1. THE EUROPEAN ACCOUNTING Le, Malík, Paukertová, Šimůnek

2. Overview of European Accounting System and Harmonization  Goal is harmonization  Includes countries in the European Economic Area  Set accounting principles  Keep open the possibility to join  Influenced by International Accounting Standards Committee (IASC) and the International Accounting Standards Board (IASB)

3. Benefits of Harmonization  Simplified work with reports  Hightened understanding  Easier managing of international companies  Moving accounting staff

4. Obstacles of Harmonization  Differences between accounting practices  Change of law and attitudes  Different purposes of financial reporting  Nationalism  Impact on an economy

5. Harmonization in European Union  Integral part of making the European Union into a single economic space  Leveling the playing field in markets  An integrated capital market  Implications on the quality and quantity of financial disclosure  Implies the need for leveling upwards

6. Influences on European accounting  Institutional  National Institutions  European Institutions  International Institutions  Cultural  The relative importance of law  Prescriptiveness or flexibility  The providers of finance  Influence of taxation

7. National Institutions  National organizations cannot be ignored  Responsibilities to their members  Interrelationships with local business and political communities  In some countries national accounting bodies exists with their own constituency

8. European Institutions  Féderation des Experts Comptables Européens (FEE)  Formed in 1987  Work toward the improve and harmonize the practice of accountancy  Promote cooperation among the professional acc. Bodies in EU  Represent EU accountancy at the international level  Be sole consultative organization  not intent to be standard-setting body but propose and promote accounting harmonization

9. International Institutions  The International Federation of Accountancy (IFAC)  Approved in 1977  Worldwide organization of accountancy bodies  Independent of governmental control  Develop and improve coordinated worldwide accountancy profession with harmonized standards

10. The relative importance of the law  How country‘s law determines details of accounting and financial reporting  Countries influenced by Roman law tradition tends to have more details

11. Prescriptiveness or flexibility  regulation can be created by:  professional accounting bodies  By individual expert  Difference between prescriptivenes and flexibility is not absolute in practice.

12. The providers of finance  Now acc. statement satisfy need of all different users in past the suppliers of finance  countries have different financial structure and finance-raising traditions  Focused on shareholders (profit and on the matching of expenses and revenues)  Focused on creditors (balance sheet and on the convention of prudence)

13. Influence of taxation  allowances to be claimable only if the identical figure from the tax computation is also used the published financial statements  this applies to the legal entity financial statements, not to the consolidated ones  different accounting principles being applied in parent company financial statements and consolidated financial statements

14. The EU Directives  The major method how to engender changes across the EU  a Directives is a binding agreement by all the member states of the EU that they will introduce national legislation  It is important to clarify what this means and what it does not mean

15. The EU Directives  What does mean the EU Directives ?  It does mean that all member states are required to implement the Directives.  What does not mean the EU Directives ?  It does not mean that citizens or institutions within a member state are required to follow the Directive

16. The Accounting Directives  Fourth Company Law Directive  related in 25 th of July  this relates to the accounts of limited companies  Seventh Company Law Directive  related in 13 th of June, 1983  this extends the principles of Fourth Directive to the preparation of consolidated accounts

17. Specific Provisions of the Fourth Directive  The Fourth Directive defines and illustrates some detailed layouts and formats for published income statement and balance sheets.  Following from the diversity of practice, however, two different formats for balance sheets and four for income are allowed  The Directive continues to prescribe requirements for particular items in the balance sheets and income statement

18. Specific Provisions of the Fourth Directive

19. The Seventh Directive  The Seventh Directive applied and broadly extended the provisions of the Fourth Directive to the preparation and publications of consolidated accounts  This Directive required much development and change in some countries, and very little in others

20. The Seventh Directive

21. IFRS for SMEs  Generally accepted accounting principles (GAAP)  International Financial Reporting Standards (IFRS)  small and medium enterprises (SMEs)

22. Changes of the European Accounting System as of 2005  Advantages  Disadvantages