26. 3. 77 Official  Journal  of the  European  Communities No C 75/5 
II 
(Preparatory  Acts) 
ECONOMIC  AND  SOCIAL  COMMITTEE 
Opinion  on the proposal  for a seventh  Directive  pursuant  to Article  54 (3) (g) of the 
EEC  Treaty  concerning  group  accounts 
The text  referred  to the  Committee  has  been  published  in Official  Journal  of the 
European  Communities  No  C 121  of 2 June  1976,  page  2. 
A. LEGAL  BASIS  FOR  THE  OPINION 
On 14 May  1976  the Council  referred  the abovementioned  proposal  to the Economic 
and Social  Committee  in accordance  with  Article  54 of the  Treaty  establishing  the 
European  Economic  Community. 
B. OPINION  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and  Social  Committee  prepared  its opinion  on the above  matter  at its 
146th  plenary  session,  held  in Brussels  on 23 and  24 February  1977. 
The full  text  of the opinion  is as follows: 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to the request  for an opinion  made  by 
the Council  of the European  Communities  on 14 May 
1976, 
Having  regard  to  the  Treaty  establishing  the 
European  Economic  Community  and,  in particular, 
Article  54 (3) (g) thereof, 
Having  regard  to the decision  taken  by its Bureau  on 
13 May  1976,  instructing  the  Section  for  Industry, 
Commerce,  Crafts  and  Services  to prepare  the 
Committee's  work  on the matter, 
Having  regard  to the opinion  issued  by the Section 
for Industry,  Commerce,  Crafts  and  Services  at its 
meeting  on 5 January  1977, Having  regard  to the  report  submitted  by  the 
rapporteur,  Mr  Friedrichs,  setting  out  the  views 
expressed  during  the proceedings, 
Having  regard  to the  discussions  at its meeting  on 
24 February  1977  (146th  plenary  session  of 23 and 
24 February  1977), 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
with  one  vote  against  and  six abstentions: 
The Committee  approves  the proposal,  subject  to the 
comments  set out below. 
No C 75/6 Official  Journal  of the  European  Communities 26. 3. 77 
1. General  Comments 
1.1. The  proposal  for a seventh  Directive  pursuant 
to Article  54 (3) (g) of the  EEC  Treaty  is closely 
related  to the  proposal  for  a fourth  Directive,  on 
which  the  Committee  has  already  commented  (1). 
Whereas  the  fourth  Directive  coordinates  national 
legislation  with  regard  to the  annual  accounts  of 
limited  liability  companies,  the  seventh  Directive 
contains  Community  rules  on consolidated  accounts. 
Thus,  account  has now  been  taken  of the fact  that,  in 
business,  numerous  firms  operate  as members  of 
groups  and  that  in such  instances  the  annual 
accounts  of the  individual  firms  do not  give  a true 
picture  of each  firm's  position. 
1.2. The  Committee  regrets  that  it has  not  been 
able to be supplied  with  any  information  about  how 
far work  on the  fourth  Directive  has  progressed  to 
date.  Even  if it were  true  to say that  the amendments 
made  hitherto  to the  original  text  of the  fourth 
Directive  are  of no  importance  for  the  seventh 
Directive,  it would  have  been  very  useful  to know  the 
latest  position  with  regard  to discussions  on the 
fourth  Directive  when  appraising  the relevant  articles 
in the  seventh  Directive.  The  Committee  would, 
therefore,  like  to point  out that  its comments  on those 
Articles  in the seventh  Directive  which  refer  back  to 
the fourth  Directive  are not to be taken  as comments 
on the Articles  in question  in the fourth  Directive.  It 
should  also  be noted  that  the Committee's  members 
from  the  new  Member  States  had  no part  in the 
production  of the opinion  on the fourth  Directive. 
1.3. Furthermore,  the Committee  would  emphasize 
that that  part  of its opinion  on the seventh  Directive 
which  deals  with  the definitions  given  in Section  1 of 
the Directive  of  'associated',  'dependent'  and 
'dominant  undertakings'  should  in no  way  be 
regarded  as anticipating  the  opinion  which  the 
Committee  will  be delivering  on  a Commission 
proposal  on the general  laws  relating  to groups. 
1.4. The  seventh  Directive,  just  like  the  six 
previous  Directives,  is based  on Article  54 (3) (g) of 
the EEC  Treaty.  Bearing  in mind  that  the production 
of group  accounts  is not  a statutory  requirement  in 
all Member  States  for  all the  types  of companies 
listed  in Article  6 (1) (a) of the proposal,  the question 
arose  as to whether  Article  54 (3) (g),  which  provides 
for coordination  of such  requirements  throughout  the 
Community,  was  a sound  legal  basis.  The  Committee 
would  ask the Commission  to examine  this  point. 1.5. The  Committee  takes  the  view  that 
consolidated  accounts  must  provide  a true  and  fair 
view  of the  group's  position.  This  means  that  all 
firms  in a group,  regardless  of their  legal  form,  must 
be included  in the  group  accounts  and  that  when 
defining  the meaning  of a 'group'  the existence  of the 
economic  unit  and  unified  management  must  be 
taken  as the basis.  These  requirements  are satisfied  in 
the seventh  Directive,  although  a number  of 
reservations  are set out below. 
1.6. In  some  of the Articles  of the proposal  for a 
Directive,  expressions  are  used  which,  in  the 
Committee's  view,  are  rather  vague.  Examples  of 
such  expressions  are 'significant  influence'  (Article  1), 
'dominant  influence'  (Article  2) and  'in so far as is 
possible'  (Article  8). The  Committee  realizes  that  it is 
not possible  to give  a precise  definition  of these 
criteria.  Nevertheless,  it considers  that  every 
endeavour  should  be made  to preclude  the possibility 
of different  interpretations  and  it calls  upon  the 
Commission  to ensure  that,  in practice,  the Member 
States  apply  the Directive  as uniformly  as possible. 
1.7. It  has not escaped  the Committee's  notice  that 
numerous  international  organizations,  such  as the 
UN and  the  OECD,  have  been  considering  the 
question  of group  accounts  for a number  of years.  In 
this connection,  the Committee  has  taken  particular 
note  of the  International  Accounting  Standards 
Committee's  Standard  No  3,  which  has  been 
introduced  by  some  stock  exchanges.  The 
Commission  should  continue  to keep  a watching 
brief  on  this  work  and  endeavour  to  ensure 
maximum  conformity  between  international  and 
European  standards. 
2. Specific  comments 
Article  1 
2.1. The  Committee  would  point  out that  Article  1 
(2) is a refutable  presumption  and  that  Article  1 (1) 
can also  apply  when  the holding  is less  than  20 %. In 
this way,  Article  1 gives  a definition  of an 'associated 
undertaking'  whose  flexibility  accords  with  the 
practical  reality.  However,  it will  be necessary  to 
ensure  that  this  rule  is applied  uniformly  in the 
Member  States. 
Article  2 
C1) OJ No C 39, 7. 6. 1973. 2.2. The  Committee  would  refer  back  to its 
comments  on Article  1, which  apply  by analogy  to 
26. 3. 77 Official  Journal  of the European  Communities No C 75/7 
Article  2. It would  also  point  to the  links  between 
Article  2 and  Article  3. 
Article  3 
2.3. The  Committee  underlines  that  unified 
management  does  not  presuppose  a centralized 
administration,  as the  English  text  of the  proposal 
suggests. 
Article  5 
2.4. The  Committee  would  ask the Commission  to 
ensure  that  Article  5 will  be compatible  with  the 
provisions  of the  fourth  Directive  in the  form  in 
which  it will  ultimately  be enacted. 
Article  6 (1) (a) 
2.5. The  Committee  would  ask the Commission  to 
check  whether  the  application  of  the  seventh 
Directive  could  pose  problems  for  smaller  groups 
and, if so, what  these  problems  would  be. 
Article  6 (2) (b) 
2.6. The  Committee  would  point  out  that  it is 
feasible  for  a 'dominant  undertaking'  with  its 
registered  office  outside  the  Community  to publish 
group  accounts  which  are comparable  with  the group 
accounts  prescribed  in this  Directive.  In such  cases, 
the obligation  laid  down  in Article  6 (2) (b) could  be 
waived. 
Article  8 
2.7. The  Committee  points  out that  the phrase  'in 
so far  as is possible'  is very  ambiguous.  In the 
interests  of the  Directive's  uniform  application,  the 
Commission  should  draw  up certain  rules  for  its 
practical  implementation.  It is otherwise  to be feared 
in connection  with  the  Directive  currently  being 
prepared  about  banks'  accounts  that  substantial 
difficulties  will  arise  when  consolidated  accounts  are 
produced  for  groups  to which  one  or more  banks 
belong  in the  form  of dominant  or dependent 
companies. 
Article  9 
2.8. The  Committee  proposes  that  group  accounts 
should  be supplemented  by a breakdown  of capital 
allocation,  providing  particulars  of the  origin  and 
allocation  of resources  and  thus  showing  where 
capital  is located  within  the group  at the end  of the 
financial  year. 
Article  12 (1) (a) 
2.9. The  Committee  suggests  that  the  fourth 
sentence  should  be changed  to read  as follows: 'Any  balance  not  so  atttributable  or  only 
attributable  with  unreasonable  difficulty  shall  be 
shown  ...' 
Article  14 (1) (a) 
2.10.  The  Committee  thinks  a positive  formulation 
would  be better  than  a negative  one.  It therefore 
proposes  a positive  wording,  which  incidentally  is in 
keeping  with  the IASC  standards,  namely: 
'The  methods  of consolidation  must  be applied 
each  year  according  to the same  procedure.' 
Article  14 (2) (a) 
2.11.  The  Committee  notes  that  the  exceptional 
cases  where  it is permissible  to depart  from  the 
provision  stipulating  the continuity  of the methods  of 
consolidation  are  far from  being  limited.  It would 
prefer  the following  text: 
'As a departure  from  the general  principle  set out 
in Article  1 (a), the methods  of consolidation  may 
be changed  only  if and  in so far  as this  is 
necessary  to satisfy  the requirements  laid  down  in 
Article  9 (2).' 
2.12.  The  rest  of (a)  would  then  have  to be 
re-worded  accordingly. 
Article  15 (b) 
2.13.  The  Committee  considers  it also  inadvisable 
at this  point  to speak  about  exceptional  cases  without 
being  more  specific.  It therefore  proposes  that  the 
sentence  in question  be amended  to read  as follows: 
'Departures  from  this  principle  shall  be permitted 
only  if and  in so far  as application  of this 
principle  is  impossible  or  in  all  fairness 
impracticable.' 
Article  16 
2.14.  The  Committee  points  out  that  some 
Community  and  non-Community  countries' 
regulations  regarding  the writing-off  period  are  less 
strict  than  the Commission  would  have  it believed.  A 
writing-off  period  of five  years  could  in many 
instances  constitute  an  unjustifiable  burden.  The 
Committee  asks  the  Commission  to take  another 
look  at this  Article  from  this  angle  bearing  in mind 
also that  there  is a contradiction  in the  writing-off 
rules  between  the  fourth  and  seventh  Directives 
regarding  the valuation  of participating  interests  on 
the one  hand  and  the treatment  of increases  in value 
on the other. 
No C 75/8 Official  Journal  of the  European  Communities 26. 3. 77 
Article  20 (6) 
2.15.  The  Committee  would  point  out  that  the 
German  text  would  be clearer  if the phrase  'die  nicht 
zum Konzern  gehoren'  ('which  do not  form  part  of 
the group'  in the English  text)  were  replaced  by 'die 
kein Konzernunternehmen  sind'  ('which  are  not 
group  undertakings').  In the  Italian  version  the 
link-up  with  Article  5 is not  clear  and  the  text  will 
have  to be  amended  accordingly,  i. e. 'collegate' 
should  be used  instead  of 'legate'. 
Article  20 (7) 
2.16.  The  Committee  is of the  opinion  that  the 
publication  of the net amount  of the group's  turnover 
broken  down  by category  of product  and  activity, 
and by geographical  market  could  be prejudicial  to 
small  groups  as regards  competition.  The  Committee, 
therefore,  would  ask  the  Commission  to reconsider 
the Article. 
Article  20 (9) and  (10) 
2.17.  The  Committee  would  point  out  that  the 
French  version  of these  paragraphs  obviously  fails  to 
express  clearly  what  is meant. 
Done  at Brussels,  24 February  1977. Article  24 
2.18.  The  Committee  considers  it inappropriate  for 
Article  24 (1)  (a) to stipulate  that  group  accounts 
must  be published  in their  entirety  in the  national 
Official  Gazette  as provided  for  in Article  44 of the 
fourth  Directive.  The  Committee  would  ask  the 
Commission  to simplify  the formalities  regarding  the 
publication  of accounts  as far as possible  given  that 
undertakings  will  be obliged  to send  a copy  of the 
full group  accounts  and  the  annual  report  together 
with  a copy  of the  auditor's  report  to all interested 
parties  on application. 
Article  26 
2.19.  The  Committee  considers  that,  in  the 
German  text,  the verb  'konnten'  should  be added  at 
the end  of Article  26 (2).  (Translator's  note:  The 
concluding  part  of the  sentence  would  then  read  in 
English  'which  they  may  adopt  subsequently  in the 
field  covered  by this  Directive'). 
Supplementary  remark 
2.20.  The  Committee  regrets  that  the  proposal 
does  not  set  any  deadlines  for  the  presentation  of 
group  accounts. 
The Chairman 
of the Economic  and  Social  Committee 
Basil  de FERRANTI 
ANNEX 
to the opinion  of the Economic  and  Social  Committee 
1. The  following  amendments  were  rejected: 
Paragraph  1.5 
Delete  last  sentence  and  add  the following: 
'However,  the  preparation  of consolidated  group  accounts  will  present  practical 
difficulties  when  the fourth  Directive  does  not  apply  to the dominant  undertaking  even 
though  the proposal  attempts  to circumvent  the omission.' 
Reason 
It is considered  impractical  to require  undertakings,  other  than  companies  to which  the 
fourth  Directive  applies,  to prepare  group  accounts.  It is pointed  out  that  there  does  not 
appear  to be any  Directive  in preparation  which  defines  the responsibilities  of undertakings 
other  than  companies  for the preparation  of accounts.  Furthermore,  since  the legal  basis  of 
26. 3. 77 Official  Journal  of the  European  Communities No C 75/9 
the proposal  is Article  54 (3) (g) which  refers  only  to 'companies  and  firms'  as defined  in 
Article  58 of the Treaty,  it is questionable  that  such  an imposition  be placed  on individuals 
and partnerships  to prepare  accounts  under  this  Directive. 
Result  of the voting: 
For: 1, abstentions:  19. 
Add a new  paragraph  1.8: 
'The  Section  would  direct  attention  to the written  report  enclosed  with  this  opinion.  This 
report  summarizes  comments  and  suggestions  from  the Section's  members  which  could 
be of interest  to the Communities'. 
Reason 
It is considered  essential  that  the various  controversial  aspects  of the Directive  be emphasized 
by including  a reference  to the report  in the opinion. 
Result  of the voting: 
For: 9, against:  35, abstentions:  19. 
Article  15 (b) 
The Committee  considers  that  Article  15 (b) should  read  as follows: 
'The  valuation  rules  laid  down  in the fourth  Directive  must  be applied  in drawing  up 
annual  accounts  to be included  in the  consolidation.  Where  this  principle  is departed 
from,  items  valued  in accordance  with  different  rules  shall  be consolidated  only  after 
having  been  valued  in accordance  with  the  valuation  rules  applied  by the  dominant 
group  undertaking,  in so far  as these  valuation  rules  refer  to the  basic  alternative 
valuation  methods  provided  for  in Articles  29, 30 and  31 of the fourth  Directive.' 
Reasons 
All undertakings  must  balance  their  books  in accordance  with  the fourth  Directive.  It is right 
and proper  that  the  flexibility  as regards  valuation  allowed  in the  fourth  Directive  should 
be open  to each  and  every  undertaking,  irrespective  of whether  its accounts  have  to be 
consolidated.  Otherwise  there  would  be discrimination  as against  undertakings  which  do 
not have  to consolidate  their  accounts. 
Result  of the voting: 
For: 6, against:  47, abstentions:  24. 
2. The  following  passage  in the Section's  opinion  was  deleted  following  the acceptance  of an 
amendment  to this  effect: 
Article  6 (2) (a) 
'In the Section's  view,  consolidated  sub-group  accounts  should  only  be required  in cases 
where  consolidated  accounts  are not  drawn  up for the group  as a whole.  The  Section 
could  approve  the obligation  to draw  up consolidated  sub-group  accounts  in other  cases 
only  if the  undertakings  concerned  form  a unit  which  is important  in view  of its role 
or its location.' 
Result  of the voting: 
For: 39, against:  27, abstentions:  8.