Excerpts from FEE's Background Note on the EC Simplification Project (July 2007):

Real life experience shows that the main burdens imposed on companies are not in the financial reporting area, but rather in other areas such as:

• overlapping requirements for different regulatory purposes such as tax, incorporation, employment and statistics;
• tax returns (corporate tax, indirect tax, local taxes, including property taxes);
• dividend distribution requirements;
• health and safety legislation and returns;
• administration of miscellaneous social security programs (calculation, payment and statistical reporting to authorities);
• the frequency of reporting requirements in certain countries, and;
• the insufficient use of electronic reporting to avoid double reporting....

Accounting is an essential facilitator of cross-border trade. There is a need for more internationally comparable and harmonised financial statements, especially for medium sized and large non-listed companies, because of increasing cross border operations, mergers and acquisitions involving companies in different Member States. Accounting and auditing requirements support the development and the integration of new economies into the EU and contribute to the dissemination of best practices.

SMEs often do not have strong financial expertise in-house so rely on independent external input received from professional accountants to improve financial and management controls that also contribute to preventing risks of failures and fraud. Reporting and related audit, enhancing the quality of the reporting, provides transparency and helps SMEs to get access to finance.

Excerpt from FEE's Position on EC Simplification Project (March 2007):

Our current view is that the Directives should include a Member State option to permit or require use of the 'IFRS for SMEs' by all companies covered by the Directives that are not listed. This gives Member States the possibility to grant a free choice to the individual company whether to apply 'IFRS for SMEs'; or national legislation based on the Accounting Directives; or a requirement to apply 'IFRS for SMEs'; or a requirement to apply national legislation. It will then be up to the Member State to decide, if and for what companies 'IFRS for SMEs' should be required or allowed,