CPEffective Insolvency and Creditor Rights Systems
According to a 2002 study prepared for the European Commission (EC), in Denmark, 23 of the Principles for Effective Insolvency and Creditor Rights Systems developed by the World Bank have been fully adopted, 11 have been almost fully adopted, 5 have been partially adopted, and 2 have not been adopted. The EC report of 2002 notes that the current operative Danish insolvency legislation is the Bankruptcy Act of 1997 as amended in 1998, adding that in 2001 a Bankruptcy Board was created to investigate issues relating to insolvency and bankruptcy and to make recommendations for reforms. A 2006 PricewaterhouseCoopers (PWC) study found that the Danish insolvency system was mainly creditor-oriented. The PWC report noted that there were some draft reforms being developed that would address debt restructuring for small-claim insolvency proceedings.
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NCInternational Financial Reporting Standards
In line with the EC's Regulation No. 1606 of 2002, listed companies in Denmark are required to use International Financial Reporting Standards (IFRSs) as endorsed by the European Union for preparation of consolidated accounts. The 2008 EC report on the implementation of Regulation No. 1606 notes that starting 2009, all non-financial listed companies will also be required to use IFRSs in preparation of annual accounts. All other entities will be permitted to prepare annual and consolidated accounts in accordance with IFRSs. Entities that do not apply international standards follow national Generally Accepted Accounting Principles (GAAP) primarily comprised of the Financial Statements Act, the Danish Accounting Standards (DKASs), and Ministerial Orders issued by the Ministry of Business and Industry in Denmark. A 2004 report by Bebbington and Song notes that although the Financial Statements Act is based on the International Accounting Standards Board framework, differences exist largely due to the incorporation of the requirements laid out in the EC directives. Similarly, the DKASs, which are applicable to listed entities, are based on IFRSs, although there are differences with the equivalent international standard, the report adds. As far as the financial reporting requirements for small and medium-size enterprise (SMEs) are concerned, a presentation by Jan-Christian Nielsen of the Danish Commerce and Companies Agency notes that starting 2009, the international standard on SMEs may be allowed but not required in Denmark.
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CPPrinciples of Corporate Governance
According to a 2007 IMF Technical Note, the Danish framework for corporate governance is not only "largely compliant" with the Organization for Economic Cooperation and Development's (OECD) Principles of Corporate Governance, but in some areas goes beyond these standards. In fact, the report notes that the Danish Recommendations on Corporate Governance will guide international work to further strengthen corporate governance standards. In 2001 the Nørby Committee was established to make recommendations on measures to improve corporate governance and the Committee decided to make specific Danish recommendations instead of using international standards - such as the OECD Principles. The Nørby Committee's recommendations are implemented on a comply-or-explain basis and were updated in 2004. A 2008 U.S. County Commercial Guide for Denmark further corroborates that in general, Danish corporate law is in line with European Union legislation and that the legal, regulatory and accounting systems are transparent and in line with international standards. However, the small size and limited liquidity of Danish equity markets can pose a challenge to effective investor protection.
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IDInternational Standards on Auditing
According to a 2007 Institute of State Authorized Public Accountants (FSR) self-assessment, Denmark adopts International Auditing and Assurance Standards Board's pronouncements as national standards although with modifications to reflect the local legal environment. The self-assessment reiterates that all of the International Standards on Auditing (ISAs) promulgated by the IAASB have been adopted with the exception of ISA 320, ISA 501, and ISA 600. However, ISAs not adopted at the time of the self-assessment were expected to be adopted in the spring of 2007, the self-assessment adds, though as of November 2008 there is no publically available information confirming their adoption. With the enactment of Directive 2006/43/EC of the European Parliament and Council (effective May 2006), all statutory audits of annual and consolidated accounts must be carried out on the basis of ISAs as adopted by the European Commission (EC). European Union member states shall adopt and publish the provisions necessary to comply with this Directive before June 29, 2008. Member states may impose additional requirements relating to the statuary audits of annual and consolidated accounts for periods expiring on June 29, 2010. According to the information provided on the EC website, Denmark has fully transposed the above-mentioned Directive into its national legislation.
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ENAnti-Money Laundering/Combating Terrorist Financing Standard
The Financial Action Task Force (FATF) conducted a mutual evaluation of Denmark's Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime against the Financial Action Task Force's (FATF) 40+9 recommendations and special recommendations in 2006. In its assessment, the FATF concludes that Denmark is fully compliant with 8, largely complaint with 16, partially compliant with 17, and non-compliant with 8 recommendations and special recommendations. The shortcomings identified by the 2006 mutual evaluation related to preventive measures such as customer due diligence and suspicious transactions reporting both for financial institutions and Designated non-Financial Business and Professions. At the time of the FATF assessment Denmark had only just implemented a new Act, namely the Act on Measures to Prevent Money Laundering and Financing of Terrorism (MLA) which came into effect in March 2006. The 2006 MLA was further amended and consolidated in 2007. The MLA, according to the 2006 mutual evaluation, strengthened preventive measures against money laundering and terrorist financing but its effectiveness was too early to gauge as the assessment was conducted at the same time as the passage of the 2006 MLA. One aspect of the 2006 MLA was however identified by the mutual evaluation as a major flaw, namely that the Act does not extend beyond Denmark to Greenland and the Faroe Islands which results in non-compliance with some of the FATF recommendations.
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CPCore Principles for Systemically Important Payment Systems
In 2007, the IMF released a detailed assessment of Denmark's real-time gross settlement system for large-value payments, the KRONOS, and its retail payments system, Sumclearing as both these systems were categorized as SIPS by the Danish authorities. Both systems were assessed against the Committee on Payment and Settlements' Core Principles for Systemically Important Payment Systems (CPSIPS). KRONOS, according to the report observes seven CPSIPS, broadly observes two, and principle V is not applicable since KRONOS settles in real time. The Sumclearing system, on the other hand, observes six CPSIPS, broadly observes three, and partly observes one CPSIPS. The IMF assessors concluded that the payment system infrastructure in Denmark is "highly developed and technologically well advanced." The country has a strong legal infrastructure, and payment systems are overseen by the Danish National Bank (DNB). The DNB's oversight responsibilities are regulated by the Securities Trading Act. KRONOS was a participant in the Euro area's now defunct Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) system. Denmark participated in TARGET as a non-euro area European Union (EU) member state. TARGET was replaced by TARGET2 in November 2007 and Denmark joined TARGET2 in May 2008. According to information provided on the DNB's website the terms and conditions for Danish participation in TARGET2 remain unchanged and the country is still subject to the restrictions for non-euro area EU member states, such as lack of access to euro liquidity overnight. While with TARGET, the large value interbank payment systems of member countries were interlinked, TARGET2 provides harmonized payment services under a single shared platform across its member countries. However, there is little information assessing TARGET2's compliance with the CPSIPS except for a statement in a 2008 European Central Bank (ECB) report on TARGET2, in which it indicates that the system is expected to fully observe all the CPSIPS. Despite the lack of information on TARGET2, it is generally believed that the system is an improvement over its predecessor and its component systems.
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