Opinion of the Advocate General — ECLI:EU:C:1998:573
Date: 1998-11-26
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary of the Judgment 
1. Freedom of movement for persons — Freedom of establishment — Companies — 
Directive 78/660 — Annual accounts of certain types of companies — Principles of 
making valuations on a prudent basis and of a true and fair view — Provisions for 
potential warranty liabilities to be entered as liabilities arising before the date of the 
balance sheet but having only potential effects 
(Council Directive 78/660, Art 20(1)) 
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SUMMARY — CASE C-275/97 
2. Freedom of movement for persons — Freedom of establishment — Companies — 
Directive 78/660 — Annual accounts of certain types of companies — Principle that 
the components of asset and liability items are to be evaluated separately — 
Derogations — 'Exceptional cases' — Meaning 
(Council Directive 78/660, Art. 31(2)) 
3. Freedom of movement for persons — Freedom of establishment — Companies — 
Directive 78/660 — Annual accounts of certain types of companies — Provisions for 
liabilities and charges — Rules governing the making of provisions — Application of 
national law — Conditions and limits 
(Council Directive 78/660) 
1. Under Article 20(1) of the Fourth 
Directive (78/660) based on Arti­
cle 54(3)(g) of the Treaty on the annual 
accounts of certain types of companies, 
which lays down the obligation to 
enter provisions for liabilities and 
charges in the accounts under 'Liabil­
ities', provisions for potential warranty 
liabilities must be entered under 
'Liabilities' provided that those liabil­
ities constitute charges the nature of 
which is clearly defined and which are 
likely to be incurred but in respect of 
which the amount or the date on which 
they will arise is uncertain. Provisions 
for potential warranty liabilities must 
therefore be entered as liabilities aris­
ing in law before. the date of the 
balance sheet but whose effects will 
not become apparent until after that 
date. Any other interpretation of the 
above provision would mean that such 
potential debts would not be shown in 
the balance sheet. This would lead to 
an overestimate of the assets, which 
would be incompatible not only with 
the principle of making valuations on a 
prudent basis, but also with the prin­
ciple of the 'true and fair view', com­
pliance with which is the primary 
objective of the Directive. 
2. Article 31(2) of the Fourth Directive 
(78/660) based on Article 54(3)(g) of 
the Treaty on the annual accounts of 
certain types of companies permits, 'in 
exceptional cases', departure from the 
principle that the components of asset 
and liability items are to be evaluated 
separately. Since the expression 'in 
exceptional cases' must be interpreted 
in the light of the Directive's aim — 
that the annual accounts of the com­
panies concerned must give a true and 
fair view of their assets, of their 
financial position and of their profit 
or loss — the cases envisaged are those 
in which separate valuation would not 
give the truest and fairest possible view 
of the actual financial position of the 
company concerned. It follows that a 
single provision for all such liabilities 
should be made where a global valua­
tion is the most appropriate way of 
ensuring that the expenditure to be 
shown under 'Liabilities' represents a 
true and fair view of its amount. 
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DE + ES BAUUNTERNEHMUNG V FINANZAMT BERGHEIM 
3. In the absence of Community rules 
specifically applying to the method and 
criteria for evaluating provisions for 
charges and liabilities which, by virtue 
of the Fourth Directive (78/660) based 
on Article 54(3)(g) of the Treaty on the 
annual accounts of certain types of 
companies, must be entered under 
'Liabilities' in the company's balance 
sheet, those provisions should be deter­
mined under the conditions laid down 
by the national legislation of the var­
ious Member States, provided, how­
ever, that the annual accounts give a 
true and fair view of the assets, finan­
cial position and the profit or loss of 
the company and that the provisions do 
not exceed in amount the sums which 
are necessary. 
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