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Financial reporting framework in Spain

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 -, as well as, for the time being, the United Kingdom.

Spain is an EU Member State. Consequently, Spanish companies listed in an EU/EEA securities market follow IFRSs since 2005. The European Commission (EC) periodically issues a document which summarises the use of options of the IAS Regulation by European Union Member States. For information on each country's plans, click to access:

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.

The process of adapting to IAS

In May 2000, the Accounting and Auditing Institute (ICAC), a public body dependent on the Ministry of the Economy, issued a comparative, provisional document, on which it had been working since the second half of 1998, between the Spanish accounting rules and those issued by the IASC. The purpose of that document was to analyse how far the Spanish regulations (the General Accounting Plan, its adaptation to specific industries and the rulings given by the ICAC itself) were compatible with those of the IASC, with the purpose of:

  • identifying areas of discrepancy; and
  • trying to introduce those IASC rules which are not currently reflected in Spanish regulations but which should be included in order to complete the full accounting model.

In March 2001, a committee of experts from the public and private sectors was set up with a view to drafting a report to analyse the extent to which Spanish regulations were in line with the European Union's recommendations, and also to define the model reflecting the IASC standards. This Committee also includes representatives from the regulatory bodies (Bank of Spain, Directorate General of Insurance, National Stock Market Commission, etc.). The Committees' report is taking into account the proposed regulations issued by the European Parliament in February 2001, for which all listed companies within the EU should present consolidated financial statements in accordance with IAS by 2005, at the latest.

Among the issues this Committee has regarded as priority, is the immediate need to address in greater depth certain matters that are not regulated in sufficient detail in the current Spanish rules or which are subject to current discussion (e.g. valuation of financial instruments, treatment of intangible assets, business combinations). Also, of priority are areas where greatest effort may be required to bring the Spanish rules in line with IAS.

Other significant differences have also been identified between the Spanish rules and IAS, including recognition of income tax based on a balance sheet approach, disclosure of segment information and earning per share, and compulsory presentation of cash-flow statements (under current Spanish regulations a statement of sources and application of funds is required). Some of these topics have already been addressed in some detail, both by the accounting profession, in general, and by private bodies (that is, the Spanish Association of Accounting and Corporate Administration) in particular.

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