ACCOUNTING STANDARDS
(21402)
9637/00
COM(00) 359
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Commission Communication: EU Financial Reporting Strategy — The Way Forward.
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| Legal base: |
— |
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| Document originated:
| 13 June 2000 |
| Forwarded to the Council:
| 20 June 2000 |
| Deposited in Parliament:
| 11 July 2000 |
| Department: |
Trade and Industry |
| Basis of consideration:
| EM of 24 July 2000 |
| Previous Committee Report:
| None |
| Discussed in Council:
| 17 July 2000 |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Cleared; but further information requested
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Background
18.1 On 23 June 1999[38],
we reported on the Commission's Action Plan for financial services,
aimed at completing the single market in financial services. The
Plan contained a proposal for a Commission Communication updating
the EU accounting strategy. In March 2000, the Lisbon European
Council concluded that steps should be taken to enhance the comparability
of financial statements by 2005.
The document
18.2 In this Communication, the Commission
sets out its plan for applying internationally agreed accounting
standards by 2005 to EU company group reports. To that end, the
Communication says that:
- before the end of 2000, the Commission will present
a formal proposal requiring all listed EU companies to prepare
their consolidated accounts (accounts for a listed group of companies
as a whole rather than the accounts of each individual company
within the group) in accordance with the International Accounting
Standards (IAS), with effect from 2005 at the latest;
- this proposal will also contain transitional
arrangements to encourage the early adoption of IAS, together
with rules for the establishment of an EU endorsement mechanism
to oversee the integration of IAS in the EU, and to confirm that
IAS will represent an appropriate basis for financial reporting
by EU companies. This will be linked to an enforcement infrastructure
to ensure application of IAS by listed EU companies;
- before the end of 2001, the Commission will bring
forward a consequential proposal for amending the Accounting Directives
so that they remain the basis for financial reporting for all
limited liability companies.
The Government's view
18.3 In his Explanatory Memorandum of 24
July 2000, the Minister for Competition and Consumer Affairs at
the Department of Trade and Industry (Dr Howells) says that the
Government supports the aim of convergence of financial reporting
in the EU with IAS. To that end, he says it is important that
the EU participates fully in influencing the development of IAS
at an early stage and that the resulting standards are fully implemented
in the EU. The Government broadly welcomes the proposal, subject
to consideration of the detailed proposals to be available later
in the year. However, the Minister flags up a widespread concern
in the UK that the "endorsement mechanism" proposed
may seek to adapt IAS for use in the EU — effectively producing
a set of standards different from IAS and undermining the UK objective
of the adoption of global accounting standards. On timing, he
notes that the Government is already pressing for amendments to
be made to the Accounting Directives by 2002, in line with the
Commission's timetable.
18.4 He says that the proposals were already
the subject of much consultation in the UK during their preparation
and that a number of bodies are preparing detailed analysis.
Conclusion
18.5 We note that this document was available
in English from 22 June and was discussed by ECOFIN on 17 July
(which welcomed the document). We recognise that the document
contains no legislative proposal but there was sufficient time
for the Minister to have provided an Explanatory Memorandum before
it went to ECOFIN, in line with normal scrutiny requirements.
18.6 This proposal is a significant development
in completing the single market with potential benefits for UK
firms operating internationally. We note the Minister's concern
in particular about the endorsement mechanism. However, the approach
that the Commission proposes will not be clearer until the details
are available later this year. So we clear this document now and
will report again when the further documents are available. Meanwhile,
we ask the Minister to tell us why we did not receive his Explanatory
Memorandum before ECOFIN discussed the document.
38 (20175) 8329/99: see HC 34-xxiii (1998-99), paragraph
1 (23 June 1999). Back
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