1. 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

2. 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. 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. 4 Primacy of Company 1st level of responsibility Other levels : failsafe Companies must have mechanisms in place to exercise that responsibility = Corporate Governance

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

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

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

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

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

10. 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. 11 Other levels of enforcement Same principles

12. 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