Regulation of The European Parliament and The Council
on the application of International Accounting Standards,
7 June 2002

Background - June 2002 Regulation – Decision on Member State Options- Contacts

On 7 June 2002 the Council of Ministers gave final approval to a Regulation on the application of international accounting standards in the EU. The Regulation forms a key building block of the EU Financial Services Action Plan. It will harmonise financial reporting in the EU on the basis of globally agreed accounting standards by 2005 and enhance EU companies access to international capital markets

The Regulation will require all companies listed on regulated markets in the EU to prepare their consolidated accounts on the basis of the standards promulgated by the International Accounting Standards Board (IASB) from 2005. It also includes a mechanism by which International Accounting Standards (IAS) can be "adopted" for use in the EU, within the EU legal framework. The Regulation will apply directly to companies and does not need to be implemented by national legislation..

Background

The European Commission's Communication which was published in 1999, "Financial Services: Implementing the Framework for Financial Markets: Action Plan" (8329/99, COM(1999)232), contained a proposal for a further Commission Communication updating the EU accounting strategy. The Lisbon European Council in March 2000 concluded that in order to accelerate completion of the internal market for financial services, steps should be taken to enhance the comparability of companies’ financial statements by 2005. The Commission Communication of 13 June 2000, "The EU's Financial Reporting Strategy: The Way Forward" (9637/00, COM(2000) 359 final), set out the Commission’s plan for achieving common internationally agreed accounting standards by 2005 for listed companies in the EU.

The Regulation is the legislative instrument by which the Commission will meet the objective in the June 2000 Communication on common internationally agreed accounting standards.

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June 2002 Regulation

A copy of the European Commission’s announcement of the publication of the Regulation can be obtained by clicking on the following link:

http://europa.eu.int/comm/internal_market/en/company/account/news/index.htm

The text of the June 2002 Regulation on the application of international accounting standards in the EU can be downloaded by clicking on the same link.

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Decision on Member State Options

Member States have the option to extend the application of the Regulation to the individual accounts of publicly traded companies and to the individual and/or consolidated accounts of non-publicly traded companies. They also have the option to delay the application of the Regulation until 2007 in two specific cases. On 02/09/2002 the Government published a consultation paper on the Member State options.  You can download one by clicking here (525Kb). A Small Business Summary (95Kb) is also available. You can also download the Summary of Responses to the consultation by clicking here (308Kb) 

On 17/07/03, the Government announced that it would extend the application of the Regulation, on a permissive basis, to the individual accounts of publicly traded companies and the individual and consolidated accounts of non publicly traded companies.  From 1 January 2005, all British companies not directly covered by the Regulation will be able to choose whether to prepare their accounts using IAS or UK accounting standards.  You can read the Government’s announcement by clicking here (100Kb)  and the Parliamentary statement by clicking here (80Kb)

Consultation on Implementation

On 25 March 2004, the Government published a consultation paper on implementing changes to the Companies Act 1985 to permit companies to choose whether to switch to IAS, and changes to the Act that are necessary to ensure full effectiveness of the IAS Regulation. The consultation paper is published jointly with HM Treasury and also covers use of IAS for building societies. You can download the consultation paper by clicking here ( 640 Kb).

A Small Business Summary is also available here (102 Kb).

Contacts

Andrew Watchman

Corporate Law and Governance Directorate
Department of Trade and Industry
Room 494
1 Victoria Street
London SW1H 0ET

Tel: 020 7215 0221

Valerie Carpenter

Corporate Law and Governance Directorate
Department of Trade and Industry
Room 498
1 Victoria Street
London SW1H 0ET

Tel: 020 7215 0225

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This document was last updated on 22 July 2003