Commission Regulation (EC) No 707/2004
of 6 April 2004
amending Regulation (EC) No 1725/2003 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community.
Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards(1), and in particular Article 3(1) thereof,
Whereas:
(1) On 29 September 2003 the Commission adopted Regulation (EC) No 1725/2003(2), which endorses interpretations adopted by the Standing Interpretation Committee (SIC). One of these interpretations is SIC-8 First-time application of IASs as the primary basis of accounting. In accordance with this interpretation, when international accounting standards (IASs) are applied in full for the first time as the primary accounting basis, the financial statements of an enterprise must be prepared and presented as if its financial statements had always been prepared in accordance with the standards and interpretations in force at the time of that first application. In consequence, retrospective application is required in most areas of accounting.
(2) In order to facilitate the transition to international accounting standards and international financial reporting standards (IAS/IFRSs), the International Accounting Standards Board (IASB) decided on 19 June 2003 to replace SIC-8 with - IFRS 1: First-time adoption of International Financial Reporting Standards. In accordance with IFRS 1, an enterprise applying IASs for the first time must comply with every single IAS and Interpretation in force at the time of that first application. Thus, like SIC-8, IFRS 1 requires retrospective application in most areas of accounting. However, IFRS 1 grants limited exemptions from that requirement in specified areas for practical reasons or where the costs entailed by compliance would most likely outweigh the benefit to users of financial statements.
(3) IFRS 1 should make it possible to achieve comparability over time both within the IFRS financial statements of a first-time adopter and as between the financial statements of different enterprises adopting IFRSs for the first time on a given date, because both current and comparative figures are based on the same set of standards existing at the time of first time application of IAS. Achieving comparability as between first-time adopters and enterprises that already apply IFRSs is, however, a secondary objective, given the fact that the number of first-time adopters in 2005 will largely exceed that of the 200 to 300 EU companies already applying IAS/IFRSs.
(4) Consultation with technical experts in the field confirms that the international financial reporting standard meets the criteria for adoption set out in Article 3 of Regulation (EC) No 1606/2002, and in particular the requirement of being conducive to the European public good.
(5) Regulation (EC) No 1725/2003 should therefore be amended accordingly.
(6) The measure provided for in this Regulation is in accordance with the opinion of the Accounting Regulatory Committee,
HAS ADOPTED THIS REGULATION:
Article 1
In the Annex to Regulation (EC) No 1725/2003, SIC-8 First-time application of IASs as the primary basis of accounting is replaced by the text set out in the Annex to this Regulation.
Article 2
This Regulation shall enter into force on the 20th day following that of its publication in the Official Journal of the European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Brussels, 6 April 2004.