After a development phase lasting several years, the International Accounting Standards Board, which is responsible for the development of  International Financial Reporting Standards (IFRS) published their own Reporting Standards for Small and Medium-sized Entities (SMEs) in July 2009. These Standards contain own provisions for preparing Annual Accounts for SMEs. Before European SMEs are able to apply these Standards, the latter have to be integrated into European law by the EU.

During the past months, the competent Internal Market Commission carried out a relevant Consultation. During the course of this Consultation it was discussed, which role this new regulation would play within scope of European Accounting in future and to which extent the reviewed Directives could be integrated. The Federal Chamber of Labour has been involved in this process.

Advantages and disadvantages of a separate Standard for SMEs

The Consultation results were presented in the stakeholder meeting. The supporters of the new  Accounting Standards believe that in particular those  SMEs will benefit, which would like to operate internationally and which would be able to maintain their competitive advantages. Making borrowing easier as well as an improved international comparability for investors, business partners and creditors were also listed as advantages.

The possible disadvantages reflect the position of the Federal Chamber of Labour (BAK). In the Consultation, the BAK came out against a Europe-wide application of the Standards. The extensive rules of the new Standards mean a significant amount of additional work and high costs for Small and Medium-sized Entities (for example for training courses, audits). The planned mix of different valuation principles and a large number of voting rights results in the fact that these complex regulations lead to a limited comparability and transparency of business transactions. This measure affects all relevant stakeholders (such as employees, banks, creditors etc).

Review of Accounting Directives - Hearing of stakeholders

The Accounting Directives form the basic conditions for preparing annual accounts within the EU. At the centre of the planned review of the Accounting Directives is a simplification and modernisation of the rules, in particular for SMEs. The Commission intends to base its review on the general principles.

The Commission presented a Discussion Paper during the meeting to debate central issues such as basic principles of accounting, preparation and publication of annual accounts with the relevant stakeholders.

It is important for stakeholders that the Accounting Directives are above all oriented towards relevant requirements for all entities. Concerns were also voiced that these changes would result in the International Financial Reporting Standards being increasingly integrated into European law.

Last year already, a Consultation was carried out on reviewing the Accounting Directives, in which the BAK also participated.

In the opinion of the BAK, a review of the Fourth and Seventh Directive can only go in one direction: the quality of accounting as well as the publicity towards stakeholder must be significantly improved. Carefully prepared annual accounts have considerably gained in importance, in particular during the course of the financial crisis.