In line with European Commission (EC) Regulation No. 1606/2002, listed companies in Finland are required to use International Financial Reporting Standards (IFRSs) in their consolidated accounts. The provisions of Regulation No. 1606/2002 led to an amendment to the Accounting Act which came into force at the end of 2004, making the application of IFRSs mandatory in consolidated accounts of all publicly listed companies in Finland. The 2006 EC report on the implementation of Regulation No. 1606/2002 points out that Finland permits IFRSs in the annual accounts for listed companies and in the annual and consolidated accounts for all other companies. Companies that choose not to apply IFRSs follow national regulations and adhere to an accounting framework governed by the Accounting Act and the Accounting Ordinance which, according to a 2002 KPMG report, differ from IFRSs.

General Overview

On July 19, 2002, EC Regulation No 1606/2002 was passed by the European Parliament and the European Council of Ministers, requiring the adoption of IFRSs, formerly International Accounting Standards, or IASs, issued by the International Accounting Standards Board (IASB). As a result of the regulation, beginning January 2005, all EU listed companies are required to prepare their consolidated financial statements following IFRSs endorsed by the EC. In 2004, amendments were made to national legislation making the application of IFRSs mandatory in the consolidated accounts of Finnish listed companies. Finland therefore adheres to EC regulations. Additionally, the 2006 EC report on the implementation of Regulation No. 1606/2002 points out that Finland permits IFRSs in the annual accounts for listed companies and in the annual and consolidated accounts for all other companies.

The 2005 Doing Business in Finland Guide by Baker Tilley explains that "in Finland the financial statements are regulated by the Accounting Act and Accounting Ordinance, the Companies Act, the Act related to general and limited partnerships, as well as statements of the Ministry of Trade and Industry (KTM) and statements and instructions issued by the Finnish Accounting Board (a state body operating in the Ministry of Trade and Industry)" (p. 12). As of January 2008, the KTM ceased all operations and its responsibilities have been transferred to the Ministry of Employment and Economy. Furthermore, the 2002 KPMG report observed that, per the Accounting Act, accounting records must be based on a general principle of good accounting practice and, unlike IFRSs, the Finnish legislation is not very detailed, and accounting practices are influenced by taxation.

According to a description of the regulatory framework provided in the 2005 self assessment of the Finnish Institute of Authorized Public Accountants (KHT-yhdistys-Föreningen CGR ry or, KHT), under the Securities Markets Act the Finnish Financial Supervision Authority (FIN-FSA) regulates the securities and banking sectors. The FIN-FSA supervises compliance with the Accounting Act for credit institutions, consortia of co-operative banks, investment companies, and mutual funds. According to a 2005 FIN-FSA paper on regulatory outline of financial statements, "the [FIN-FSA] issues regulations, guidelines and interpretations on the financial statements and annual report of unlisted credit institutions. In addition, the [FIN-FSA] issues regulations, guidelines and interpretations on the interim financial reports of deposit banks. These are based on the Accounting Act, the Act on Credit Institutions, the Act on Investment Firms and the Government Degree on the Annual Accounts and Consolidated Annual Accounts of Credit Institutions and Investment Firms" (p. 4). Empowered by the Insurance Company Act, the insurance sector is regulated by the Insurance Supervisory Authority (Vakuutusvalvonta, or ISA).

According to a 2008 report by the Central Chamber of Commerce (Centralhandelskammaren Keskuskauppakamari, or CCC), the KHT is a private professional body responsible for setting national auditing standards and ethics requirements based on the International Federation of Accountants (IFAC) recommendations and standards. Further, the 2006 KHT self-assessment notes that the KHT translates and publishes IFRSs and other IASB pronouncements into Finnish and develops guidance regarding the international standards. Per the CCC paper, the regulatory oversight of the accountancy profession is performed by the CCC's Auditing Board, which ensures compliance with the Auditing Act and other professional requirements of the KHT and regional auditors of the Registered Association of Certified Auditors (HTM-tilintarkastajat ry, or HTM). According to the 2006 self-assessment, the KHT adopted the 2004 IFAC code of conduct with modifications. However, the code was subsequently revised. The KHT self-assessment explains that the KHT is in the process of amending its ethical requirements in accordance with the revised IFAC Code. The KHT and the HTM are listed as members on the IFAC website.

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IFRS 2: Share-based Payment (effective 2005)

II

According to the 2002 KPMG report, "disclosure requirements are less extensive than under IAS" (p. 14). However, there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IFRS 3: Business Combinations (effective 2004)

II

According to the 2002 KPMG report, among other differences, "pooling of interests accounting is fairly common [and] fair value adjustments may be subsumed within goodwill" (p. 7). The IASB subsequently revised IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IFRS 4: Insurance Contracts (effective 2006)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

II

According to the 2002 KPMG report, "there are no specific rules for discontinuing operations" (p. 16). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

II

According to the 2002 KPMG report, "there are only limited disclosure requirements for financial instruments" (p. 16). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 1: Presentation of Financial Statements (effective 2007)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 2: Inventories (effective 2005)

II

According to the 2002 KPMG report, among other differences "cost may include only variable costs" (p. 11). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 7: Cash Flow Statements (effective 1994)

II

According to the 2002 KPMG report, "there are no specific rules concerning the form of a financial analysis. A sources and application of funds statement is adequate" (p. 6). No further information on Finland's compliance with this principle is publicly available.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 10: Events after the Reporting Period (effective 2005)

II

According to the 2002 KPMG report, "other than for dividends, there are no specific rules relating to accounting for events after the balance sheet date" (p. 9). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 11: Construction Contracts (effective 1995)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 12: Income Taxes (effective 2001)

II

According to the 2002 KPMG report, among other differences, "current tax amounts are not recognized directly in equity [and] some tax items are presented as operating expenses" (p. 15). No further information on Finland's compliance with this principle is publicly available.

IAS 14: Segment Reporting (effective 1998)

II

According to the 2002 KPMG report, "there is no specific guidance on identifying reportable segments" (p. 15). No further information on Finland's compliance with this principle is publicly available.

IAS 16: Property, Plant and Equipment (effective 2005)

II

According to the 2002 KPMG report, among other differences, "cost generally may include only variable costs [and] the estimated cost of dismantling and removing an asset and restoring the site usually is not capitalized" (p. 9). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 17: Leases (effective 2005)

II

According to the 2002 KPMG report, among other differences, "the classification of leases into finance or operating leases is optional. There are no specific requirements on the treatment of lease incentives" (p. 15). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 18: Revenue (effective 1995)

II

According to the 2002 KPMG report, among other differences, "the percentage-of-completion method is optional for contract accounting. The completed contract method is allowed instead" (p. 13). No further information on Finland's compliance with this principle is publicly available.

IAS 19: Employee Benefits (effective 2006)

II

According to the 2002 KPMG report, among other differences, "there are no specific requirements on accounting for employee benefits except for insurance companies and pension foundations" (p. 14). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

II

According to the 2002 KPMG report, "there are no significant differences from IAS in practice" (p. 14). No further information on Finland's compliance with this principle is publicly available.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

II

According to the 2002 KPMG report, among other differences, there are no rules for accounting for hyperinflation. The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 23: Borrowing Costs (effective 1995)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 24: Related Party Disclosures (effective 2005)

II

According to the 2002 KPMG report, among other differences, "the definition of related parties is more limited than under IAS" (p. 16). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 28: Investments in Associates (effective 2005)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 31: Interests in Joint Ventures (effective 2005)

II

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

II

According to the 2002 KPMG report, among other differences, "there are only limited accounting rules for financial instruments" (p. 11). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 33: Earnings per Share (effective 2005)

II

According to the 2002 KPMG report, among other differences, "EPS [earnings per share] is not disclosed on the face of the income statement" (p. 16). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 34: Interim Financial Reporting (effective 1999)

II

According to the 2002 KPMG report, "no separate equity statement or financial analysis is required" (p. 17). No further information on Finland's compliance with this principle is publicly available.

IAS 36: Impairment of Assets (effective 2004)

II

According to the 2002 KPMG report, "impairment losses for non-current assets are recognized only when they are expected to be permanent" (p. 11). Other differences were also noted. The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

II

According to the 2002 KPMG report, "there are no specific rules on the recognition of contingent assets or liabilities" (p. 13). No further information on Finland's compliance with this principle is publicly available.

IAS 38: Intangible Assets (effective 2004)

II

According to the 2002 KPMG report, "internally generated intangible assets, e.g. development costs, may be expensed or capitalized" (p. 10). Other differences were also noted. The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

II

According to the 2002 KPMG report, differences exist. However the IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 40: Investment Property (effective 2005)

II

According to the 2002 KPMG report, "Finnish GAAP does not deal specifically with investment property" (p. 10). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

IAS 41: Agriculture (effective 2003)

II

According to the 2002 KPMG report, "there are no regulations regarding biological assets, although there are guidelines on certain aspects of accounting for cattle" (p. 11). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.