Changes to the existing accounting legislation in Norway became necessary to comply with the new European Accounting Directive. However, the mandate behind the proposal and the proposed new legislation go way beyond minimum adjustments that would have been necessary to comply with the new European Accounting Directive. Rather than suggesting minimum amendments to the current law, the current legislation is removed and replaced by a new law that basically consist of the regulation included in the Accounting Directive. Most of the accounting regulation not provided in the Directive will be included in legally binding accounting standards, developed by a committee appointed by the Ministry of Finance. This approach allows greater flexibility should future changes in the accounting requirements be required. The accounting standards will be derived from the IFRS for SMEs with deviations only allowed when certain rather strict criteria are met.  

Key changes that the new Accounting Act will introduce to Norwegian accounting include:

• Current legislation will be replaced by a law primarily based on general accounting principles in line with the Directive’s minimum requirements. This will remove for example the revenue-oriented principles such as the matching principle that currently characterise Norwegian accounting legislation.
• Accounting standards based on IFRS for SMEs might lead to significant changes such as extended use of fair value measurement (for example for investment property, biological assets, fixed assets and significantly more financial instruments).

As a member of the European Economic Area, Norway has adopted the European IAS Regulation that requires that companies listed in a securities market must prepare their consolidated financial statements in accordance with IFRSs. Norway has also used the option under the IAS Regulation to require IFRS as adopted by the EU in the separate company financial statements of companies whose securities trade in a regulated market but that do not prepare consolidated financial statements because they have no subsidiaries. In addition, all other companies in Norway currently have the option to apply IFRSs voluntarily. This option would remain unchanged under the proposed new Accounting Act.

In addition, the Norwegian Ministry of Finance currently has a regulation in place that offers an option to apply a simplified version of IFRS developed by the Ministry. This option is currently applicable both in the consolidated and in the separate financial statements of entities that is not required to apply IFRS as endorsed by the EU. The proposed new law would see the option to apply this "light" version restricted to separate financial statements of entities that report to IFRS reporting entities, and also suggests that the IFRS “light” reporting guidance is set out in a separate accounting standard.

The Norwegian move is part of a greater tendency to bring national reporting standards more into line with IFRS concepts by using the IFRS for SMEs as basis for new national accounting standards. In a similar move, the United Kingdom replaced its local GAAP by the IFRS for SMEs based FRS 102 in March 2013.

The new Norwegian Accounting Act might become effective in 2017, however, 1 January 2018 or later seems more likely. The Accounting Standards will be issued in due course.

Please click for the following information on the Norwegian Ministry of Finance's website (both documents available in Norwegian only):

• Press release
• Exposure draft NOU 2015:10