The British government is confident that it will avoid legal action from the
European Commission at the European Court of Justice (ECJ), which has formally
warned the UK and five other European Union (EU) about not implementing a key
The Commission said Britain, Belgium, Spain, Italy, Netherlands and
Luxembourg had failed to properly reply to letters in March which stated that
they were in breach of Directive 2003/51/EC. It has given them a two-month
deadline to solve the problems or possibly face ECJ action.
The legislation imposes globally recognised guidelines short of International
Accounting Standards (IAS) on non-listed EU companies, and is a key plank of the
Commission’s financial services action plan.
EU internal market commissioner Charlie McCreevy said that although great
strides had been made towards a more open, integrated and competitive European
financial market, if member states did not implement EU regulations then the
rules were ‘absolutely useless’.
The directive defines which types of companies have to produce accounts,
establishes which format should be used for the profit and loss account and the
balance sheet, and lays down which valuation principles should be applied.
Under a related IAS directive all listed EU companies must use IAS from 2005
onwards. In member states which do not apply IAS to all companies there is a
requirement for ‘similar, high-quality financial reporting’ to be applied.
One effect in the UK has been that Lloyd’s syndicate accounts will be
prepared annually, mirroring other insurance undertakings, instead of on a
cumulative basis for three underwriting years.
A UK Department of Trade and Industry spokeswoman claimed that Britain was
now catching up with both pieces of legislation, and that the relevant
‘directives have now been implemented in the UK and Northern Ireland. Only
Gibraltar is outstanding and that will be dealt with shortly’, he said.
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