intends to liaise with Member States, notably through the Committee of European Securities Regulators (CESR) to develop a common approach to enforcement”

5. Development of FRRP • Memorandum of Understanding with Financial Services Authority (FSA) UK Securities Regulator • Technical adviser to FSA on CESR sub-committee on enforcement (CESRfin SCE) • Welcomed as active participant in CESRfin SCE • Able to contribute directly to development of CESR Standards of Financial Information and other guidance • Two principles based standards • Changes to operations to meet requirements of Standard 1 • Increased powers • Active selection • Extended remit

6. Standard No 2 ‘Co-ordination of Enforcement Activities • Enforcement remains national responsibility but need for “road map” that sets out common approach to enforcement across EU • Need to: • Demonstrate consistent application of IFRS • Discuss enforcement decisions • Share experiences – sampling approach, compliance methodologies

7. Standard No 2 Four principles • Enforcers should take account of previous decisions • Includes ex ante, ex post decisions • Recognises practicalities – timing, feasibility, early discussion

8. Principles 2 and 3 • Decisions taken by enforcers to be made available to others • Private database of relevant enforcement decisions • Action and ‘no-action’ decisions • Includes ex ante, ex post decisions

9. Database • Specific cases but on a no-names basis to guarantee confidentiality • Input policies that determine database criteria • Not database of all decisions • Not a rule-book • Is a database of key decisions that are of significance because of nature, materiality, complexity, occurrence

10. Principle 4 – European Enforcers Co-ordination Sessions (EECS) • All EU national enforcers of accounting information invited to participate • Regular meetings to • Exchange views on cases • Discuss decisions taken or to be taken • Opportunity to discuss general enforcement issues – sampling, how to improve responses from companies • Not a second chamber that revises or approves

11. EECS • Overall objective – improve convergence on future decisions • Efficient and flexible • Success depends on • practical co-operation of members • quality of output • Commitment to the process

12. Experience in practice EECS sessions commenced early 2005 • Attended by up to 25 EU national enforcers • Mixture of enforcement bodies – securities regulators, private bodies, semi-private organisations • Discuss decisions submitted to database • Discuss decisions to be taken, issues on the horizon • Collaborate on issues of common interest • Tour de table of enforcement activities • Guidance on sampling • Results of studies, reviews