1. Introduction
The Sarbanes-Oxley Act of 2002 recommends global accounting convergence as a means of raising the quality of financial reporting and restoring investor confidence in publicly traded companies. Probably nothing will be more important to global accounting convergence than the decision of the European Commission to adopt International Financial Reporting Standards (IFRS).1 In June 2002, the European Union (EU) Council of Ministers approved a regulation requiring EU-listed companies to prepare consolidated financial statements in accordance with IFRS for years beginning on or after January 1, 2005. The Act was approved by the European Parliament and enacted into law on September 11, 2002, as Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the Application of International Accounting Standards (IAS) (IAS regulation). This IAS regulation will cover all companies listed on a regulated market, including banks and insurance companies. Member States have the option to extend this requirement to unlisted companies and to individual financial statements. Companies traded both in the EU and on a regulated market outside the EU that are already applying another set of internationally accepted standards (for example, U.S. Generally Accepted Accounting Principles (GAAP)), and companies that have issued debt instruments but not equity instruments may be temporarily exempted by the Member States and not required to comply with IFRS until January 1, 2007 (EC, 2002).