PracticePeople In PracticeBrussels forces accounting change

Brussels forces accounting change

The European Commission has approved a reform to EU accounting regulations, forcing all organisations that receive assistance from local and central governments for supplying public services, to produce separate accounts for this element of their business

The move will force them to split such records from anynormal commercial activities.

Its decision, which was taken following consultation with EU Member Statesand the European Parliament, will amend the EU Transparency Directive.

Competition commissioner Mario Monti said: ‘Such separation of internalaccounts will make the actual costs of the public service obligations moreapparent and provide the Commission with the necessary data to examinecomplaints about alleged over-compensation of public service costs andcross-subsidisation of commercial activities.’

He said separate accounts would be required for activities, whereorganisations received special payments from public funds for supplying aparticular type of service, or where they were granted exclusive rights byway of compensation.

The move has been sparked by complaints about the behaviour of organisationssuch as privatised utilities, who have been accused of exploiting theirdominant positions and existing special relationships with governments,whilst competing in the general marketplace with newcomers.

Monti said that separating accounts would help the Commission pinpointwhether these privileges broke EU competition law. He said: ‘Such dualactivities can – and sometimes do indeed – cause difficulties as regardspossible distortions of competition.

Revenues from the reserved activitiesor financial transfers received from the state as compensation for publicservice costs could be used to cross-subsidise activities in areas open tocompetition.

Member States will have until July 31, 2001, to implement the reformsnationally. Affected companies will have to operate separate accounts fromJanuary 1, 2002.

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