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International Accounting : Europe

By HWA | Publish On: December 24, 2012 | Posted In:
The blog article highlight’s the following points:
  • Understand how financial reporting is regulated and enforced in five European countries: France, Germany, the Czech Republic, the Netherlands, and the U.K.
  • Describe the key similarities and differences between the accounting systems of these five countries.
  • Identify the use of International Financial Reporting Standards at the levels of the individual company and the consolidated financial statements in these five countries.
  • Describe the audit-oversight mechanisms in these five countries.

IFRS in the European Union

  • Starting in 2005, all EU-listed companies must follow IFRS in their consolidated financial statements.
  • Generally, IFRS consolidated statements are permitted for non-listed companies.
  • Requirements for individual company financial statements vary – IFRS may be required, allowed, or prohibited.
1. IFRS are based on fair presentation principles
2. IFRS may be overridden in rare circumstances to achieve fair presentation
3. Accounting measurements
  • Business combinations – purchase accounting
  • Goodwill – annual impairments test
  • Investments in associates – equity method
  • Translation of financial statements of foreign operations – functional currency concept
  • Assets valued at historical cost or fair value
  • Research costs – expensed; development costs – capitalized
  • LIFO not allowed
  • Finance leases – capitalized; operating leases – expensed
  • Provisions – recognized when probable and estimable
  • Deferred taxes – recognized in full, using the liability method, for temporary differences between the carrying amount and tax base


1. “The Plan” – national uniform chart of accounts (national accounting code)
  • Objectives and principles of financial reporting
  • Definitions of elements
  • Recognition and valuation rules
  • Standardized chart of accounts
  • Model financial statements

2. Other influences on French accounting rules

  • Commercial legislation (Code de Commerce)
  • Tax laws
Accounting regulation and enforcement
1. CNC – National Accounting Board
  • Keeps plan current
  • Makes rulings and recommendations on accounting issues
2. CRC – Accounting Regulation Committee
  • Converts CNC rulings and recommendations into binding regulations
3. ANC – National Accounting Authority
  • Will replace CNC and CRC as the national standard setter
4. AMF – Financial Markets Authority
5. OEC – Institute of Public Accountants
  • Represents the accounting profession
  • Members prepare financial statements, and provide tax, information systems, and management advisory services
  • Supervises securities markets
6. CNCC – National Institute of Statutory Auditors
  • Members audit and give an opinion on financial statements
  • Must report criminal acts to the High Council of External Auditors
  • Substantial overlap in OEC and CNCC membership
  • Statutory auditors not allowed to provide accounting services to the same client
  • AMF oversees audits of listed companies, but relies on a committee of the CNCC to conduct audit-quality reviews
Unusual features of French financial reporting
  • Must report results of environmental activities
  • Reports aimed at preventing bankruptcies
  • Social report


1. Creditor protection
  • Conservative balance sheet valuations
  • Reserves as protection against unforeseen risks and insolvency
  • Accounting is designed to compute a prudent income amount that leaves creditors unharmed after distributions are made to owner
 2. Influence of tax law
  • Determination principle: taxable income is determined by what is booked in a company’s financial records

3. Reliance on statutes and court decisions

Accounting regulation and enforcement
1. German Commercial Code (HGB)
  • Applies to all business entities
2. German Accounting Standards Board
  • Develops recommendations for consolidated financial statements
3. Financial Reporting Enforcement Panel
  • Enforces compliance with German financial reporting requirements and IFRS by listed companies
4. Chamber of Accountants
  • Oversees WPs (“enterprise examiners”)
Unusual features of German financial reporting
1. Auditor’s private report to board of directors and supervisory board on company’s future prospects.
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