WRITTEN QUESTION E-2831/02

by Robert Goebbels (PSE) to the Commission

(9 October 2002)

Subject: International trade and rules on the availability of balance sheets

Member State legislation varies greatly with regard to the publication of company balance sheets. Generally speaking, public limited companies are required to publish their annual accounts, but small and medium sized enterprises are often granted exemptions, and it is also possible for simplified accounts to be published. The situation is the same at international level, where very few countries require the accounts of companies registered within their borders to be published in full. In general, this requirement only applies to listed companies.

The Commission has drawn up a proposal for a directive amending the EU accounting directives and supplementing the regulation recently adopted by the Council on the application of international accounting standards. This regulation provides that, from 2005 onwards, all EU companies listed in a regulated market must prepare their consolidated financial statements in accordance with international accounting standards. However, this requirement will not apply to unlisted companies, and there is therefore a risk of the transparency and comparability of financial information not being enhanced.

Moreover, in some EU countries, including France, virtually all companies both large and small are required to publish their balance sheets, which is bound to handicap SMEs that operate on international markets where they are competing with companies not subject to this requirement.

Will the Commission propose, in the foreseeable future, general harmonisation of the rules on the publication of balance sheets at EU level? Should it not also request that harmonised rules on the publication of annual accounts at international level be drawn up under the auspices of the WTO, in order to avoid any distortion of competition between EU companies and companies registered elsewhere?

Answer given by Mr Lamy on behalf of the Commission

(5 November 2002)

Current Community legislation provides for minimum harmonisation of the rules on publication of company accounts at EU level. Directive 78/660/EEC on annual company accounts(1) and Directive 83/349/EEC on consolidated accounts(2) require (at Articles 47 and 38, respectively) publication of the annual accounts (balance sheet, profit and loss account and notes to the account) and, where appropriate, of the consolidated accounts, the annual report and the auditor's report in a register open to the public in accordance with Article 3 of Directive 68/151/EEC(3). However, Member States have the option of requiring small companies e.g. those whose annual turnover is less than EUR 6,25 million and with an average staff complement of less than 50 to prepare and publish a simplified form of the balance sheet and notes to the account only.

This level of publication has hitherto been considered sufficient and satisfactory on the whole as it has not been proven that the exemption granted to small businesses, which reduces their administrative workload, could harm competition in the internal market.

The adoption of international accounting standards (IAS) by the EU should help ensure greater comparability of company financial reports. Although Regulation (EC) No 1606/2002(4) is primarily aimed at listed companies, it also gives Member States the option of permitting or requiring unlisted companies to apply IAS in the preparation of their annual or consolidated accounts. The aim of the proposed Commission directive amending the accounting directives is to facilitate the gradual adoption of IAS by unlisted companies over a timescale acceptable to Member States. The Commission has also advocated to the International Accounting Standards Board (IASB) the development of IAS specific to small and medium-sized enterprises. This project features prominently on the IASB's agenda.

It should also be noted that there are other methods for accessing company accounts than those used in the European Union. In the United States, for example, the data can be obtained through companies which specialise in financial information.

As regards the part of the question about the World Trade Organisation (WTO) and the possibility of harmonised rules on the publication of annual accounts at international level in order to avoid any distortion of competition between EU companies and companies registered elsewhere, it should first be noted that the WTO is an international organisation mandated by its statutes to deal with international trade. It is not the WTO's role to solve all economic problems of distortion of competition at world level. While fair economic competition is more than desirable, for example through harmonised rules on the publication of companies' annual accounts, the structure of the various international organisations (WTO, International Monetary Fund, the International Bank for Reconstruction and Development, etc.) and the principle of specialisation mean that each organisation must confine its intervention to its own sphere of action and, where necessary, coordinate its action more closely with the others.

In 1998, WTO Members adopted Disciplines on Domestic Regulation in the Accountancy Sector (document No S/WPPS/W/21). These are to be applicable to Members who scheduled specific commitments for accountancy at the conclusion of the current round of negotiations. They are intended to facilitate trade in accountancy services by ensuring that domestic regulation affecting trade in accountancy services meets the requirements of General Agreement on Trade in Services (GATS) Article VI:4. Basically, they consist of a set of rules aimed at ensuring that regulations are transparent and administrative procedures predictable, reasonable and objective. However, they do not establish, or aim to establish, any international harmonisation of accountancy rules and regulations.

(1) Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies, OJ L 222, 14.8.1978.

(2) Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts, OJ L 193, 18.7.1983.

(3) First Council Directive 68/151/EEC of 9 March 1968 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the community, OJ L 65, 14.3.1968.

(4) Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, OJ L 243, 11.9.2002.