Considerations on COM(2002)259 - Amendment of Council Directives 78/660/EEC, 83/349/EEC and 91/674/EEC on the annual and consolidated accounts of certain types of companies and insurance undertakings - Main contents
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| dossier | COM(2002)259 - Amendment of Council Directives 78/660/EEC, 83/349/EEC and 91/674/EEC on the annual and consolidated accounts of certain ... |
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| document | COM(2002)259  |
| date | June 18, 2003 |
(2) On 13 June 2000, the Commission published its Communication entitled 'EU Financial Reporting Strategy: The Way Forward' in which it was proposed that all listed companies prepare their consolidated accounts in accordance with one single set of accounting standards, namely International Accounting Standards (IAS), at the latest by 2005.
(3) Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards(4) (hereinafter: the IAS Regulation) introduced the requirement that, from 2005 onwards, all listed companies prepare their consolidated accounts in accordance with IAS adopted for application within the Community. It also provided an option for Member States to permit or require the application of adopted IAS in the preparation of annual accounts and to permit or require the application of adopted IAS by unlisted companies.
(4) The IAS Regulation provides that, to adopt an international accounting standard for its application in the Community, it is necessary that it meets the basic requirement of the Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies(5) and of the Seventh Council Directive 83/349/EEC of 13 June 1983 on consolidated accounts(6), that is to say that its application results in a true and fair view of the financial position and performance of an enterprise - this principle being considered in the light of the said Directives without implying a strict conformity with each and every provision of those Directives.
(5) As the annual and consolidated accounts of undertakings covered by Directives 78/660/EEC and 83/349/EEC which are not prepared in accordance with the IAS Regulation will continue to have those Directives as the primary source of their Community accounting requirements, it is important that a level playing field exists between Community companies which apply IAS and those which do not.
(6) For the purposes both of the adoption of IAS and the application of Directives 78/660/EEC and 83/349/EEC, it is desirable that those Directives reflect developments in international accounting. In this respect, the Communication of the Commission entitled 'Accounting Harmonisation: A New Strategy vis-à-vis International Harmonisation' called for the European Union to work to maintain consistency between Community Accounting Directives and developments in international accounting standard setting, in particular within the International Accounting Standards Committee (IASC).
(7) Member States should be able to modify the presentation of the profit and loss account and balance sheet in accordance with international developments, as expressed through standards issued by the International Accounting Standards Board (IASB).
(8) Member States should be able to permit or require the application of revaluations and of fair value in accordance with international developments, as expressed through standards issued by the IASB.
(9) The annual report and the consolidated annual report are important elements of financial reporting. Enhancement, in line with current best practice, of the existing requirement for these to present a fair review of the development of the business and of its position, in a manner consistent with the size and complexity of the business, is necessary to promote greater consistency and give additional guidance concerning the information a 'fair review' is expected to contain. The information should not be restricted to the financial aspects of the company's business. It is expected that, where appropriate, this should lead to an analysis of environmental and social aspects necessary for an understanding of the company's development, performance or position. This is consistent also with Commission Recommendation 2001/453/EC of 30 May 2001 on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies(7). However, taking into account the evolving nature of this area of financial reporting and having regard to the potential burden placed on undertakings below certain sizes, Member States may choose to waive the obligation to provide non-financial information in the case of the annual report of such undertakings.
(10) Differences in the preparation and presentation of the audit report reduce comparability and detract from the user's understanding of this vital aspect of financial reporting. Increased consistency should be achieved by amendments, consistent with current international best practice, to the specific requirements concerning the format and content of an audit report. The fundamental requirement that an audit opinion states whether the annual or consolidated accounts give a true and fair view in accordance with the relevant financial reporting framework does not represent a restriction of the scope of that opinion but clarifies the context in which it is expressed.
(11) Directives 78/660/EEC and 83/349/EEC should accordingly be amended. Furthermore, it is also necessary to amend Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions(8).
(12) The IASB is developing and refining the accounting standards applicable to insurance activities.
(13) Insurance undertakings should also be allowed to use fair-value accounting as expressed through appropriate standards issued by the IASB.
(14) Consequently Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings(9) should be amended.
(15) These amendments will remove all inconsistencies between Directives 78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the one hand and IAS in existence at 1 May 2002, on the other.