CELEX: 51978PC0703
Language: en
Date: 1978-12-12
Title: AMENDED PROPOSAL FOR A SEVENTH DIRECTIVE PURSUANT TO ARTICLE 54(3) (g) OF THE EEC TREATY CONCERNING GROUP ACCOUNTS (Presented by the Commission to the Council pursuant to the second paragraph of article 149 of the EEC Treaty)

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COM (78) 703
Vol. 1978/0265
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 ---pagebreak---          COMMISSION OF THE EUROPEAN COMMUNITIES
                                                           COM(78 ) 703 final
                                                           Brussels . 12 December 1978
                    AMENDED PROPOSAL FOR A SEVENTH DIRECTIVE
                          PURSUANT TO ARTICLE 54(3 ) ( g )
                  OF THE EEC TREATY CONCERNING GROUP ACCOUNTS
                  (Presented "by the Commission to the Council
                   pursuant to the second paragraph of article
                   149 of the EEC Treaty)
                           m v>?r                   5
001(78) 703 final
 ---pagebreak---                                          - 1 -
                                 EXPLANATORY MEMORANDUM
  I.  INTRODUCTION
 This amended proposal for a seventh Directive , based on Article 54(3)(g ) of
 the EEC Treaty and concerning group accounts has two main objectives . In the
 first place , account has been taken of the Opinions of the European Parliament
 of '|6 j Une 1978(1 ) and of the Economic and Social Committee of 24 February
 '1977 ( 2 ). in addition , the adoption by the Council on 25 July 1978 of the
 fourth Directive , based on the same article of the Treaty and concerning the
 annual accounts of certain kinds of company ( 3 ), has made necessary a series
of amendments to the proposal for a seventh directive which are listed in the
annex to this memorandum . The memorandum itself is limited to an explanation
of the amendments which have been made in the light of the two Opinions cited
above .
II .   COMMENTS ON THE ARTICLES
Artide 5(d ), Artide 17a , Artide 20(4a ), Artide 20(b ))
Parliament requested , in the form of an amendment to Article 9 , that inform­
ation should be given concerning holdings in enterprises presumed to be
dependent within the meaning of Article 2(2 ) but not forming part of a group
since they are not managed on a unified basis .       The Commission considers that ,
in expressing this view , Parliament did not wish to propose an extension of
the scope of the obligation to consolidate in itself , which explains why
Parliament expressed its full agreement with the definitions contained in
Articles 1 to 4 .     In order to satisfy the wishes of Parliament , the Commission ,
in its amended proposal , has envisaged the following provisions :
1 . Inclusion of undertakings between which there exists a relationship of the
     kind specified in Article 2(2 ) in the category of affiliated undertakings
     ( Article 5(d );
( 1 ) OJ No . 163 , 10.7.78 , p. 60 .
( 2 ) OJ No . 75 , 26.3.77 , p. 5 .
( 3 ) OJ No . L 222 , 14.8.78 , p. 11 .
 ---pagebreak---                                      - 2 -
2 . Application of the equity method to holdings in the capital of associated
    undertakings within the meaning of Article 'I which are presumed to be
    dependent within the meaning of Article 2(2 ).   This rule shall apply in
    the case of holdings of an undertaking forming part of a group ( Article 17 ),
    and in the case of an undertaking not part of a groun ( Article 17a ).
3 . In the case of holdings in the capital of undertakings which are not
    associated , but which are presumed to be dependent , indication in the notes
    of the differences between the values which figure in the balance sheet and
    the values according to the equity method ( Article 20(4a ) and Article 20b ).
Article 6a
According to the original proposal ( Article 6(2)(a )), each dependent group
undertaking having its registered office within the Community and through
which other group undertakings are dominated is obliged to draw up sub-group
consolidated accounts .   Parliament considers that an obligation of this kind
imposed generally on sub-groups would entail the imposition of excessive costs
and in the present circumstances , would be of limited interest .   Sub-group
accounts should not therefore be drawn up when the dominant undertaking
publishes accounts for the group as a whole in conformity with the seventh
Directive .  The present amended proposal suggests an intermediate solution .
While retaining Parliament 's conception of the subsidiary character of sub­
group accounts in relation to the accounts of the group as a whole , the
Commission considers , in agreement with the opinion of the EEC Accountants'
Study Group , that other conditions must be fulfilled if the omission of sub­
group accounts is to be justified .   In particular , reference should be made
to the agreement of shareholders or members of the dependent undertaking
concerned / to a declaration that the dominant undertakings guarantees the
commitments entered into by the dependent undertaking , and to certain
disclosure provisions in this context .
 ---pagebreak---                                      - 3 -
Article 6b
The initial proposal ( Article 6(2)(b )) dealt with the case of several
dependent undertakings within the EEC which find themselves at the same level
in relation to a dominant undertaking outside the EEC .    In this situation ,
sub-group accounts would also have to be drawn up relating to all these
dependent undertakings as well as all other group undertakings dominated
through them .  Parliament , and also the Economic and Social Committee
consider such an obligation too onerous .   Consolidated accounts drawn up for
the group as a whole should suffice on condition that certain supplementary
information is given on the activities of the group within the Community .
The Commission is of the opinion that in these particular cases also , the
omission of sub-group accounts of this kind could only be justified under the
same conditions as those proposed for Article 6a .    In addition , the Commission
is in favour of the idea put forward by Parliament of requiring information
which distinguishes for certain activities between those inside and those
outside the Community .  However , this break down should be made in the
accounts of all groups and sub-groups wherever the undertaking which is
obliged to draw up the accounts has its registered office .    The break down
seems to be appropriate as regards employees ( Article 20(8 )), categories of
activity and geographical markets ( Article 20(7 )), as well as research and
development ( Article 22(2)(d )).
Article 8
The original proposal provided that the Member States should apply the
Directive to banks and insurance companies " in so far as possible ".
Parliament and the Economic and Social Committee consider this text too
imprecise . Parliament has proposed an enumeration of the articles that the
Member States need not apply to the enterprises in question .     In this
amended proposal , the Commission adopts Parliament 's view by limiting the
exemptions which are possible until subsequent co-ordination to the rules
relating to structure ( Article 11 ) and valuation ( Articles 15 and 16 ) for
the consolidated accounts and by making it clear that these exemptions
apply only to a group undertaking , whether . dominant or dependent , which
carries out the activity in one of the sectors specified .
 ---pagebreak--- Article 10(3 )
The amended proposal has followed Parliament 's Opinion in specifying that the
audit of group accounts required by Article 23 shall apply to the issue of the
non-consolidation of a group undertaking by reason of it minor importance for
the purposes of giving a true and fair view of the group 's situation .
Article 14(1)(e )
The original proposal required a     separate audit of the interim accounts
of a group undertaking . To avoid    supplementary expenses . Parliament
expressed itself in favour of an audit for these accounts at the same time
as the audit of the group accounts .   The amended proposal adopts this
solution .
Article 15(d )
In accordance , as far as substance is concerned , with Parliament and taking
its inspiration from a provision in the fourth Directive ( see paragraph 4 of
the annex ), the concept of deferred taxation has been re-defined .
Article 16
The amended proposal has adopted in their entirety the Opinions of Parliament
and the Economic and Social Committee regarding the writing-off of consolid­
ation differences which cannot be attributed to an item in the consolidated
balance sheet   in applying the provisions of the fourth directive on writing-
off good-will ( see paragraph 5 of annex ).
 ---pagebreak---                                         - 5 -
                                        ANNEX
               Amendments to the proposal for a seventh Directive
                consequent upon adoption of the fourth Directive
CI ) Supplementary information and departures from generally applicable
      provisions in order to give a true and fair view of the group 's situation
      Article 9 ( 4 ) to ( 6 ) - amended proposal for a seventh Directive
      Article 2 ( 4 ) to ( 6 ) - fourth Directive
( 2 ) Drawing up of a group consolidated balance sheet in an abridged form
      Article 11 ( 2 )         - amended proposal for a seventh Directive
      Article 11               - fourth Directive
( 3 ) Drawing up of a group consolidated profit and loss account in an
      abridged form
      Article 11(3 )           - amended proposal for a seventh Directive
      Article 27               - fourth Directive
( 4 ) Definition of deferred taxation
      Article 15 ( d )         - amended proposal for a seventh Directive
      Article 43 ( 11 )        - fourth Directive
( 5 ) Consolidation differences non-attributable to items in the consolidated
      group balance sheet
      Article 16               - amended proposal for a seventh Directive
      Article 37 ( 2 )         - fourth Directive
( 6 ) Information in the notes to the accounts concerning participating
      interests of group undertakings
      Article 20 ( 5 )         - amended proposal for a seventh Directive
      Article 43 j ( 2 )       - fourth Directive
 ---pagebreak---                                         - 6 -
  ( 7 ) Information in the notes to the accounts concerning financial commitments
        outside the group that are not shown in the group consolidated balance
        sheet
        Article 20 ( 6 )       - amended proposal for a seventh Directive
        Article 43 I ( 7 )     - fourth Directive
  ( 8 ) Break down in the notes to the accounts of the net amount of the group 's
        turnover by category of product and by geographical market
        Article 20 ( 7 )       - amended proposal for a seventh Directive
        Article 43 I ( 8 )     - fourth Directive
  ( 9 ) Information in the notes to the accounts concerning persons employed by
        group undertakings
        Article 20 ( 8 )       - amended proposal for a seventh Directive
        Article 43 I ( 9 )     - fourth Directive
( 10 ) Information in the notes to the accounts on the extent to which the
        calculation of the group 's profit or loss for the financial year has
        been affected by valuation of items made to obtain tax relief
        Article 20 ( 9 )       - amended proposal for a seventh Directive
        Article 43 I ( 10 )    - fourth Directive
( 11 ) Drawing up of notes to the accounts in abridged form
        Article 20 a           - amended proposal for a seventh Directive
        Article 44             - fourth Directive
( 12 ) Omission of certain information likely to be prejudicial to one of the
        undertakings concerned
        Article 21 ( 1 ) ( b ) - amended proposal for a seventh Directive
        Article 45 ( 1 ) (b)   - fourth Directive
 ---pagebreak---                                         - 7 -
( 13 ) Omission of a break down of the net amount of a group 's turnover by
       category of product and by geographical market
       Article 21 ( 2 )        - amended proposal for a seventh Directive
       Article 45 ( 2 )        - fourth Directive
( 14 ) Content of group annual report
       Article 22              - amended proposal for a seventh Directive
       Article 46              - fourth Directive
( 15 ) Exemption from obligatory audit of group consolidated accounts
       Article 23 ( 2 ) ( a )  - amended proposal for a seventh Directive
       Article 51  (2)         - fourth Directive
( 16 ) Publication procedures for group consolidated accounts and annual report
       Article 24 ( 1 )        - amended proposal for a seventh Directive
       Article 47 ( 1 )        - fourth Directive
( 17 ) Publication of group consolidated accounts and annual report in abridged
       form
       Article 24 ( 2 ), ( 3 ) - amended proposal for a seventh Directive
       Article 47 ( 2 ), ( 3 ) - fourth Directive
( 18 ) Repeal of transitional provisions of fourth Directive
       Article 26a             - amended proposal for a seventh Directive
       Article 57 , 58 8 61    - fourth Directive
 ---pagebreak---                                       - 8 -
( 19 ) Enlargement of functions of Contact Committee to include problems arising
       from the seventh Directive
       Article 26b           - amended proposal for a seventh Directive
       Article 52            - fourth Directive
( 20 ) Bringing into force of national provisions
       Article 26            - amended proposal for a seventh Directive
       Article 55            - fourth Directive
 ---pagebreak---                                      - 9 -
ORIGINAL PROPOSAL                       AMENDED PROPOSAL
    PROPOSAL FOR A SEVENTH COUNCIL         PROPOSAL FOR A SEVENTH COUNCIL
               DIRECTIVE                              DIRECTIVE
pursuant to Article 54(3)(g ) of the    Unchanged
EEC Treaty concerning group accounts
( submitted to the Council by the
Commission on 4 May 1976 )
THE COUNCIL OF THE EUROPEAN
COMMUNITIES
Having regard to the Treaty
establishing the European Economic
Community , and in particular
Article 54(3)(g ) thereof ;
Having regard to the Proposal from
the Commission ;
Having regard to the Opinion of the
European Parliament ;
Having regard to the Opinion of the
Economic and Social Committee ;
 ---pagebreak---                                         - 10 -
Whereas Directive No ... of the           Whereas the Council on 25 July 1978
...   ( 1 ) for coordination of national  adopted Directive 78 / 660 / FEC ( 1 ) for
Legislation regarding the annual          coordination of national legislation
accounts of limited liability             regarding the annual accounts of limited
companies applies to the accounts          liability companies which applies to the
of individual companies ;                 accounts of individual companies ;
whereas at present a growing number       Unchanged
of companies are no longer managed
independently but belong to groups
in which management of the under­
takings belonging to the group is
coordinated in the interests of the
whole group ;     whereas the annual
accounts of companies belonging to
a group cannot by themselves give
a true and fair view of their
position ;     whereas group accounts
should therefore be drawn up in
order to give a true and fair view
of the economic unit constituted
by the group and whereby the
position of a company belonging
to the group can be determined
more easily ;     whereas coordination
of national laws on group accounts
is therefore essential in order to
complete the scope of the Directive
referred to above and to attain the
objective that information required
to be published by companies within
the Community to protect the
interests of their members , their
employees and third parties be
drawn up on equivalent lines and
may be duly compared ;
( 1 ) Amended proposal for a fourth        ( 1 ) 0J No . L 222 , 14.8.78 , p. * 11 .
      Directive on annual accounts ,
      Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                       - 11 -
Whereas groups of companies are in       Whereas groups of companies are in
fact economic units in which all the     fact economic units in which all the
member companies and undertakings        member companies and undertakings
 are managed on a central and unified    are managed on a unified basis
basis in the interest of the whole       in the interest of the whole group ;
group ;  whereas this central and        whereas this unified management
unified management within a group is     within a group is normally exercised
normally exercised as a result of        as a result of the relationships
the relationships of dependence          of dependence linking group under­
 linking group undertakings ;            takings ; ( English text only )
whereas , however , a group sometimes    unchanged
consists of undertakings which exist
on an equal footing with one another ;
whereas a definition of groups must
be given which takes account of
these economic characteristics ;
Whereas the purpose of coordinating
laws on group accounts is to
protect all the interests subsisting
in limited liability companies ;
whereas in order to provide such
protection , it must become compuls­
ory . to draw up group accounts
both in respect of companies heading
a group and those which are in a
position of dependency within a group ;
whereas in order that the informa­       whereas in order that the informa­
tion given is complete , it is also      tion given is complete , it is also
necessary that , when a group is         necessary that , when a group is
organized with several levels ,          organized with several levels ,
special consolidated accounts be         special consolidated accounts be
drawn up for the different parts         drawn up for the different parts
of the group ( sub-group accounts );     of the group ( sub-group accounts )
                                         unless the dominant         undertaking
                                         has drawn up a consolidated account
                                         for the whole group in accordance
                                         with this Directive and the share­
                                         holders or members , as well as any
                                         creditors have been adequately protected ;
 ---pagebreak---                                      - 12 -
Whereas group accounts should give       Unchanged
a true and fair view of the assets .
Liabilities , financial position and
results of the group ;   whereas the
annual accounts of all the under­
takings belonging to a group should
in principle therefore be required
to be consolidated ;   whereas when
the accounts are consolidated , the
relevant items in the annual
accounts of group undertakings
should be incorporated in full in
the group accounts , with interests
held by persons outside the group
being shown separately ;   whereas ,
however , the necessary corrections
should be made in order to elimin­
ate any transactions or financial
relationships between group under­
takings ;
Whereas a number of general
principles relating to the drawing
up of group accounts and the valua­
tion of items in those accounts must
be laid down in order to ensure that
items are presented coherently and
can be readily compared both as
regards the methods used to value
them and the periods covered by the
accounts ;
 ---pagebreak---                                      - 13 -
Whereas holdings in the capital of       Unchanged
undertakings over which group under­
takings exert a significant influence
without however controlling such
undertakings should also be valued
realistically in the group accounts
by taking account of the results
obtained by the relevant under­
takings ;
Whereas it is of vital importance for
all those having an interest in a
company "belonging to a group that
information on the structure of
groups should be published ;   whereas
it is therefore essential that the
notes to the group accounts should
contain precise information on the
undertakings belonging to the group
and the nature of the legal relation­
ship connecting them to the group .
HAS ADOPTED THIS DIRECTIVE   :
 ---pagebreak---                                        - 14 -
    Section 1                              Section 1
    DEFINITIONS                            DEFINITIONS
    Article 1                              Article 1
1 . For the purposes of this Directive ,   Unchanged
    an associated undertaking means an
    undertaking over which another un­
    dertaking exercises , directly or
    indirectly , a significant influence .
2 . An undertaking is presumed to be
    associated with another undertaking
    where the latter undertaking holds ,
    directly or indirectly , 20 % or
    more of the capital of the former
    undertaking or of the votes attach­
    ing to shares issued by that under­
    taking .
3 . For purposes of application of pa­
    ragraphs 1 and 2 , holdings of a
    dependent undertaking within the
    meaning of Article 2 of the Di­
    rective , and holdings of a person
    acting on behalf of the undertaking
    or of an undertaking dependent on
    it shall be regarded as forming
    part of the holding of one under­
    taking in the capital of another .
 ---pagebreak---                                         - 15 -
    Article 2                               Article 2
1 . For the purposes of this Directive ,    Unchanged
    a dependent undertaking means an
    undertaking over which another un­
    dertaking , referred to as the domi­
    nant undertaking , is able , directly
    or indirectly , to exercise a domi­
    nant influence .
2 . An undertaking is presumed to be
    dependent on another undertaking
    where the latter undertaking , di­
    rectly or indirectly :
    ( a ) holds the major part of the
    undertaking 's subscribed capital ; or
    ( b ) controls the majority of the
    votes attaching to shares issued by
    the undertaking ;   or
    ( c ) can appoint more than half of
    the members of the undertaking 's
    administrative , managerial or
    supervisory body .
3 . Holdings of an undertaking dependent
    on the dominant undertaking and
    holdings of another person acting on
    behalf of the dominant undertaking
    or of an undertaking dependent on
    it shall be regarded as forming part
    of the holding of the dominant
    undertaking .
 ---pagebreak---                                          - 16 -
    Article 3                               Article 3
1 . For the purposes of this Directive ,    1 . For the purposes of this Directive ,
    a dominant undertaking and one or           a dominant undertaking and one or
    more undertakings dependent on it           more undertakings dependent on it
    shall constitute a group if the             shall constitute a group if the
    dominant undertaking exercises in           dominant undertaking exercises in
    practice its dominant influence to          practice its dominant influence to
    the effect that all such under­             the effect that all such under­
    takings are managed on a central            takings are managed on a unified
    and unified basis by the dominant           basis by the dominant undertaking .
    undertaking . Each such undertaking         Each such undertaking is a group
    is a group undertaking .                    undertaking . ( English text only )
2 . Where an undertaking is dependent on    2 . Unchanged
    another undertaking as defined in
    Article 2 of this Directive , the
    dominant undertaking and the de­
    pendent undertaking are presumed to
    constitute a group .
 ---pagebreak---                                        - 17 -
    Article 4                              Article 4
1 . Undertakings between which no          1 . Undertakings between which no
    relationship of dependency as              relationship of dependency as
    defined in Article 2 exists shall          defined in Article 2 exists shall
    also be regarded as constituting a         also be regarded as constituting a
    group for the purposes of this Di­         group for the purposes of this Di­
    rective if all such undertakings           rective if all such undertakings
    are managed on a central and               are managed on a unified basis .
    unified basis .  Each such under­          Each such undertaking is a group
    taking is a group undertaking .            undertaking . ( English text only )
2 . Where in a group as defined in         2 . Where in a group as defined in
    paragraph 1 , one or more group            paragraph 1 , one or more group
    undertakings exercise in practice          undertakings exercise in practice
    a dominant influence on one or more        a dominant influence on one or more
    other undertakings to the effect           other undertakings to the effect
    that all such undertakings are             that all such undertakings are
    managed on a central and unified           managed on a unified basis , those
    basis , those dependent undertakings       dependent undertakins shall also
    shall also form part of the group          form part of the group and each of
    and each of them is a group under­         them is a group undertaking .
    taking .                                   ( English text only )
 ---pagebreak---                                        - 18 -
Article 5                                  Article 5
For the purposes of Directive Mo ...       For the purposes of Directive
( 1 ) of ... and of this Directive ,       78 / 660 / EEC   and of this Directive ,
the following are affiliated under­        the following are affiliated under­
takings :                                  takings :
( a ) undertakings between which a         ( a ) unchanged
relationship exists as defined by
Article 1 of tins Directive ;
( b ) dominant and dependent under -       ( b ) unchanged
takings within the meaning of
Article 2 of this Directive ;
( c ) undertakings forming part of a       ( c ) unchanged
group within the meaning of
Articles 3 and 4 of this Directive .
                                           ( d ) undertakings between which a
                                           relationship exists as defined by
                                           Article 2(2 ) of this Directive .
 ( 1 ) Amended proposed for a fourth
       Directive on annual accounts ,
       Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                         - 19 -
    Section 2                               Section 2
    SCOPE                                   SCOPE
    Article 6                               Article 6
1 . ( a ) Where a dominant undertaking of   1 . Unchanged
    a group has its registered office
    within the Community , it shall draw
    up group accounts and a group annual
    report if either the dominant under­
    taking of the group or any dependent
    group undertaking is established as
    one of the following types of
    company   :
    - in Germany :
    die Aktiengesellschaft , die Komman­
    ditgesellschaft auf Aktien , die Ge­
    sellschaft mit beschränkter Haftung ;
    - in Belgium :
    la société anonyme , de naamloze ven-
    nootschap , la société en commandite
    par actions , de commanditaire ven-
    nootschap op aandelen , la société de
    personnes à responsabilité limitée ,
    de personen vennootschap met beperkte
    aansprakeli jkheid ;
    - in Denmark    :
    Aktieselskab , Kommandit-Aktieselskab ,
    Anpartsselskab ;
    -   in France :
    la société anonyme , la société en
    commandite par actions , la société à
    responsabilité limitée ;
    - in Ireland :                              - in Ireland :
    companies incorporated with limited         public companies limited by shares
    liability ;                                 or by guarantee , private companies
                                                limited by shares or by guarantee
 ---pagebreak---                                      - 20 -
Article 6 ( continued )                 Article 6 ( continued )
- in Italy :                                 Unchanged
la società per azioni , la società in
accomandita per azioni , la società a
responsabilità limitata ;
in Luxembourg :
la société anonyme , la société en
commandite par actions , la société à
responsabilité limitée ;
- in The Netherlands :
de naamloze vennootschap , de besloten
vennootschap met beperkte aansprake­
 lijkheid ;
- in the United Kingdom :                .   - in the United Kingdom :
 companies incorporated with limited         public companies limited by shares
 liability .                                 or by guarantee , private companies
                                             limited by shares or by guarantee .
 ( b ) Without prejudice to the          2 . Without prejudice to the
provisions of Article 10 , the               provisions of Article 10 , the
          •»
 annual accounts of all undertakings         annual accounts of all undertakings
 forming part of the group , without         forming part of the group , without
 regard to where their registered            regard to where their registered
 offices are situated , shall be             offices are situated , shall be
 consolidated .   The group accounts         consolidated .  The group accounts
 shall be drawn up as of the same            shall be drawn up as of the same
 date as the annual accounts of the          date as the annual accounts of the
 dominant group undertaking .                dominant group undertaking .
 ---pagebreak---   Article 6 ( continued )              Article 6 a
. ( a ) Each dependent group under­    1 . Each dependent group under­
  taking having its registered office       taking having its registered office
  within the Community and through          within the Community and through
  which other group undertakings are        which other group undertakings are
  dominated shall draw up consolidat­       dominated shall draw up sub-group
  ed sub-group accounts and a sub­          consolidated accounts and a sub­
  group annual report where one of          group annual report where one of
  those undertakings is established         those undertakings is established
  as one of the types of company            as one of the types of company
  referred to in paragraph 1(a ).           referred to in Article 6(1 ).
  However , this requirement does not       Article 6(2 ) shall apply mutatis
  apply to a dependent group undei–         mutandi s .
  taking which has not been establish­
  ed as one of those types of company  2 . However , the Member States may
  provided that the dominant group         exempt undertakings referred to in
  undertaking publishes group accounts     paragraph 1 which are governed by
  in conformity with the provisions        their national laws from the
  of this Directive .                      obligation to establish sub-group
                                           consolidated accounts and a sub­
  The annual accounts of all under­        group annual report , where the
  takings forming part of the sub­         following conditions are fulfilled :
  group without regard to where their
  registered offices are situated ,        ( a ) the annual accounts of all
  shall be consolidated .   The            undertakings forming part of the
  consolidated sub-group accounts          sub-group shall be consolidated in
  shall be drawn up as of the same         the group accounts ;
  date as the annual accounts of the
  dependent group undertaking which        ( b ) the group consolidated accounts
  has to draw up the consolidated          and annual report shall be drawn up
  sub-group accounts .                     audited and published in accordance
                                           with this Directive ;
 ---pagebreak--- - 22 -
   Article 6 a ( continued )
         ( c ) all shareholders or members of
        the dependent enterprise             have
        declared their agreement to the
        exemption from such obligation ;
        this declaration shall be made in
         respect of every financial year ;
         ( d ) the dominant enterprise has
        declared that it guarantees the
         commitments entered into by the
        dependent enterprise ;
         ( e ) the exemption concerning the
        drawing up of the sub-group consolid­
         ated accounts and sub-group annual
         report      shall be disclosed in the notes
        to the group consolidated accounts .
         ( f ) the declarations referred to
         in ( c ) and ( d ) shall be published by
        the dependent undertaking in accord­
        ance with Article 3 of Directive
         68 / 151 / EEC ( 1 ) provided that this
         enterprise is established as one of
         the types of company referred to in
         Article 6('l ).
     ( 1 ) OJ No . L 65 , 14.3.1968 , p. 8
 ---pagebreak---  Article 6 ( continued )               Arti cle 6 b
 ( b ) Consolidated sub-group accounts 1 . Sub-group consolidated accounts
and a sub-group annual report shall        and a sub-group annual report shall
also be drawn up where the register­       also be drawn up where the register­
ed office of the dominant group            ed office of the dominant group
undertaking is situated outside the        undertaking is situated outside the
Community and one or more dependent        Community and one or more dependent
group undertakings having their            group undertakings having their
registered office within the               registered office within the
Community are placed at the same           Community are placed at the same
 level towards the dominant group          level towards the dominant group
undertaking and where one of those         undertaking and where one of those
dependent group undertakings or one        dependent group undertakings or one
of the group undertakings dominated        of the group undertakings dominated
through them is established as one         through them is established as one
of the types of companies referred         of the types of companies referred
to in paragraph 1(a ).    This             to in Article 6(1 ).  This
requirement applies to each                requirement applies to each
dependent group undertaking which          dependent group undertaking which
is placed at the same level within         is placed at the same level within
the group and nearest to the               the group and nearest to the
dominant group undertaking .               dominant group undertaking .
However , where none of these under­       However , where none of these under­
takings is established as one of           takings is established as one of
the types of companies referred to         the types of companies referred to
in paragraph 1(a ), only one of them       in Article 6(1 ), only one of them
needs to draw up the consolidated          needs to draw up the sub-group con­
sub-group accounts and the sub­            solidated accounts and the sub­
group annual report .                      group annual report .
 ---pagebreak---                                     - 24 -
Article 6 ( continued )                 Arti c le 6 b ( continued )
In the consolidated sub-group           ?.. The annual accounts of all the
accounts referred to in the                 dependent group undertakings
preceding subparagraph shall be             referred to in the second sentence
consolidated the annual accounts            of paragraph 1 ,    as well as of all
of all the dependent group under­           other group undertakings dominated
takings referred to in the second           through them    irrespective of
sentence of the preceding sub­              where their registered offices are
paragraph as well as of all other           situated , shall be consolidated in
group undertakings dominated                the sub-group accounts referred to
through them without regard to              in paragraph 1 .    The last sentence
where their registered offices              of Article 6(2 ), together with
are situated .  The second sentence         Article 6a(2 ) shall apply mutatis
of paragraph 2(a ) applies .                mutandi s .
 ---pagebreak--- Article 6 ( continued )                Article 6 c
( c ) The provisions of Articles 9     The provisions of Articles 9
to 25 also apply to the consolidated   to 25 also apply to the sub-group
sub-group accounts and the sub­        solidated accounts and the sub­
group annual report referred to        group annual report referred to
in ( a ) and ( b ) of this paragraph . in Articles 6 a and 6 b .
 ---pagebreak---                                         - 26 -
    Article 7                               Article 7
1 . Each group undertaking within the       1 . Each group undertaking within the
    meaning of Article 4(1 ) whose re­           meaning of Article 4(1 ) whose re­
    gistered office is situated within           gistered office is situated within
    the Community shall draw up group            the Community shall draw up group
    accounts and a group annual report ,         accounts and a group annual report ,
    where either that undertaking it­            where either that undertaking it­
    self or a dependent group under­             self or a dependent group under­
    taking within the meaning of                 taking within the meaning of
    Article 4(2 ) is established as one          Article 4(2 ) is established as one
    of the types of companies referred           of the types of company referred
    to in Article 6(1)(a ).   In the             to in Article 6(1 ).   In the
    latter case , only one of the group           latter case , only one of the group
    undertakings within the meaning of            undertakings within the meaning of
    Article 4(1 ) needs to draw up the            Article 4(1 ) needs to draw up the
    group accounts and the group annual           group accounts and the group annual
    report .                                      report .
2 . The provisions of Article 6(1)(b )       2 . The provisions of Article 6(2 ),
    and ( 2 ) of Articles 9 to 25 shall           6 a , 6 b   and of Articles 9 to 25
    also apply in respect of the group            shall also apply in respect of the
    accounts „ and group annual report            group accounts and group annual
     referred to in this Article .                report referred to in this Article .
 ---pagebreak---                                     - 27 -
Article 8                              Article 8
Insofar as is possible , the Member    Pending subsequent co-ordination ,
States shall apply the provisions      Member States shall not be bound to
of this Directive regarding the        apply Articles 11 , 15 and 16 with
presentation of group accounts and     regard to an undertaking forming part
consolidation principles where a       of a group where that undertaking is
group undertaking is a credit          a bank , other financial institution
institution or an insurance company .  or an insurance undertaking .
 ---pagebreak---                                        - 28 -
    Section 3                              Section 3
    DRAWING UP OF GROUP ACCOUNTS           DRAWING UP OF GROUP ACCOUNTS
    Article 9                              Article 9
1 . The group accounts snail comprise      1 . Unchanged
    the group consolidated balance sheet ,
    the group consolidated profit and
    loss account and the notes to the
    accounts .  These documents shall
    constitute a composite whole .
2 . The group accounts shall give a true   2 . Unchanged
    and fair view of the group 's assets ,
    liabilities , financial position and
    results .
3 . They shall be presented clearly and    3 . Unchanged
    in conformity with the provisions
    of the Directive .
                                           k . Where the application of this
                                               Directive is not sufficient to give
                                               a true and fair view within the
                                               meaning of paragraph 2 , additional
                                               information shall be given .
 ---pagebreak--- - 29 -
    Article 9 ( continued )
    5 . Where , in exceptional cases , the
        application of a provision of
        Section 3 is incompatible with the
        obligation laid down in paragraph
        2 , a derogation shall be made from
        such provision in order to give a
        true and fair view within the
        meaning of paragraph 2 .  Any such
        derogation shall be disclosed in the
        notes to the accounts together with
        a proper explanation of the reasons
        therefor and a statement of its
        effect on the assets , liabilities ,
        financial position and profit or
        loss .  Member States may define
        the said exceptional cases and lay
        down the relevant special rules of
        derogation .
        Member States may authorize or
        require the disclosure in the group
        accounts of other information in
        addition to that which is to be
        disclosed in accordance with this
        Di rective .
 ---pagebreak---                                     - 30 -
Article 10                              Article 10
A group undertaking may be omitted      1 . A group undertaking may be omitted
from a consolidation if it is of            from a consolidation if it is of
only minor importance for the               only minor importance for the
purposes of Article 9(2 ) of this           purposes of Article 9(2 ).  The
Directive .  Application of this            application of this provision shall
provision must be indicated in the          be mentioned in the notes to the
notes to the accounts .                     accounts , together with a proper
                                            explanation of the reasons therefor .
Where several group undertakings        2 . Unchanged
satisfy the requirement of para­
graph 1 , they shall nevertheless
be consolidated if those under­
takings taken as a whole are of a
certain importance for the purposes
of Article 9(2 ) of the Directive .
                                        3 . The audit of group accounts required
                                            by Article 23
                                            shall also relate to the observance
                                            of the provisions of the preceding
                                            paragraphs .
 ---pagebreak---                                       - 31 -
Article 11                               Article 11
Without prejudice to the provisions      1 . Without prejudice to Article 12 of
of Article 12 below , Articles 3 to          this Directive , Articles 3 to
27 of Directive No ... ( 1 ) of ...           30 of Directive 78 / 660 / EEC
shall apply in respect of the                 shall apply in respect of the
presentation of group accounts .              presentation of qroup accounts .
                                         2 . When at the date of the group
                                              consolidated balance sheet , the
                                              limits of two of the three criteria
                                              referred to in Article 11 of Directive
                                              78 / 660 / EEC are not exceeded at group
                                              level ,        Member States may permit
                                              the dominant group undertaking to
                                              draw up a group consolidated
                                              balance sheet in an abridged form
                                              in accordance with that Article .
                                             Article 12 of the above-mentioned
                                              Directive shall apply .
                                         3 . In addition , when at the date of the
                                              group consolidated balance sheet ,
                                              the limits of two of the three
                                              criteria      referred to in Article 27
                                             of Directive 78/ 660/ EEC are not
                                             exceeded at group level , Member
                                             States may authorize the dominant
                                             group undertaking to depart , within
                                             the limits of the said Article , from
                                             the layouts prescribed by Articles
                                             23 to 26 of the said Directive .
                                             Article 12 thereof shall apply .
( 1 ) Amended proposal for a fourth
      Directive on annual accounts ,
      Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                           - 32 -
    Article 12                               Article 12
1 . ( a ) The book values of holdings in     Unchanged
    the capital of undertakings whose
    accounts are consolidated shall be
    compensated with the corresponding
    percentage of the capital of the
    undertakings in question including
    reserves , results and results
    brought forward .   This compensation
    shall be carried out on the basis
    of the values existing at the
    moment of the acquisition of these
    holdings .   Differences arising from
    compensation shall be entered
    directly against the relevant items
    in the group consolidated balance
    sheet .   Any balance not so
    attributable shall be shown as a
    separate item with an appropriate
    heading .   Amounts entered under this
    item shall be explained in the notes
    to the accounts .
    ( b ) By way of derogation from para­
    graph 1(a ), holdings in the capital
    of the group 's dominant undertaking
    held by dependent group undertakings
    whose accounts are consolidated
    shall not be consolidated .    Such
    holdings shall be shown in the group
    accounts as the group 's own shares .
 ---pagebreak---                                           - 33 -
    Artide 12 ( continued )                   Artide 12 ( continued )
2 . Without prejudice to the provisions       Unchanged
    of Articles 14 , 15 , 17 and 18 , the
    asset and Liability items in the
    balance sheets of grouD undertakings
    whose accounts are consolidated
    shall be incorporated in full in the
    group consolidated balance sheet .
    Shares held by persons outside the
    group in the capital , reserves ,
    results or results brought forward
    of such dependent grouD undertakings
    shall be shown as a separate item
    with an appropriate heading .
 ---pagebreak--- Article 13                          Article 13
Without prejudice to the provisions Unchanged
of Articles 14 , 15 , 17 and 18 ,
income and expenditure shown in the
profit and loss accounts of group
undertakings whose accounts are
consolidated shall be incorporated
in full in the group consolidated
profit and loss account .   Shares
held by persons outside the group
in the results of dependent group
undertakings shall be shown as a
separate item with an appropriate
heading in the group consolidated
profit and loss account .
 ---pagebreak---    Article 14                              Article 14
. Group accounts shall be drawn up in      I. Unchanged
   accordance with the following
   general principles :
   ( a ) the methods of consolidation          ( a ) unchanged
   may not be changed from one year to
  the next ;
   ( b ) debts and claims between group        ( b ) unchanged
  undertakings whose accounts are
   consolidated shall be eliminated ;
   ( c ) income and expenditure relating       ( c ) unchanged
  to transactions between group under­
  takings whose accounts are consoli­
  dated shall be eliminated ;
   ( d ) profits relating to transactions      ( d ) unchanged
  between group undertakings whose
  accounts are consolidated shall be
  eliminated ;
   ( e ) annual accounts which are includ­     ( e ) annual accounts which are includ­
  ed in the consolidation shall , in          ed in the consolidation shall , in
  so far as is possible , be drawn up         so far as is possible , be drawn up
  as of the same date as the group            as of the same date as the group
  accounts .    Where the financial year      accounts .    Where the financial year
  of a group undertaking does not             of a group undertaking does not
   coincide with that adopted for the          coincide with that adopted for the
  group accounts , the accounts of that       group accounts , the accounts of that
  undertaking may be consolidated only        undertaking may be consolidated only
  on the basis of audited interim             on the basis of interim accounts
   accounts drawn up as at year-end           drawn up as at year-end for the
  ■for the group .                            group .    These interim accounts shall
                                               also      be included in the audit of
                                              the group accounts required by Article
 ---pagebreak---                                     - 36 -
Artide 14 ( continued )                 Artide 14 ( continued )
( a ) Departures from the general       2 . ( a ) unchanged
principle set out in 1(a ) shall be
permitted in exceptional cases .
Where the principle is departed from ,
an indication thereof shall be given
in the notes to the accounts , to­
gether with an explanation of the
reasons therefore , and an asses-
ment of the effect on the group'
assets , liabilities , financial
position and results .
( b ) Departures from the general           ( b ) unchanged
principle set out in 1(d ) shall be
permitted where the transaction
relates to a fixed asset which has
a limited useful life and has been
concluded according to normal
market conditions .   Where the
principle is departed from , an
indication thereof shall be given
in the notes to the accounts .
 ---pagebreak---                                        37 -
Article 15                               Article 15
Valuation of items in the group          Valuation of items in the group
accounts shall be carried out in         accounts shall be carried out in
accordance with the following            accordance with the following
general principles :                     general principles :
(a)   items included in the consoli­     ( a ) items included in the consoli­
dation shall be valued in conformity     dation shall be valued in conformity
with Articles 28 to 39 of Directive      with Articles 31   to 42 of Directive
No ... (1 ) of ... ;                     78 / 660 / EEC .
( b ) the same valuation rules must be   ( b ) unchanqed
applied in drawing up annual accounts
to be included in the consolidation .
Departures from this princiole shall
be permitted in exceptional cases .
Where the principle is departed from
this shall be indicated , together
with the reasons therefore , in the
notes to the accounts , and ■'terns
valued in accordance with different
rules shall be consolidated only
after having been valued in accor­
dance with the valuation rules
applied by the dominant group under­
taking ;
( c ) without prejudice to the provi -   ( c ) unchanged
sions of Article 12(1)(a ), 14(1)(d ),
paragraphs ( a ) and ( b ) above and
Articles 17 and 18 , the same values
must be ascribed to the items in­
corporated in the group consolidated
balance sheet as in the balance
sheets of group undertakings ;
( 1 ) Amended proposal for a fourth
      directive on annual accounts .
      Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                    - 38 -
Article '15 ( continued )              Article 15   ( continued )
( d ) deferred taxation arising in     ( d ) account shall be taken of the
consolidation shall be taken into      difference between the tax charged
account .   Such taxation shall be     for the financial year and for earlier
shown separately either in the         financial years and the amount of tax
group consolidated balance sheet       payable in respect of those years ,
and profit and loss account or in      provided that this difference is
the notes to the accounts .            material for the purposes of future
                                       taxation .   This amount shall be
                                       disclosed as a cumulative amount either
                                       in the group consolidated balance sheet
                                       under a separate item with an aopro-
                                       priate heading , or in the notes to the
                                       accounts .
 ---pagebreak---                                       - 39 -
Article 16                               Article 16
Differences arising in consolidation     Differences arising in consolidation
which , pursuant to Article 12('l)(a ),  which , pursuant to Article 12(1)(a ),
have been entered against the rele­      have been entered against the rele­
vant items in the group consolidated     vant items in the group consolidated
balance sheet shall be dealt with in     balance sheet shall be dealt with in
accordance with the rules laid down      accordance with the rules laid down
in Articles 29 to 39 of Directive        in Articles 31 to 42 of Directive
No ... ( 1 ) of ...                      78 / 660 / EEC .
Where consolidation differences can­     Where consolidation differences can­
not be entered wholly or in part         not be entered wholly or in part
against the various items in the         against the various items in the
group consolidated balance sheet and     group consolidated balance sheet and
are shown as such as a separate item     are shown as such as a separate item
on the assets side , the value of        on the assets side , the value of
that item shall be written off over      that item shall be written off in
a maximum period of five years .         accordance with Article 37(2 ) of the
                                         above-mentioned Directive-
CD Amended proposal for a fourth
    Directive on annual accounts .
    Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                         - 40 -
    Article 17                              Article 17
1 . Holdings of group undertakings in the Unchanged
    capital of undertakings which are
    associated with group undertakings
    within the meaning of Article 1 of
    this Directive , shall be shown in
    the group consolidated balance sheet
    as a separate item with an appro­
    priate heading .
2 . The following principles shall apply
    to the valuation in the group conso­
    lidated balance sheet of the holdings
    referred to in paragraph 1 :
    ( a ) The amount of any differences
    existing when such holdings were
    acquired between their purchase price
    and the corresponding percentage of
    the capital of such associated under­
    takings , including reserves , results
    and results brought forward , shall
    be shown separately in the group
    consolidated balance sheet or in
    the notes to the accounts .    The
    values making up this amount shall
    be analysed in the notes to the
    accounts .   For the purpose of valu­
    ing the holdings in question in the
    group consolidated balance sheet ,
    the various components making up
    these differences shall be dealt with
    in accordance with the provisions
    of Article 16 .
 ---pagebreak---                                          - 41 -
    Artide 17 ( continued )                   Artide 17 ( contmued )
    ( b ) The purchase price of holdings      Unchanged
    in the capital of an associated
    undertaking shall be increased or
    reduced in the group consolidated
    balance sheet by the profits or
    losses realized by this undertaking
    on a pro rata basis according to
    the percentage of capital held by
    the group undertaking .   These
    amounts shall be shown each year in
    the group consolidated profit and
    loss account as a separate item
    with an appropriate heading .
    Where the associated undertaking
    distributes dividends to the group
    undertaking , the book value of the
    holding in the group consolidated
    balance sheet , shall be reduced
    accordingly .
    ( c ) The provisions of Article
    14(1)(d ) shall be taken into account .
3 . Application of paragraphs 1 and 2
    above may be waived where the
    holding in the capital of the
    associated undertaking is of only
    minor importance for the purposes of
    Article 9(2 ) of this Directive .
    Such waiver must be indicated in the
    notes to the accounts .
 ---pagebreak--- - 42 -
   Article 17 a
   1 . Where undertakings not forming part
        of a group hold shares in the
        capital of undertakings which are
        associated within the meaning of
        Article 1 and presumed to be
        dependent within the meaning of
        Article 2(2 ), the provisions of
        Article 17 shall apply mutatis
        mutandis to the inclusion and
        valuation of those shares in the
        annual accounts of the undertaking
        holding them .
        Member States shall not be bound to
        apply paragraph 1 if neither the under­
        taking which holds the shares nor
        the undertaking in which they are
        held is established as one of
        types of company referred to in
        Art i c le 6(1 ) .
    3 . Article 17(3 ) shall apply mutatis
        mutandi s .
 ---pagebreak---                                        - 43 -
    Article 18                             Article 18
1 . Where a group undertaking manages      Unchanged
    another undertaking jointly with one
    or more undertakings which do not
    form part of the group , Member
    States may authorize the accounts of
    that undertaking to be consolidated
    in the group accounts on a pro rata
    basis according to the percentage of
    capital held by the group undertak­
    ing .
2 . Articles 9 to 16 shall apply mutatis
    mutandis to the proportional conso­
    lidation of accounts referred to in
    paragraph 1 .
3 . Where this Article applies , Article
    17 shall not apply if the undertaking
    whose accounts are consolidated on a
    proportional basis is an associated
    undertaking within the meaning of
    Article 17 .
 ---pagebreak---                                     - LL  -
Article 19                               Article 19
The notes to the accounts shall          Unchanged
contain commentary on the group
consolidated balance sheet and
profit and loss account in such
manner as to give a true and fair
view of the group 's assets , liabil­
ities , financial position and
results .
 ---pagebreak--- Article 20                            Article 20
 In addition to the information re­   In addition to the information re­
quired under other provisions of      quired under other provisions of
this Directive , the notes to the     this Directive , the notes to the
accounts shall in any event include   accounts shall include information
information in respect of the         in respect of at least the following
following matters :                   matters   :
the valuation methods applied to      1 . Unchanged
the various items in the group
accounts , and the methods employed
in calculating the value adjust­
ments .  For items in the annual
accounts of group undertakings in
foreign currency which have been
incorporated in the group accounts ,
the rates of exchange used for
their conversion into local
currency must be indicated ;
the name and registered office of     2 . the name and registered office of
group undertakings whose accounts         group undertakings whose accounts
have been consolidated , the per­         have been consolidated , the per­
centage of the capital held in            centage of the capital held in
those undertakings and the legal          those undertakings and the legal
relationships between them .  The         relationships between them .  The
same information must be given in         same information shall be given in
respect of group undertakings             respect of group undertakings
whose accounts have not been              whose accounts have not been
consolidated pursuant to Article 10 ;     consolidated pursuant to Article 1
                                          together with an explanation for
                                          their exclusion from consolidation
 ---pagebreak---                                         - 46 -
    Artide 20 ( continued )                Artide 20 ( continued )
3 . the name and registered office of      3 . the name and registered office of
    undertakings associated with a group        undertakings associated with a group
    undertaking and which appear in the         undertaking and which appear in the
    group accounts pursuant to Article          group accounts pursuant to Article
    17 , and the percentage of the              17 , and the percentage of the
    capital held in such undertakings .         capital held in such undertakings
    The same information must be given          The same information shall be given
    in respect of undertakings associat­        in respect of undertakings associat­
    ed with a group undertaking to which        ed with a group undertaking to which
    Article 17 ( 3 ) has been apolied ;         Article 17 ( 3 ) has been applied ,
                                                together with a proper explanation
                                                of the reasons therefor ;
4 . the name and registered office of      4 . unchanged
    undertakings whose accounts have
    been consolidated on a proportional
    basis pursuant to Article 18 to­
    gether with the percentage of the
    capital held in such undertakings ;
                                            4a . the name and registered office of
                                                undertakings other than those
                                                referred to in paragraphs 2 , 3 and
                                                4        which are presumed to be
                                                dependent , within the meaning of
                                                Article 2(2 ), on a group undertak­
                                                ing , together with the amounts of
                                                the differences between the value
                                                of the shares in the capital of
                                                these enterprises appearing in the
                                                group consolidated balance sheet
                                                and the value attributable to them
                                                in accordance with Article 17(2 );
 ---pagebreak---                                         - 47 -
    Article 20 ( continued )                Article 20 ( continued )
5 . the name and registered office of       5 . the name and registered office of
    undertakings other that those               undertakings other than those
    referred to in paragraphs 2 , 3 and         referred to in paragraphs 2 , 3
    4 above , in which group undertak­          and 4      in which group undertak­
    ings hold not less than 10 % of             ings , either themselves or through
    the capital , stating the percent­          a person acting in his own name
    age of the capital held and the             but on behalf of the group under­
    subscribed capital , reserves and           takings , hold at least a percent­
    results for the most recent                 age of the capital which the
    financial year of the undertaking           Member States cannot fix at more
    in question ;                               than 20 % , showing the proportion
                                                of the capital held , the amount of
                                                capital and reserves , and the
                                                profit or loss for the latest
                                                financial year of the undertaking
                                                concerned for which accounts have
                                                been adopted .  This information
                                                may be omitted where for the
                                                purposes of Article 9(2 ) it is
                                                of negligible importance only .
                                                The information concerning capital
                                                and reserves and the profit or loss
                                                may be omitted where the under­
                                                taking concerned does not publish
                                                its balance sheet and less than
                                                50 % of its capital is held
                                                ( directly or indirectly ) by the
                                                group undertaking .
 ---pagebreak---                                     - 48 -
Article 20 ( continued )                Article 20 ( continued )
the overall amount offinancial          6 . the total amount of financial
commitments outside the group which         commitments outside the group which
are not shown in the group consolid­        are not shown in the group consolid­
ated balance sheet , in so far as           ated balance sheet , in so far as
this information is of assistance in        this information is of assistance in
assessing the financial position            assessing the financial position
of the group .  Commitments exist­          of the group .      Commitments concern­
ing with regard to undertakings             ing pensions and commitments exist­
which do not form part of the group         ing with regard to undertakings
but are affiliated with a group             which do not form part of the group
undertaking shall be shown                  but are affiliated with a group
separate ly ;                               undertaking shall be shown
                                            separate ly ;
the net amount of the group 's turn­    7 . the group 's net turnover within the
over , broken down by category of           meaning of Article 28 of Directive
product and activity , and by               78 / 660 / EEC , broken down by categories
geographical market .    The amount         of activity and into geographical
contributed by each category and            markets in so far as , taking account
market to the group 's result for           of the manner in which the sale of
the year must be indicated ;                products and the provision of
                                            services falling within the group 's
                                            ordinary activities are organized ,
                                            these categories and markets differ
                                            substantially from one another .
                                            The break down by geographical
                                            market shall distinguish in
                                            particular between the internal
                                            and external markets of the
                                            Communi ty ;
 ---pagebreak---                                             - 49 -
     Article 20 ( continued )                   Article 20 ( continued )
 8 . the number of persons employed by          8 . the average number of persons
     group undertakings during the year ,           employed by group undertakings
     broken down by category , and , if             during the year , broken down by
     they are not shown separately in               category and according to whether
     the group     consolidated profit and          they are employed inside or out­
      loss account , the whole of the               side the Community , together with ,
     personnel costs relating to the                if they are not shown separately
     accounting period , broken down as             in the group consolidated profit
     provided in Article 20 , point I. 6            and loss account , the whole of
     of Directive No ...      ( 1 ) of ...;         the   staff     costs relating to
                                                    the financial year , broken down
                                                    as provided for in Article 23(6 ) of
                                                    Directive 78 / 660 / CEE ;
 9 . the taxes included in the operating        9 . the extent to which the calculation
     result , the financial result or the           of the profit or loss of the group
     exceptional result of the group ;              for the financial year has been
                                                    affected by a valuation of the
                                                    items which , by way of derogation
                                                    from the principles enunciated in
                                                    Articles 31 and 34 to 42 of
                                                    Directive 78 / 660 / EEC , was made in
                                                    the financial year in question or
                                                    in an earlier financial year with
                                                    a view to obtaining tax relief .
                                                    Where the influence of such a
                                                    valuation on the group 's future
                                                    tax charges is material , details
                                                    shall be disclosed ;
10 . the amount of the changes in the          10 . Deleted
     group 's result for the year due to
     the application of tax laws .
     ( 1 ) Amended proposal for a fourth
           Directive on annual accounts ,
           Supplement 6 / 74 - Bull . EC .
 ---pagebreak--- - 50 -
    Article 20 a
    When at the date of the group consolid­
    ated balance sheet , the limits of two
    of the three criteria referred to in
    Article 11 of Directive 78 / 660 / EEC are
    not exceeded at group level , Member
    States may permit the dominant group
    undertaking to draw up abridged notes
    to their group accounts without the
    information required by Article 20(6 )
    to ( 9 ) of this Directive .
    Article 12 of Directive 78 / 660 / EEC
    shall apply .
 ---pagebreak--- - 51 -
    Article 20 b
    1 . Where undertakings not forming part
        of a group hold shares in the
        capital of undertakings which are
        presumed to be dependent within the
        meaning of Article 2(2 ), but which
        are not associated within the
        meaning of Article 1 , the notes to
        the annual accounts of these
        enterprises shall include information
        at  least as to the name and
        registered office of the under­
        takings presumed dependent , together
        with the amounts of the differences
        between the value of these shares
        appearing in the balance sheet of
        these undertakings and the value
        attributable to them in accordance
        with Article 17(2 ).
    2 . Article 17a(2 ) shall apply
 ---pagebreak---                                                  - 52 -
    Article 21                                      Article 21
1 . Member States may allow the particu -           1 . Member States may allow the particu­
     lars stipulated in Article 20 ,                     Lars stipulated in Article 20 ( 2 ),
    points 2 , 3 , 4 and 5 :                             ( 3 ), ( 4 ), ( 4a ) and ( 5 ) :
    ( a ) to take the form of a statement                ( a ) unchanged
    filed in accordance with Article 3(1 )
    and ( 2 ) of Directive 60 / 1 51 / EEC ( 1 )
    of 9 March 1968 .     This shall be in­
    dicated in the notes to the accounts ;
    ( b ) to be omitted when their nature                ( b ) to be omitted when their nature
    is such that , in the view of a                      is such that they would be serious­
    reasonable businessman , they would                  ly prejudicial to any of the under­
    be seriously prejudicial to any of                  takings affected by these provisions ,
    the undertakings to which these                            Member States may make such
    provisions relate .     The omission of             omissions subject to prior adminis­
    the particulars shall be mentioned                  trative or judicial authorization .
    in the notes to the accounts .                      Any such omission shall be disclosed
                                                        in the notes to the accounts .
2 . Member States may allow the parti­                  Paragraph 'l(b ) shall also apply to
    culars stipulated by Article 20 ,                   the information prescribed by
    point 7 to-be omitted where the                     Article 20(7 ).        When at the date of
    requirements laid down in Article 24                the group consolidated balance
    of Directive No ...     ( 2 ) of ... are            sheet , the limits of two of the
    satisfied by the group as a whole .                 three criteria referred to in
    The second paragraph of Article 24                  Article 11 of Directive 78 / 660 / EEC
    of that Directive shall apply .                     are not exceeded at group level ,
                                                        Member States may permit the
    ( 1 ) First Council Directive of 9 March
                                                        disclosures prescribed by Article
          1968 on coordination of safeguards
          which , for the protection of the             20(7 ) of this Directive to be omitted ,
          interests of members and others ,             Article 12 of Directive 78 / 660/ EEC
          are required by Member States of
          companies within the meaning of               shaLl apply .
          the second paragraph of Article
          58 of the Treaty , with a view to
          making such safeguards equivalent
          throuqhout the Community , 0J L 65
          of 14~3.'I968 .
    ( 2 ) Amended proposal for a fourth
          Directive on annual accounts ,
          Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                         - 53 -
    Section 4                               Section 4
    GROUP ANNUAL REPORT                     GROUP ANNUAL REPORT
    Article 22                              Article 22
1 . The group 's annual report shall        1 . Unchanged
    contain a detailed review of the
    development of the group 's business
    and of its position .
2 . The report shall also give              2 . Unchanged
    particulars of :
    ( a ) important events that have             ( a ) unchanged
    occurred since the year-end ;
    ( b ) the group 's likely future             ( b ) unchanged
    development ;
    ( c ) the activities of the group            ( c ) the activities of the group
    with regard to research f,nd                 in the field of research and
    development and the costs thereof .          development , broken down into
                                                 activities inside and outside the
                                                 Community ;
                                                 ( d ) acquisitions of own shares by
                                                 group undertakings in accordance
                                                 with Article 22(2 ) of Directive
                                                 77 / 91 / EEC ( 1 ).
                                            ( 1 ) OJ No . L 26 , 31.1.77 , p. 1 .
 ---pagebreak---                                           - 54 -
    Section 5                                Section 5
    Article 23                               Article 23
1 . ( a ) The dominant group undertaking     1 . ( a ) Unchanged
    shall cause the group accounts to
    be audited by one or more persons
    authorized by national law to audit
    accounts .
    ( b ) The person or persons respons­         ( b ) Unchanged
    ible for auditing the accounts shall
    also verify that the group annual
    report is consistent with the group
    accounts of that financial year .
2 . Ca ) Member States may waive the         2 . ( a ) When at the date of the group
    compulsory auditing provisions of            consolidated balance sheet , the limits
    paragraph 1 where the requirements           of two of the three criteria referred
    laid down in Article 49(2 ) of               to in Article 11 of Directive
    Directive No ...     ( 1 ) of ... are        78 / 660 / EEC are not exceeded at group
    satisfied by the group as a whole            level , the Member States may relieve
    and where none of the group under­           the dominant undertaking of the
    takings "is established under any            obligation imposed by paragraph 'I .
    of the forms specified in Article            Article 12 of the above-mentioned
    1(1)(a ) of that Directive .      The        Directive shall apply .
    third subparagraph of Article 49(2 )
    of that Directive shall apply .
    ( b ) Where paragraph 2(a ) is applied ,     ( b ) Unchanged
    the Member States shall introduce
    appropriate sanctions into their law
    for cases in which group accounts
    and group annual reports are not
    drawn up in accordance with the
    requirements of this Directive .
    ( 1 ) Amended proposal for a fourth
          Directive on annual accounts ,
          Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                           - 55 -
Section 6                                     Section 6
PUBLICATION                                   PUBLICATION
Article 24                                    Article 24
( a ) Group accounts , the group annual       1 . ( a ) Group accounts , duly approved ,
report and the report submitted by                and the group annual report , together
the person responsible for auditing               with the opinion submitted by the
the accounts shall be published by                person responsible for auditing the
the dominant undertaking of the                   group accounts , shall be published as
group in the manner provided in                   laid down by the laws of each Member
Article 44 of Directive No ...        (1)         State in accordance with Article 3
of ...                                            of Directive 68 / 15'1 / EEC . The second
                                                  subparagraph of Article 47(1 ) of Dir­
                                                  ective 78/ 660/ EEC shall apply to the
                                                  group annual report .
( b ) Articles 45 and 46 of that                  ( b ) Articles 48 and 49 of Directive
Directive shall also apply .                      78 / 660 / EEC shall also apply .
Notwithstanding paragraph 1(a ),              2 . Notwithstanding paragraph 1 a ), when
Member States may permit :                        at the date of the group consolid­
                                                  ated balance sheet , the limits of
                                                  two of the three criteria referred to
                                                  in Article 11 of Directive 78 / 660 / CEE
                                                  are not exceeded at group level , the
                                                  Member States may permit the dominant
                                                  group undertaking to publish :
( 1 ) Amended proposed for a fourth
      Directive on annual accounts ,
      Supplement 6 / 74 - Bull . EC .
 ---pagebreak---                                           - 56 -
Article 24 ( continued )                     Article 24 ( continued )
( a ) the publication merely of a group          ( a ) a group consolidated balance
consolidated balance sheet abridged              sheet in an abridged form in
as provided in Article 50(2)(b ) of              accordance with Article 47(2)(a )
Directive No ... ( 1 ) of ..., and of            of the above-mentioned Directive ;
notes to the accounts not necessarily
including the explanations required
under Article 20 , points 6 to '10 ,
of this Directive .      Such deroga­
tion shall be permitted only where
the requirements laid down in
Article 49(2 ) of Directive No ...       (1)
of . . . are satisfied by the group as
a whole and where none of the group
undertakings is established under
any of the forms specified in
Article 1(1)(a ) of that Directive .
The third subparagraph of Article
49(2 ) of that Directive shall apply ;
( b ) publication to be effected only            ( b ) abridqed notes without the
as prescribed by Article 3 of                    information prescribed by Article
Directive 68 / 1 51 / EEC of 9 March 1968 .      20(6 ) to ( 9 ) of this Directive .
Such derogation shall be permitted
only where the requirements laid                 In addition , the Member States may
down in Article 50(2)(a ) of Directive           relieve such dominant undertakings
No ... ( 1 ) of ... are satisfied by             from the obligation to publish the
the group as a whole and where none              group consolidated profit and loss
of the group undertakings is estab­              accounts , the group annual report
lished under any of the forms                    and the opinions of the person
specified in Article 1 ( 'I ) ( a ) of that      responsible for auditing the group
Directive .   The second subparagraph            accounts .
of Article 50(2)(a ) of that Directive
shall apply .                                    Article 12 of Directive 78 / 660 / EEC
                                                 shall apply .
( 1 ) Amended proposed for a fourth
      Directive on annual accounts .
      Supplement 6 / 74 - Bull . EC .
 ---pagebreak--- - 57 -
    Article 24 ( continued ;
    3 . When at the date of the group
        consolidated balance sheet , the limits
        of two of the three criteria referred
        to in Article 27 of Directive
        78 / 660 / EEC are not exceeded at group
         level , the Member States may permit
        the dominant group undertaking to
        publish :
         ( a ) a group consolidated balance
        sheet in an abridged form in
        accordance with Article 47(3)(a ) of
        the above-mentioned Directive
        and
         ( b ) abridged notes without the
         information prescribed by Article
        20(7 ) and ( 9 ) of this Directive .
        The present paragraph shall be
         without prejudice to paragraph 1
         in so far as it relates to the
        group consolidated profit and loss
         account , the group annual report
        and the      report of the person
         responsible for auditing the group
        accounts .
        Article 12 of Directive 78 / 660 / EEC
         shall apply .
 ---pagebreak---                                        - 58 -
    Section 7                               Section 7
    FINAL PROVISIONS                        FINAL PROVISIONS
    Article 25                              Article 25
1 . When the first group accounts are       Unchanged
    drawn up pursuant to this Directive ,
    the book value of a holding and the
    percentage of the capital that it
    represents at the time of such first
    consolidation pursuant to this
    Directive may be taken into account
    for purposes of application of
    Article 12(1)(a ) of this Directive .
    Any difference between these two
    values which represents a liability
    shall be entered against group
    reserves in the group consolidated
    balance sheet .
2 . The provisions of paragraph 1 shall
    apply mutatis mutandis to the
    valuation pursuant to Article 17(2 )
    of a holding in the capital of an
    undertaking associated with a group
    undertaking and to the proportional
    consolidation according to Article 18 .
 ---pagebreak---                                        «- 59 -
    Article 26                              Article 26
1 . Member States shall , within eighteen   1 . The Member States shall bring into
    months of notification of this Di­          force the laws , regulations and
    rective , make all the amendments to        administrative provisions necessary
    their laws , regulations and adminis­       for them to comply with this
    trative provisions necessary to             Directive within two years of its
    comply with the provisions of this          notification .  They shall forth­
    Directive , and shall forthwith             with inform the Commission thereof .
    inform the Commission thereof .  They
    shall bring such amendments into        2 . The Member States may stipulate that
    force within thirty months of               the provisions referred to in para­
    notification of this Directive .            graph 1 shall not apply until 18
                                                months after the end of the period
                                                provided for in that paragraph .
2 . The Member States shall communicate     3 . The Member States shall ensure
    to the Commission the texts of the          that they communicate to the
    essential provisions of internal            Commission the texts of the main
    law which they adopt subsequently           provisions of national law which
    in the field covered by this                they adopt in the field covered
    Di recti ve .                               by this Directive .
 ---pagebreak--- - 60 -
   Article 26 a
   Articles 57 , 58 and 61 of Directive
   78 / 660 / EEC shall apply until the
   expiration of a period of 30 months
   from the notification of this
   Di rective .
 ---pagebreak--- - 61 -
   Article 26 b
   The Contact Committee set up on the
   basis of Article 52 of Directive
   78 / 660 / EEC shall also have as its
   function
   ( a ) to facilitate , without prejudice
   to Articles 169 and 170 of the Treaty ,
   harmonized application of this
   Directive through regular meetings
   dealing in particular with practical
   problems arising in connection with
   its application ;
   ( b ) to advise the Commission , if
   necessary , on additions or amendments
   to this Directive .
 ---pagebreak---                                    - 62 -
Article 27                             Article 27
This Directive is addressed to the     Unchanged
Member States .