| Author (Person) | Davies, Eric | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Publisher | ProQuest Information and Learning | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 6.10.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 06/10/2003 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
On 29 September 2003 the European Commission adopted a Regulation endorsing International Accounting Standards (IAS). Commenting on the move, Internal Market Commissioner Frits Bolkestein said the new Regulation 'will help the 7000 or so listed EU companies affected to get ready for 2005, when their consolidated accounts will have to be in line with IAS. That will put an end to the current Tower of Babel in financial reporting, improve competition and transparency and make the free movement of capital much easier.' Background The introduction to the European Commission's 1995 Communication Accounting harmonisation: A new strategy vis-á-vis international harmonisation (COM(95)508) stated that
In order to address these shortcomings, the Commission proposed 'putting the Union's weight behind the international harmonisation process which is already well under way in the International Accounting Standards Committee (IASC, since renamed the International Accounting Standards Board - IASB). The objective of this process is to establish a set of standards which will be accepted in capital markets world-wide.' (* The 'Fourth Company Law Directive' is formally entitled: Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54 (3) (g) of the Treaty on the annual accounts of certain types of companies; the 'Seventh Company Law Directive' is: Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54 (3) (g) of the Treaty on consolidated accounts; collectively they are known as the Accounting Directives). The June 1998 Cardiff European Council asked the Commission to put forward proposals for improving the single market in financial services. At the end of October 1998, the Commission issued Financial Services: Building a framework for action, a Communication in which it stated: 'A coherent programme of action to smooth out remaining legislative, administrative and fiscal barriers to cross-border flotations and investment-related activities is necessary to complement the market-driven modernisation of EU wholesale markets prompted by the single currency.' It therefore suggested a number of actions, including a review of whether company reporting options in the Accounting Directives were compatible with the need for further harmonisation of financial reporting, and working towards maintaining consistency between the Union's financial reporting framework and international accounting standards developed by the International Accounting Standards Committee. The Communication was followed in May 1999 by Financial Services: Implementing the framework for financial markets: Action Plan (COM(1999)232), known as the Financial Services Action Plan. The March 2000 Lisbon Strategy endorsed the FSAP and promoted the development of 'Efficient and transparent financial markets [to] foster growth and employment.' The Strategy highlighted a number of actions required to 'accelerate completion of the internal market for financial services', including implementing the Financial Services Action Plan by 2005. Amongst the issues identified as requiring priority action was 'enhancing the comparability of companies' financial statements'. The June 2000 Feira European Council called on the Commission to present proposals for - amongst other things - 'a new accounting strategy to enhance the comparability of listed companies' financial statements'. The Commission's response was EU Financial Reporting Strategy: the way forward (COM(2000)359), in which it committed itself to a number of key actions to be met by the end of 2000 and 2001. Two initiatives promised before the end of 2000 were:
A proposal 'to modernise the Accounting Directives so they can remain the basis for financial reporting for all limited liability companies' was promised before the end of 2001. Consequently - in February 2001 - the Commission issued a draft Regulation 'requiring all EU companies listed on a regulated market, including banks and insurance companies, to prepare consolidated accounts in accordance with International Accounting Standards (IAS)' by 2005. The Regulation was estimated to affect some 7000 listed EU companies - compared to the 275 previously using it. (IAS have since been renamed International Financial Reporting Standards - IFRS - but seem generally to be known still as IAS). The Barcelona European Council of March 2002 invited the Council and the European Parliament 'to adopt as early as possible in 2002 the proposed International Accounting Standards Regulation.' Adoption of Regulation 1606/2002 on the application of international accounting standards was welcomed in June 2002 by the Seville European Council. The Accounting Directives will, however, remain the relevant legislation for five million or so companies not subject to IAS requirements. Therefore, in July 2002, the Commission published a Proposal for a Directive amending 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 (COM(2002)259/2). It was adopted in May 2003, updating the Directives and, according to the Commission, enabling 'Member States which do not apply IAS to all companies to move towards similar, high quality financial reporting.' The Regulations Regulation 1606/2002 on the application of international accounting standards (popularly known as the IAS Regulation) entered into force in July 2002. Its objective is stated as being 'the adoption and use of international accounting standards in the Community with a view to harmonising the financial information presented by the companies referred to - in order to ensure a high degree of transparency and comparability of financial statements and hence an efficient functioning of the Community capital market and of the Internal Market.' However, because the Regulation seeks to ensure conformity with standards which are set by an independent organisation - the International Accounting Standards Board - it has been necessary for the European Commission to 'endorse' IASs. Only when they have been endorsed will individual IASs become legally binding under the IAS Regulation. The Commission has therefore adopted a further Regulation - text not available at time of writing - endorsing those International Accounting Standards / International Financial Reporting Standards which it has approved. Each of the current 34 IASs has been assessed by the Accounting Regulatory Committee (comprising representatives of Member States and chaired by the Commission) and after advice from the European Financial Reporting Advisory Group (EFRAG, comprising private sector accounting experts). All but two Standards have been accepted (IAS 32 and IAS 39 remain to be endorsed). 31 associated interpretive documents known as SICs (after 'Standing Interpretations Committee') have also gone through the same process, with 28 being adopted. Those IASs endorsed will be published - in all Community languages - in the Official Journal of the European Union. Internal Market Commissioner Frits Bolkestein said: 'Adoption by the Commission of this Regulation, endorsing most of the existing International Accounting Standards - will help the 7000 or so listed EU companies affected to get ready for 2005, when their consolidated accounts will have to be in line with IAS.' Further information within European Sources Online
Further information can be seen in these external links: EU Institutions European Commission: Other organisations
Eric Davies Background and reporting on the week's main stories in the European Union and the wider Europe. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Subject Categories | Law | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
