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Denmark replaces existing accounting standards for SMEs with one single standard

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22 Apr 2013

In an effort to modernise accounting for small and medium-sized entities (SMEs) and to inspire the preparation of informative and relevant financial statements, the Accounting Technical Committee of FSR – Danske Revisorer (FSR – Danish Auditors) has published a new accounting standard replacing existing guidelines scattered so far through a number of standards.

Until now, the FSR offered two sets of non-mandatory guidelines for the so-called class B and class C companies. They had the option of following either the accounting standard for small companies issued by the FSR in 2007 (class B companies) or the suite of Danish Accounting Standards number 1-22 (class B and C companies) if they did not choose to follow the Danish Financial Statements Act alone. The Danish Accounting Standards were based on International Accounting Standards (IAS) but were not updated since 2002 because the application of IFRSs became mandatory for listed companies in Europe in 2005. The accounting standard for small companies was again based on the Danish Accounting Standards but adapted to SMEs’ needs.

Apart from complying with the Danish Financial Statements Act, which is based on the 4th and 7th EU Accounting Directives, following a certain (set of) accounting standard(s) has not been mandatory for B and C class companies and continues to be voluntary. The new, single standard issued in mid-April is an updated version of the old standard for class B companies expanded to now also include class C companies. It embodies also some current accounting thinking for smaller entities as for example reflected in the IFRS for SMEs. It is to be understood as accounting guidance for issues not covered by or explained in detail in the Act and as inspiration for preparing good informative financial statements.

Going forward, B and C class companies have the following options:

  • drawing up their financial statements based on the Danish Financial Statements Act alone
  • drawing up their financial statements based on the Danish Financial Statements Act but also applying the new accounting standard for class B and C companies to ensure informative and relevant financial reporting
  • following full IFRSs.

The accounting standard for small companies issued in 2007 and the suite of Danish Accounting Standards number 1-22 have been withdrawn.

Listed companies (class D companies) are not affected by this change. They will continue to apply full IFRS as adopted for use in the EU, as is required for all listed companies in Europe.

The new accounting standard comes into force with financial statements for reporting periods beginning on or after 1 January 2013. Early application is permitted.

The accounting landscape for SMEs in Europe is currently undergoing some change. Only recently, the UK FRC issued FRS 102 replacing local GAAP with a new standard based on the IFRS for SMEs. The European Union is currently revising the Accounting Directives in an effort to simplify and unify accounting requirements for SMEs, and so-called micro entities in particular. As reported before, agreement on the revision of the Accounting Directives has just been reached although details of the changes have not been communicated yet. In connection with the revision of the Accounting Directives there had also been calls to allow the application of the IFRS for SMEs in member states that choose to do so; however, as the IFRS for SMEs conflicts with certain provisions of the 7th Accounting Directive, this has not come to pass.

Please click for further information on the FSR website (Danish language only):

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