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The report aims to provide a commentary on what accounting treatments were ultimately chosen. This survey is a snapshot of the implementation of the Accounting Directive at April 2016. It only covers eight member states, but it does include some of the largest. It is scarcely surprising given the number of MSOs that were included in the Directive that the overall picture is one of differences between the different countries with the implication that accounting will not be harmonised across Europe.
There are some areas where the surveyed countries did end up with comparable outcomes. For example, the Directive’s maximum disclosure requirements for small companies represented significant harmonisation, even if by reducing transparency and the information available on the public record. The extra optional disclosures have generally been included, though of course not entirely, by the member states surveyed. The micro-entity regime was mostly adopted and in terms of the thresholds defining such entities and the presentational requirements, have generally been done on a similar basis across EFAA´s sample.
However, there is no escape from the fact that users looking at the accounts of companies across Europe will have to exercise considerable care in reading, interpreting and comparing the information they contain.
a. The accounting options examined here have more often than not been done differently across the sample. Users will not be able to expect that contents and the timeliness of their availability will be the same across the EU.
b. The financial information on some significant matters may be prepared on a different basis. Some of this difference may well be evident if the accounting policies are consulted – for example those differences in terms of revaluations, fair value and inventory valuations.
c. Other matters might be harder to fathom, for instance the basis of provisions or hedge accounting.
d. Some of the options for member states dealt with in a similar way by the member state are those that give choice for companies in how they do their accounting (for example over borrowing and development costs). So again care will be needed by users to understand what they are looking at.
e. Nor should it be forgotten that on many accounting treatments (for example on leases, deferred tax and pension obligations) the Directive is silent and there will therefore be further differences and lack of harmonisation.
What are the implications of this picture of a lack of harmonisation of financial information about SMEs that emerges from the implementation of the Accounting Directive?
This will provide impediments to the development of SME investing or their doing business on a cross-border basis. Already the EC’s Capital Markets Union programme has noted the potential importance of a comparable European system of financial reporting for
SMEs involved in alternative or SME growth markets. The programme has also noted the possibility of a common information base for credit applications.
The CCCTB may be an important component in the area of EU action against tax avoidance. Any common corporate tax base would have to start with a common accounting basis.