11. 11. 88 Official Journal of the European Communities No C 287/5 
II 
(Preparatory Acts) 
COMMISSION 
Proposal for a Council Directive amending Directive 78/660/EEC on annual accounts and 
Directive 83/349/EEC on consolidated accounts with respect to the exemptions for small and 
medium-sized companies and to the drawing up and publication of accounts in ECU 
COM(88) 292 final — SYN 158 
(Submitted by the Commission to the Council on 24 October 1988) 
(88/C 287/06) 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European 
Economic Community, and in particular Article 54 
thereof, 
Having regard to the proposal from the Commission, 
In cooperation with the European Parliament, 
Having regard to the opinion of the Economic and 
Social Committee, 
Whereas national provisions concerning the presentation 
and content of annual accounts and annual reports of 
public and private limited companies, concerning the 
valuation methods used therein and concerning the 
publication of such accounts and reports have been 
harmonized by Council Directive 78/660/EEC ('), as 
last amended by the Act of Accession of Spain and 
Portugal; 
Whereas the administrative burdens on small and 
medium-sized companies should be reduced in 
accordance with the Council resolution of 3 November 
1986 (2) and with the Council resolution of 30 June 1988 
on the improvement of the business environment and the 
promotion of the development of enterprises, in 
particular SME's, in the Community (3), which calls 
more especially for a substantial alleviation of the obli­
gations arising from Directive 78/660/EEC; 
Whereas Directive 78/660/EEC allows Member States 
to grant exemptions for certain companies of minor 
economic and social importance; whereas Member States 
have made widely-varying use of this possibility; whereas 
this variation in requirements may cause distortions of 
(') OJ No L 222, 14. 8. 1978, p. 11. 
(2) OJ No C 287, 14. 11. 1986, p. 1. 
(3) O] No C 197, 27. 7. 1988, p. 6. competition between small companies in different 
Member States, depending on whether or not the 
exemptions are available there, and undermines the 
objective of ensuring the comparability and equivalence 
of the information given in company accounts; 
Whereas, in order to simplify and harmonize the 
accounting obligations for small companies, the 
exemptions provided for in Directive 78/660/EEC in 
favour of small companies and relating to the drawing 
up, auditing and publication of accounts should be made 
mandatory; 
Whereas it is desirable for this purpose that some small 
closely-held companies should be completely exempt 
from the rules prescribed by Directive 78/660/EEC, 
subject to appropriate safeguards for the interests of 
shareholders and third parties; whereas an exemption for 
such companies is justified from the point of view of the 
single European market because they are unlikely to 
engage in intra-Community trade; 
Whereas a certain flexibility in the definition of small 
and medium-sized companies is justified by a different 
economic environment in Member States; 
Whereas provision should be made for exempting 
companies whose administrative or management body 
consists of only one person from the requirement of 
including details of the director's remuneration and any 
advances or credits granted to him in the notes on the 
accounts; 
Whereas it is also necessary to simplify the requirements 
imposed on small companies for drawing up and 
publishing notes on the accounts; whereas such 
companies should be exempt from the obligation to 
supply certain items of information that can be regarded 
as less important for the smaller company; whereas for 
No C 287/6 Official Journal of the European Communities 11. 11. 88 
the same reason such companies should be exempt from 
the requirement to present an annual report, provided 
that certain important items of information normally 
given in the report are supplied in the notes on the 
accounts; 
Whereas small and medium-sized companies should be 
allowed to keep the accounting documents available to 
the public at the registered office of the company 
without disregarding the basic idea that these documents 
should be available to the public without restriction; 
Whereas it is important to promote European monetary 
integration by allowing companies to draw up and 
publish their accounts in ECU; and whereas Council 
Directives 78/660/EEC and 83/349/EEC ('), as 
amended by the Act of Accession of Spain and Portugal, 
should be clarified in this respect so as to require 
companies availing themselves of this possibility to state 
the method they have used for conversion into ECU in 
the notes on the accounts, 
HAS ADOPTED THIS DIRECTIVE: 
SECTION 1 
Exemptions for small and medium-sized companies 
Article 1 
The following Article is inserted in Directive 
78/660/EEC: 
'Article la 
1. This Directive shall not apply to companies 
falling within Article 11 where the following 
additional conditions are fulfilled: 
(a) the company is not affiliated with other under­
takings within the meaning of Article 41 of 
Directive 83/349/EEC and is not linked to 
another undertaking by virtue of a participating 
interest; 
(b) the shareholders or members of the company are 
the same persons as the members of its adminis­
trative or management body and are natural 
persons; 
(c) the shares of the company are registered and 
under its statutes or instrument of incorporation 
may not be transferred without the company's 
consent; 
(d) the exemption is disclosed in accordance with 
Article 3 of Directive 68/151/EEC. 
2. The Member States shall provide appropriate 
penalties for failure by such companies to keep 
proper accounts. 
(•) OJ No L 193, 18. 7. 1983, p. 1. 3. When Member States require such companies to 
present their annual accounts to the shareholders or 
members of the company using a layout, such layout 
may not go beyond that which is prescribed by this 
Directive for companies falling within Article 11.' 
Article 2 
Article 2 (6) of Directive 78/660/EEC is replaced by the 
following: 
'6. Except in relation to companies falling within 
Article 11, the Member States may authorize or 
require the disclosure in the annual accounts of other 
information as well as that which must be disclosed 
in accordance with this Directive.' 
Article 3 
The last sentence of Article 4 (1) of Directive 
78/660/EEC is replaced by the following: 
'Except in relation to companies falling within Article 
11, such subdivision or new items may be required by 
the Member States.' 
Article 4 
Article 11 of the Directive 78/660/EEC is replaced by 
the following: 
Article 11 
1. Companies which on their balance sheet dates 
do not exceed the limits of two of the following three 
criteria: 
— balance sheet total: 1 550 000 ECU, 
— net turnover: 3 200 000 ECU, 
— average number of employees during the financial 
year: 50 
may draw up abridged balance sheets showing only 
those items preceded by letters and Roman numerals 
in Articles 9 and 10, disclosing separately the infor­
mation required in brackets in D (II) under "Assets" 
and C under "Liabilities" in Article 9 and in D (II) in 
Article 10, but in total for each. 
Article 15 (3) (a) and (4) shall not apply to abridged 
balance sheets. 
2. However, Member States may simultaneously 
and in like proportions increase or decrease by up to 
50 % the thresholds concerning the balance sheet 
total and the net turnover referred to in paragraph 1. 
As to the average number of employees referred to in 
paragraph 1, Member States may adopt a lower 
figure with a minimum number of 25.' 
11. 11. 88 Official Journal of the European Communities No C 287/7 
Article 5 
Article 27 of Directive 78/660/EEC is replaced by the 
following: 
'Article 27 
1. Member States shall permit companies falling 
within Article 11, and may permit other companies 
which on their balance sheet dates do not exceed the 
limits of two of the following three criteria: 
— balance sheet total: 6 200 000 ECU, 
— net turnover: 12 800 000 ECU, 
— average number of employees during the financial 
year: 250 
to adopt layouts different from those prescribed in 
Articles 23 to 26 within the following limits: 
(a) in Article 23: 1 to 5 inclusive may be combined 
under one item called "Gross profit or loss"; 
(b) in Article 24: A(l), A (2) and B (1) to B (4) 
inclusive may be combined under one item called 
"Gross profit or loss"; 
(c) in Article 25: (1), (2), (3) and (6) may be 
combined under one item called "Gross profit or 
loss"; 
(d) in Article 26: A (1), B (1) and B (2) may be 
combined under one item called "Gross profit or 
loss". 
Article 12 shall apply. 
2. However, for the application of this Directive, 
Member States may simultaneously and in like 
proportions increase by up to 50 % the thresholds 
concerning the balance sheet total and the net 
turnover referred to in paragraph 1.' 
Article 6 
Article 30 of Directive 78/660/EEC is replaced by the 
following: 
Article 30 
Member States shall permit companies falling within 
Article 11, and may permit other companies, to show 
taxes on the profit or loss on ordinary activities and 
taxes on the extraordinary profit or loss in total as 
one item in the profit and loss account before "Other 
taxes not shown under the above items". In the case, 
"profit or loss on ordinary activities after taxation" 
shall be omitted from the layouts prescribed in 
Articles 23 to 26. Where this waiver is applied, companies other than 
those falling within Article 11 must disclose in the 
notes on the accounts the extent to which the taxes 
on the profit or loss affect the profit or loss on 
ordinary activities and the "Extraordinary profit or 
loss".' 
Article 7 
The following paragraph is added to Article 43 of 
Directive 78/660/EEC: 
'3. Member States may waive the requirement to 
provide the information referred to in paragraph 1 
(12) and (13) for companies whose administrative or 
management body consists of only one person.' 
Article 8 
Article 44 of Directive 78/660/EEC is replaced by the 
following: 
Article 44 
1. Companies falling within Article 11 may draw 
up abridged notes on their accounts without the 
information referred to in Article 43 (1) (5) to (13). 
However, the notes must disclose the information 
referred to in Article 43 (1) in total for all the items 
concerned. 
2. The companies referred to in paragraph 1 shall 
also be exempt from the obligation to disclose in the 
notes on the accounts the information referred to in 
Article 15 (3) (a) and (4), Articles 18, 21 and 29 (2), 
Article 34 (2), Article 40 (2), and the second 
subparagraph of Article 42. 
3. Article 12 shall apply.' 
Article 9 
The introductory phase of Article 45 (1) of Directive 
78/660/EEC is replaced by the following: 
'1. Member States shall permit companies falling 
within Article 11 and may permit other companies to 
treat the disclosures prescribed in Article 43 (1) (2) in 
such a way as:' 
Article 10 
The following paragraph is added to Article 46 of 
Directive 78/660/EEC: 
'3. Companies falling within Article 11 shall 
not be required to prepare an annual report, provided 
that the information referred to in paragraph 2 (a) 
and (d) is given in the notes on the accounts.' 
Article 11 
Article 47 of Directive 78/660/EEC is amended as 
follows: 
No C 287/8 Official Journal of the European Communities 11. 11. 88 
1. Paragraph 2 is replaced by the following: 
'2. Notwithstanding paragraph 1, companies falling 
within Article 11 may publish: 
(a) abridged balance sheets in accordance with Article 
11; 
(b) abridged notes on the accounts in accordance 
with Article 44. 
Article 12 shall apply. 
Such companies shall not be required to publish their 
profit and loss account or their annual report.' 
2. The following paragraph 4 is inserted: 
'4. Notwithstanding paragraph 1, subparagraph 1, 
Member States shall permit companies falling within 
Article 11 and may permit companies falling within 
Article 27 to make the accounting documents which 
must be published in accordance with the present 
Directive available to the public at the company's 
registered office. It must be possible for anyone to 
obtain a copy of these documents upon request, 
including by mail. The price of such a copy must not 
exceed its administrative cost. 
Member States shall provide that the place where the 
public can obtain these documents is published by 
means of a reference, in accordance with Article 3 (4) 
of Directive 68/151/EEC. Member States shall also 
provide appropriate sanctions for failure by companies 
to publish these documents in accordance with the 
present paragraph. 
This paragraph shall not apply to companies having 
made a public issue of securities.' 
Article 12 
Article 51 (2) of Directive 78/660/EEC is replaced by 
the following: 
'2. Companies falling within Article 11 shall be 
exempt from the requirement referred to in para-
graphe 1. 
Article 12 shall apply.' 
SECTION 2 
Drawing up and publication of accounts in ECU 
Article 13 
The following section 11a is inserted in Directive 
78/660/EEC: 'SECTION 11a 
Drawing up and publication of accounts in ECU 
Article 51a 
Companies may draw up and publish their accounts 
in ECU at the exchange rate prevailing on the 
balance sheet date. The method to be used for 
conversion into ECU is described in the notes on the 
accounts.' 
Article 14 
The following section 5a is inserted in Directive 
83/349/EEC: 
'SECTION 5a 
Drawing up and publication of consolidated accounts 
in ECU 
Article 38a 
Consolidated accounts may be drawn up and 
published in ECU at the exchange rate prevailing on 
the balance sheet date. The method to be used for 
conversion into ECU is described in the notes on the 
consolidated accounts.' 
SECTION 3 
final provisions 
Article 15 
1. The Member States shall bring into force the laws, 
regulations and administrative provisions necessary to 
comply with this Directive by 1 January 1990. They shall 
forthwith inform the Commission thereof. 
2. A Member State may provide that the provisions of 
this Directive shall first apply to accounts for financial 
years beginning on 1 January 1992 or during the 
calendar year 1992. 
3. The Member States shall communicate to the 
Commission the texts of the main provisions of national 
law which they adopt in the field covered by this 
Directive. 
Article 16 
This Directive is addressed to the Member States.