• Austria is included in the IFAD GAAP Convergence Studies
  
• National Professional Organisation Website: Institut Osterreichischer Wirtschaftsprufer
  
• National Professional Organisation Website: Kammer der Wirtschaftstreuhander
  
• Response to IFAC Member Body Survey on Standard Setting and Regulation

Update for July 2003
Update for April 2003
Update for October 2001
Update for July 2001
Update for May 2001

Adoption of IFRSs in Europe Effective in 2005

In June 2002, the European Union adopted an IAS Regulation requiring European companies listed in an EU securities market, including banks and insurance companies, to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. EU countries have the option to:

• Require or permit IFRSs for unlisted companies.
• Require or permit IFRSs in parent company (unconsolidated) financial statements.
• Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007.
• Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007.

The European IAS regulation applies not only to the 27 EU Member States but also to the three members of the European Economic Area (EEA) – Iceland, Liechtenstein, and Norway.

Austria is an EU Member State. Consequently, Austrian companies companies listed in an EU/EEA securities market will follow IFRSs starting in 2005. In January 2005, the European Commission published the results of a survey of the 25 EU member states and the 3 EEA member states on their plans regarding the four options above. For information on each country's plans, click to download:

• Table on Use of IFRS Options in 27 Member and 3 EEA States (PDF 52k)

The European Commission has adopted the following wording for use in the notes to the accounts and in the audit reports of companies subject to EU Regulation 1606/2002/EC (the 'IAS regulation'):

• "in accordance with International Financial Reporting Standards as adopted by the EU" or
• "in accordance with IFRSs as adopted by the EU".

Companies may also state, in a footnote, compliance with IFRSs as adopted by the IASB, if that is the case.

Vienna Stock Exchange

The Vienna Stock Exchange (Wiener Borse) has three markets: Official Market, Second Regulated Market, and Third Market. The EU IAS Regulation does not apply to the Third Market.

The financial instruments traded on the markets of Wiener Borse are grouped into the following segments: equity market, (shares), bond market (bonds), derivatives market (derivatives), structured products (certificates, exchange traded funds, investment funds, and warrants), and other securities (shares, participation certificates). These segments can include both IFRS and non-IFRS companies.

Most Austrian Listed Companies Have Already Switched to IFRS

For the past three years, the Vienna stock exchange has required all domestic and foreign companies listed on the A-Market and the Austrian Growth Market (AGM) to submit consolidated financial statements under either IFRS or US GAAP. Other listed companies have been permitted to use IFRS or US GAAP or the Austrian commercial code. In their 2002 financial statements, nearly all listed Austrian companies have used IFRS. Only a few are now using US GAAP or the Austrian code. Starting in 2005, virtually all listed European companies, including Austrian companies, will be required to use IFRS.

Fair Value Guideline of EU

In February 2003 a draft of the Austrian 'Fair Value Bewertungsgesetz' was issued, which is meant to bring the Austrian Commercial Law in line with the EU Guideline. Under this regulation, fair value estimates may only be included in consolidated financial statements based on IFRS. A mark-to-market valuation in the individual financial statements or consolidated financial statements based on Austrian GAAP is currently not permitted, as important tax and company law issues still have to be discussed.

Provisions for Severance Payments

Based on the 'Betriebliche Mitarbeitervorsorgegesetz': The old regulation under which a company has to pay severance payments when an employee leaves the company (in special cases) is changed to a model where contributions (1.53% of the monthly remuneration) are paid by the employer to a special fund (Mitarbeitervorsorgekasse). This is due for those employees whose contracts have been signed after December 31, 2002. Therefore no severance provision has yet to be recognised for these contracts.

The discussion paper proposes a requirement for quarterly reports to be prepared and published on a year-to-date basis for each of the first 3 quarters of the year. The discussion paper does not require the compliance with a specific interim reporting standard (eg IAS or US GAAP), since ASEC would not be able to reliably check this at this stage.

The reporting enterprise would be required to publish interim reports immediately after completion or, at a minimum, within 2 months of the reporting date. Moreover, the interim report would be required to be made available on the internet via the home page of the reporting company. One copy would also be required to be submitted to ASEC.

The interim report would be required to include at least the following content and data:

• Balance sheet: As at the end of the current interim period with comparative figures at the end of the preceding financial year; the balance sheet would be required to follow either IAS or US-GAAP interim reporting requirements.
• Income statement: Current interim period and year to date information with comparative figures for the comparable interim period (current and year to date); either of the disclosure methods regulated in Austria can be used (Total cost and Cost of sales approach).
• Cash-flow statement: Year to date information for the current period with corresponding comparative figures; at a minimum the cash flows from operating, investing and financing activities shall be presented, the total reflecting the change in cash and cash equivalents, for which opening and closing balances should be disclosed.
• Statement of changes in equity: Year to date information for the current period with corresponding comparative figures.
• Other information required by the Austrian Securities Exchange Act (Börsegesetz): Details of current situation, development of costs and revenue, investment, revenue breakdown, number of employees, events of particular significance, which could effect business operations, interim dividends (distributed or proposed)
• Notes: At a minimum, information on material extraordinary events, material seasonal effects, and the outlook for the current financial year would be required to be provided. If the quantitative information was audited or reviewed by an auditor, the audit or review opinion would be required to be included.

Professional Responsibilities for External Auditors

Within the coming weeks, regulation concerning the professional responsibilities of external auditors is likely to be amended. Currently, auditor liability in relation to audit engagement negligence is limited to €0.363 million. It is expected that the penalty will increase to €1 million where required due care has not been exercised. However, in the case of public companies, the maximum penalty is expected to increase to €4 million, and in cases of gross negligence the penalty is expected to be multiplied by 5.

Also, due to proposed changes to the Austrian Banking Act, the liability of the auditors of banks is expected to be based on the amount of total assets, and to be between €2 million and €6 million.

New regulations concerning external rotations is also likely to be introduced into the Austrian Banking Act. The regulations would require a change of auditors at least every five years. External rotations have also been discussed for insurance companies and other listed companies. However, no regulations have as yet been proposed.

Euro Conversion

In June 2001, the Euro-Tax Conversion Law was resolved by the Austrian parliament. As a result, all laws containing amounts or references in Austrian Schillings (ATS) are to be changed into Euro amounts or Euro references, effective 1 January 2002.

In 1999, the Austrian Parliament enacted a law that allows all Austrian companies to use IFRS or another internationally recognised set of accounting standards, rather than the Austrian commercial code (HGB), when preparing consolidated financial statements if the following prerequisites are met:

• the financial statements also comply with European Directives,
• the financial statements disclose the basis of accounting used as well as significant differences from Austrian Law,
• the quality of information is deemed at least equivalent to the quality of information if prepared in compliance with Austrian Law, and
• the auditor confirms that the above criteria are met.

This regulation is not limited to listed companies and was enacted in anticipation of the harmonisation process which is now also supported by the European Commission.

Since April 2001, the Vienna stock exchange requires all domestic and foreign companies listed on the A-Market and the Austrian Growth Market (AGM) to submit consolidated financial statements under either IFRS or US GAAP. Other listed companies are permitted to use IFRS or US GAAP or they may use Austran GAAP. So far about 50% of the companies listed on the A-Market have used IAS for their financial statements for the year 2000.

In the second quarter of 2001, Parliament will pass a new regulation regarding management stock option programmes with the aim to facilitate the raising of capital for companies having issued such programmes.