FEE comments on the EC proposals for the recast of the 4th and 7th Accounting Directives

  • FEE (Federation of European Accountants - Fédération des Experts-comptables Européens) (lt green) Image
  • European Union Image

09 Apr 2013

The Federation of European Accountants (FEE) has issued a letter to Mr. Klaus-Heiner Lehne, Chair of the Committee on Legal Affairs (JURI) of the European Parliament on the recast of the 4th and 7th Accounting Directives. The European Commission published proposals for revising the Accounting Directives in October 2011 and JURI, representing the European Parliament, subsequently analysed the proposals. Currently, European Council, Parliament and Commission seem to be locked in their trilogue. FEE has been trying to further inform the debate and help close the gaps by publishing various comment letters and a policy statement on the topic.

In accordance with the policy statement published in December 2012, FEE expresses the firm belief that accounting and auditing are not administrative burdens but rather "essential tools to enable managers to manage, investors to invest and enterprises to trade, grow and create wealth and employment". Against this backdrop FEE comments on other EC proposals:

  • FEE believes that general accounting principles should be applicable to all aspects of financial reporting. Among these FEE sees the true and fair view as well as materiality, substance over form and prudence.
  • FEE questions the real benefits of a fully prescribed reporting regime for small companies. The EC proposals seek to harmonise small company reporting in the Member States by introducing a common  reporting frame which would see less disclosures load. FEE believes some of the disclosures (especially those on off-balance sheet transactions, related party transactions and post balance sheet events) are a critical element of transparency and should not be disbanded. On the contrary, FEE supports giving the Member States an option to require further disclosures they deem necessary.
  • FEE believes that fair value accounting should be permitted as a Member State option. While the EC Proposals intended to keep a Member State option to permit or require fair value accounting for specific assets, JURI proposed to prohibit this practice. FEE urges all parties involved in the trilogue discussions to retain a Member State option permitting or requiring fair value accounting for certain relevant account balances.
  • FEE suggests making the use of IFRS for SMEs possible. From a European perspective, FEE regrets that the EC Proposals do not seize the opportunity to allow EU Member States to make their own decision to opt to use IFRS for SMEs or not as this would help especially the smaller Member States with limited standard-setting capacities.
  • FEE suggest permitting merger accounting as a simplification measure. The provisions allowing merger accounting are removed from the EC proposals, however, merger accounting is widely used in practice. This accounting option would also simplify accounting and thus reduce costs for preparers.
  • FEE believes requiring cash flow statements would benefit enterprises and stakeholders. FEE sees the cash flow statement as an essential tool to provide relevant information about the cash generating capacity of a company which would allow for a more rounded and complete view of companies especially in periods of instability. Therefore, FEE suggests a mandatory inclusion in the annual financial statements of a cash flow statement for large companies and a Member State option to require it for medium-sized companies.
  • FEE asks for a swift finalisation of the debate on country-by-country reporting. FEE encourages all parties involved in the trilogue discussion to close the gap between the different views on country-by-country reporting to allow for a successful finalisation of the Accounting Directive as a whole.

Please click for access to the full letter on the FEE website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.