It’s a funny thing. Newspapers, commentators and even some accountants talk about the impending launch of the euro. But in reality it’s old news. The euro has been with us since New Year’s Day 1999, when exchange rates between 10 participating currencies were locked.
Since then, the national currencies of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Portugal, Spain, and latterly Greece, have ceased to exist, they are now merely denominations of euro.
British companies handling these ex-currencies have generally continued to account for them in their old names and individual conversion rates to sterling, but this state of affairs is about to end.
In January 2002, euro notes and coins will start circulating in the 11 EU countries now in the first wave of membership, and by June, old cash should have been withdrawn. From that point it will be the euro or nothing.
The single currency will have an strong impact on accounting practice, regardless of whether or not Labour win an election on a pro-euro platform and take Britain into the eurozone.
Director of the ICAEW’s Brussels office, Julian Paleson, thinks the euro’s influence will grow. He says: ‘We’ll get the euro by the back door.
Millions of us holiday in Europe and we’ll all come back with a few euros.
What will we do with them? You’ll see McDonalds say they will take euros. Change will come by the front door too.
‘Multinationals will want their accounts in euros. It will be a slow process of people getting used to it, but one day, people will say – does it matter? For the accountancy profession – if not the general public – the forward march of the euro will matter. It could be seen as a great opportunity.’
Paleson adds: ‘Accountants’ first task will be an educational programme to tell people how it works. Later, for all companies with interests in continental Europe, there will be pure accounting problems of accepting what it means to have one currency.’
The Treasury agrees. Its advice is: ‘UK firms which keep accounts of dealings in other major European currencies will need to handle the euro, although other businesses’ accounts may not be affected. Some firms may want to consider whether to change accounting systems.’
Given the likelihood of the euro making a large impact in Britain, regardless of whether it’s the official currency, it is partly comforting that the government and accountancy institutions have been making preparations.
Following the election of Labour’s mildly pro-euro government in 1997, a Business Advisory Group on Economic and Monetary Union, was launched, bringing together a number of business organisations, the TUC and the Consumer’s Association, to discuss detailed practical issues. It reported in January 1998.
Among other initiatives, the government also established a euro preparations unit in the Treasury which aims to ensure business and public authorities are prepared for the implications of the euro’s introduction in the eleven other EU countries and to complete planning and preparation to enable UK entry early in the next parliament, if appropriate.
The Accounting Standards Board has also issued detailed advice within an abstract by its Urgent Issues Taskforce. Costs, it says, could include administrative planning, staff training, provision of information to customers, modification of software and the adaptation of hardware, such as banks’ automatic teller machines.
More of these papers can be expected if British public opinion gets used to the euro. And that is what Paleson thinks will happen: ‘The UK is being a bit Canute-like. But there will be no great drama, it will suddenly happen: people will say, let’s use the euro.’
Guidance from the ASB’s Urgent Issues Taskforce can be found at www.asb.org.uk/uitf/index.html
WHO WILL DEAL WITH THE EURO?
The Treasury has listed the type of UK companies that will deal with euros. They include:
– Exporters and importers: even exporters used to quoting in sterling may be pressured to quote in euros from customers in euroland, says the Treasury
– Multinational firms and their suppliers: Some multinationals operating in the EU are already using the euro to simplify their finances. They might want their British suppliers to use the euro as well and if they have enough market muscle, these requests will be hard to resist
– Retail banking: UK systems can make payments in euro. Most banks are ready to offer euro accounts for businesses
– Retailers: Shops in tourist areas will come under pressure to take euro by European visitors who may no longer accept the hassle of changing money for trips within the EU as being justified. Stores handling international orders will also be asked if they will accept euros. It is likely that many will say yes
– Wholesale financial markets: They have been habitually using the euro instead of the currencies it replaced since January 1, 1999.
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