The EC's proposal to revise the 4th and 7th Directives on accounting by the EU’s 7.5 million companies represents the first major revision of this legislation in over 30 years.
The proposal aims to simplify existing accounting requirements and to reduce the administrative burden on reporting companies, especially the 95 per cent of EU companies that are SMEs.
ACCA will be studying the proposals in more detail, but agrees that it is very important to ensure the protection of essential users: it therefore supports the retention of the basic requirements to prepare annual accounts on a standardised basis, the fundamental accounting principles, and the requirement for companies to file at least some information on the public record. The proposals will promote the cause of comparability by virtue of the reduction in Member State options: greater comparability should contribute to the more efficient functioning of the single market.
ACCA also supports the principle of transparency in accounting as a major force for enhancing competition in the internal market, for SMEs as well as larger companies. Transparency in this area is vital for the success of a number of current EU initiatives, including the Digital Single Market, which aims to remove barriers in the way of SMEs engaging in cross-border trade. ACCA welcomes the positive contributions to transparency in the proposal, such as those concerning the disclosure of related party transactions and the inclusion of the substance over form principle.
The Commission's proposal to give Member States the right to exempt all undertakings from the obligation to publish their management report is less welcome.
The proposal also recommends additional disclosure reductions for small companies. While this may be helpful to an extent by reducing costs to preparers, the proposed changes would also inevitably involve a reduction of the information that is available to users. On this point, ACCA is disappointed that the Commission has not taken the opportunity to improve the quality of the financial information available to users by requiring small companies to file the full set of accounts, that need to be prepared in any case, rather than an abridged version of it.
ACCA is also disappointed that that the Commission has not taken the chance to amend the detail of the Directives to allow IFRS for SMEs to be used in the EU without amendment.
In parallel with these changes, there is to be draft legislation for accounting by micro companies. It will be important that these two proposals are integrated properly to make a single coherent regime for growing companies.
Press release
© ACCA - Association of Chartered Certified Accountants
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article