----

----

I Information

Commission

----

FINAL ANNUAL ACCOUNTS OF THE EUROPEAN COMMUNITIES

FINANCIAL YEAR 2004

VOLUME I

CONSOLIDATED REPORTS ON IMPLEMENTATION OF THE BUDGET AND CONSOLIDATED FINANCIAL STATEMENTS

(2005/C 302/01)

CONTENTS

Development of the European Communities' accounting system

Presentation of the accounts

Chapter 1:Consolidated reports on implementation of the budget of the European Communities:

Chapter 3:Consolidated financial statements of the European Communities: ANNEXES

Annex 1:   Accounting principles, rules and methods

Annex 2:   Explanatory notes to the reports on implementation of the budget

DEVELOPMENT OF THE EUROPEAN COMMUNITIES' ACCOUNTING SYSTEM

A number of public administrations have broadened their accounting systems from giving information only on budget execution to be more dynamic and complete by setting out a full picture of their economic situation and of their assets and liabilities. In recent years, the European Communities have recognised the advantage of modernising their accounts to change from a system of accounts focusing on a cash-based description of budget expenditure and revenue operations to a system based on assets and liabilities with the objective of presenting the Communities' financial situation in a more comprehensive form, showing all its assets, entitlements and debts as well as the expenditure and revenue for the financial year. The Commission therefore undertook to fall into line with the approach adopted by a large number of States and supported by international bodies such as IFAC (1) and OECD. This work started in earnest in 2003 with the commencement of the ‘modernisation of the accounting system’ project, which had the aim of placing the European Communities in the forefront of the international movement towards the modernisation of public sector accounting from 2005 onwards.

The Financial Regulation (2) lays down the broad outlines of the new accounting framework for the European Communities from 2005. The transitional provisions of the Financial Regulation include the general rule that the provisions of Title VII of part one — Accounting — shall apply gradually depending on technical possibilities in order to be fully effective for the budgetary year 2005. This gradual application relates in particular to the new principles governing the Institutions' accounts.

As planned, in January 2005 the new accounting system came into use, together with a new set of accounting rules and a new chart of accounts. While the budget accounts are still based on movements of cash, the general accounts are now accrual-based. These new rules and methods are based on internationally accepted standards for the public sector — the IPSAS — and, for accounting transactions that are not yet covered by IPSAS, on the relevant IAS/IFRS. They have been adopted by the Accounting Officer of the Commission after receiving the opinion of an Accounting Standards Committee that provided independent professional guidance. The IT architecture was updated to ensure that each accounting event, and not just cash movement, may be fully registered when it occurs. Improvements will continue to be made to the IT systems to further the integration of systems and to provide better management reporting. The financial statements from 2005 onwards will be able to be produced directly from the central IT system. Directorates-Generals' internal control procedures are extended to cover accrual accounting aspects. Finally, the scope of consolidation will be extended in 2005 to include the various Community agencies.

Thus these financial statements for 2004 are the last to be prepared under the transitional provisions of the Financial Regulation. None-the-less, while not fully accrual-based, the Commission has already introduced elements of accrual accounting in the presentation of these and previous financial statements, without yet being able to apply the corresponding standards in full. For the financial year 2004 the information did not come from an integrated system of accounts, so the Accounting Officer's departments used non-accounting information from the Commission's services to complete the balance sheet and draw up its annexes.

It is also highlighted that the balance sheet and off-balance sheet presented here at 31/12/2004 will differ from the opening balance sheet that will be included in the 2005 annual accounts, since they are prepared under different rules.

PRESENTATION OF THE ACCOUNTS

CHAPTER 1

CONSOLIDATED REPORTS ON THE IMPLEMENTATION OF THE BUDGET OF THE EUROPEAN COMMUNITIES

RESULT OF IMPLEMENTATION OF THE BUDGET

1.   BUDGET OUTTURN 2004

The budget outturn for the European Communities is included under heading I.A.1 on the liabilities side of the consolidated balance sheet.

The budget outturn for EFTA-EEA is included under heading IV.B.1 on the liabilities side of the consolidated balance sheet.

The functioning of the EFTA-EEA system is detailed in the explanatory notes, Annex 2.

CONSOLIDATED REPORTS ON IMPLEMENTATION OF THE BUDGET REVENUE

2.   CONSOLIDATED SUMMARY OF THE IMPLEMENTATION OF GENERAL BUDGET REVENUE 2004

DETAIL TITLE 1: OWN RESSOURCES

DETAIL TITLE 3: SURPLUSES AVAILABLE

3.   CORRECTION OF BUDGETARY IMBALANCES (CHAPTER 15)

4.   CONSOLIDATED SUMMARY OF THE IMPLEMENTATION OF BUDGET REVENUE 2004 BY INSTITUTION

5.   FINANCIAL YEAR 2004: COMPARISON OF THE IMPLEMENTATION OF BUDGET REVENUE 2004 AND 2003

DETAIL TITLE 1: OWN RESSOURCES

DETAIL TITLE 3: SURPLUSES AVAILABLE

6.   CONSOLIDATED SUMMARY OF THE IMPLEMENTATION OF BUDGET EXPENDITURE

7.   CONSOLIDATED SUMMARY OF BUDGET IMPLEMENTATION — EXPENDITURE

8.   CONSOLIDATED SUMMARY OF COMMITMENTS OUTSTANDING

9.   IMPLEMENTATION OF COMMITMENT

AND PAYMENT APPROPRIATIONS BY INSTITUTION

Appropriations for institutions other than the Commission are consolidated in heading 5 of the financial perspectives

Commitment

appropriations

Payment

appropriations

10.   BREAKDOWN AND CHANGES IN COMMITMENT

AND PAYMENT APPROPRIATIONS BY POLICY AREA

11.   IMPLEMENTATION OF COMMITMENT

APPROPRIATIONS BY POLICY AREA

12.   IMPLEMENTATION OF PAYMENT APPROPRIATIONS

BY POLICY AREA

13.   COMPARAISON OF BUDGET IMPLEMENTATION 2004

AND 2003 BY FINANCIAL PERSPECTIVE

Commitment

Appropriations

Payment

Appropriations

14.   BREAKDOWN AND CHANGES IN COMMITMENT

AND PAYMENT APPROPRIATIONS BY FINANCIAL PERSPECTIVE

15.   IMPLEMENTATION OF COMMITMENT APPROPRIATIONS

BY FINANCIAL PERSPECTIVE

16.   IMPLEMENTATION OF PAYMENT APPROPRIATIONS

BY FINANCIAL PERSPECTIVE

17.   CONSOLIDATED BREAKDOWN OF COMMITMENTS OUTSTANDING BY THE COMMITMENT'S YEAR OF ORIGIN

CHAPTER II

CONSOLIDATED FINANCIAL STATEMENTS OF THE EUROPEAN COMMUNITIES

BALANCE SHEET

ASSETS

LIABILITIES

CHAPTER 3

CONSOLIDATED FINANCIAL STATEMENTS OF THE EUROPEAN COMMUNITIES

----

(1)  International Federation of Accountants.

(2)OJ L 248, 16.9.2002.

----

----

THE COURT OF AUDITORS' STATEMENT OF ASSURANCE

(2005/C 302/02)

RELIABILITY OF THE ACCOUNTS

LEGALITY AND REGULARITY OF THE UNDERLYING TRANSACTIONS

28 September 2005

Hubert WEBER

President

European Court of Auditors

12, rue Alcide De Gasperi, LU-1615 Luxembourg

----

(1)  The ‘Consolidated reports on implementation of the budget and Consolidated financial statements’ make up Volume I of the annual accounts of the European Communities, financial year 2004.

(2)  See Annex 1, Volume I, of the final accounts of the European Communities, financial year 2004.

----