Internationalisation of accounting

The shape of European accounting law has changed dramatically since the IAS regulation of the European Union entered into force on January 1, 2005. For the first time, all groups of companies listed in the European Union are obliged to draw up balance sheets according to uniform rules (the IAS/IFRS), which are compiled by a private accounting board (IASB) and implemented by the European Commission. The IAS/IFRS are increasingly accepted as a „world standard“ well beyond Europe.

This upheaval forces the legislation to re-orient in many areas. As for European company law, the information function of the balance sheet and the cross-border comparability of company data come to the fore. As a consequence, the classic function of the balance sheet, i.e. to identify the „distributable“ profit of a company with regard to creditors’ interests is put into question. This has led to an international discussion on the existing creditor protection system of European company law, which is based on the raising and maintenance of legal capital as defined in the balance sheet. It is discussed whether this system should be completely reformed or whether the harmonisation reached so far should be repealed in order to enable free competition between the Member States' legal systems.

From a taxation point of view, the arrival of the IAS/IFRS raises the question of tying the tax accounting to these international accounting principles. The diverging purposes of tax law and capital market law seem to suggest an abandonment of the authoritativeness of the financial balance sheet for the tax balance sheet. Yet the harmonisation of the rules on consolidated accounts equally offers an opportunity to obtain a Europe-wide unification of the taxable base and thereby a reduction of obstacles to cross-border corporate organisation.

While the standardisation of financial reporting for groups of companies listed in the European Union is already a reality, the accounts of non-listed groups and individual accounts must still be drawn up in accordance with the respective national law. This raises the question of whether these areas of accounting should be included in the standardisation of accounting practices and, if so, how this could be achieved.