EC Welcomes European Parliament's Decision On Accounting Rules

by Ulrika Lomas, for LawAndTax-News.com, Brussels

19 December 2005

The European Commission last week welcomed the European Parliament's vote to approve the proposal for a Directive amending the European Union’s Accounting Directives.

The amendments will bring improved disclosure by obliging listed EU companies to provide an annual corporate governance statement and providing more insight into the use of off-balance sheet arrangements and unusual transactions with related parties, such as the spouse of a board member. In addition, thresholds defining small and medium sized companies will be increased by 20%, which will help to reduce those companies' financial reporting burdens.

Internal Market and Services Commissioner Charlie McCreevy announced that:

"This is good news. The approach followed by the European Parliament is totally in line with what I intend to achieve with Better Regulation. We improve disclosure for the most complex listed and unlisted companies and at the same time allow Member States much more scope for reducing burdens on small and medium sized companies. Empowering investors to better understand complex accounting techniques by large companies and freeing small companies from red tape will spur on economic growth."

The amendment of the Accounting Directives establishes collective responsibility of board members at EU level; improves transparency about unusual related parties’ transactions and off-balance sheet arrangements; and introduces an obligation for listed EU-companies to annually provide a corporate governance statement.

The amendments to the Accounting Directives will also allow Member States to remove inconsistencies between IAS 39, the renowned international accounting standard on fair value measurement, and the Accounting Directives. This is in line with the recently adopted Commission Regulation of 15 November 2005 1864/2005 with regard to listed companies.

Member States will be permitted to decide for themselves whether they want to use the possibilities offered by the Directive to alleviate accounting regulatory burdens on companies.

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