Opinion of the Advocate General — ECLI:EU:C:2001:608
Date: 2001-11-15
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment;Provisions governing the Institutions
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary of the Judgment 
1. Preliminary rulings — Jurisdiction of the Court — Interpretation of Community law 
in a context where it is not directly applicable — Admissibility, in this case, of the 
questions referred 
(Art. 234 EC; Council Directive 78/660) 
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SUMMARY — CASE C-306/99 
2. Freedom of movement for persons — Freedom of establishment — Companies — 
Directive 78/660 — Annual accounts of certain types of companies — Provision to 
cover the risk arising front a commitment appearing at the foot of the balance sheet — 
Whether possible to enter such risk on the liabilities side of the balance sheet — 
Condition — Valuation of asset and liability items — Whether possible to make a 
globalised assessment — Condition 
(Council Directive 78/660, Arts 14, 20(1), and 31(1) (e)) 
3. Freedom of movement for persons — Freedom of establishment — Companies — 
Directive 78/660 — Annual accounts of certain types of companies — Principle of 
valuing asset and liability items at the balance-sheet date — Repayment after that date 
of a loan for which credit risk provision had been made — Retrospective revalu­
ation — No obligation — Condition 
(Council Directive 78/660, Art. 31(1)(c)(bb)) 
1. Questions referred for a preliminary 
ruling in the context of a dispute 
concerning the valuation of a provision 
for potential losses arising from a credit 
institution's sub-participation in the 
risk of non-repayment of a loan, and 
concerning the annual accounts of 
certain types of companies, are admiss­
ible, notwithstanding the circum­
stances that, at the material date in 
the main proceedings, Member States 
were not required to apply the provi­
sions of the Fourth Directive to the 
annual accounts of a body like that in 
question, that the national legislation 
transposing the Fourth Directive did 
not reproduce the principles set out in 
the directive verbatim, and that the 
legislation on tax accounts, being based 
only indirectly on that national trans­
posing legislation, transposes the 
Fourth Directive outside the context 
which it envisages, where the following 
factors are present: 
— the problems of interpretation of 
Community law which the national 
court seeks to resolve are essentially 
concerned with the accounting 
approach required by the Fourth 
Directive; 
— subsequently to the facts in the main 
action, the provisions in question 
were applied, without modification, 
to bodies such as those in question 
and the questions referred are there­
fore neither general nor hypotheti­
cal; 
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BIAO 
— there is nothing in the national 
legislation to prevent full com­
pliance, when drawing up the 
annual accounts of such bodies, with 
the aim, principles and provisions of 
that directive. 
(see paras 78, 90-92, 94, 
operative part 1) 
2. The Fourth Directive 78/660 on the 
annual accounts of certain types of 
companies does not preclude a provi­
sion intended to cover possible losses 
or debts arising from a commitment 
appearing at the foot of the balance 
sheet pursuant to Article 14 of that 
directive from being entered on the 
liabilities side of the balance-sheet 
pursuant to Article 20(1), provided 
that the loss or debt in question may 
be characterised as 'likely or certain' at 
the balance-sheet date, that assessment 
being a matter for the national court. 
Article 31(1)(e) of that directive, which 
provides that the components of asset 
and liability items must be valued 
separately, does not exclude the possi­
bility that, in order to ensure com­
pliance with the principle of prudence 
and the principle that a true and fair 
view of the assets and liabilities be 
given, the most appropriate method of 
valuation might be to carry out a 
globalised assessment of all the rel­
evant factors. In the absence of further 
particulars in the directive, which 
merely sets out general principles with­
out seeking to regulate all their possible 
applications, assessment of the relevant-
criteria is a matter for national law, 
read where appropriate in the light of 
the international accounting standards 
(IAS), provided always that the general 
principles set out by that directive are 
fully complied with. 
(see paras 112, 116, 118-119, 
operative part 2) 
3. Pursuant to Article 31(1)(c)(bb) of the 
Fourth Directive 78/660 on the annual 
accounts of certain types of companies, 
for the purposes of valuing items in the 
annual accounts, account must be 
taken of all foreseeable liabilities and 
potential losses arising in the course of 
the financial year concerned or of a 
previous one, the relevant date for 
valuing asset and liability items being 
therefore, in principle, the balance-
sheet date. 
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SUMMARY — CASE C-306/99 
In that respect, repayment of a loan 
which takes place after the balance-
sheet date does not constitute a fact 
necessitating retrospective revaluation 
of a provision intended to cover the 
risks relating to that loan and entered 
on the liabilities side of the balance-
sheet. However, compliance with the 
principle that a 'true and fair view' be 
given of the company's assets and 
liabilities requires that mention should 
be made in the annual accounts of the 
disappearance of the risk covered by 
that provision. 
(see paras 121, 126, 
operative part 3) 
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