Corporate: The European Commission has adopted an Interpretative Communication on a number of issues dealt with in the main EU Accounting Directives concerning annual and consolidated accounts

United Kingdom
The European Commission has adopted an Interpretative Communication on a number of issues dealt with in the main EU Accounting Directives. The communication aims to give guidance to bodies responsible for setting accounting standards in the Member States, to accounting professionals and to investors and other users of company accounts.

Basic EU-wide rules on the preparation and presentation of companies' annual accounts and the consolidated accounts of groups of companies are laid down respectively in the 4th and 7th Company Law Directives. The Communication clarifies the meaning of a number of the Directives' provisions in the light of developments which have taken place since their adoption. It forms part of the new accounting strategy which aims to improve the comparability of accounts drawn up in different Member states and to integrate European accounting harmonisation efforts into a broader context of harmonisation at international level.

On Consolidated Accounts, the Communication deals with the parent-subsidiary relationship, the exclusion of a subsidiary from the scope of the consolidation and the relationship between annual and consolidated accounts. The Communication also includes some clarifications on the inclusion of environmental issues in the financial statement. For example, it confirms that environmental risks or liabilities resulting from past transactions or events qualify for recognition as a provision in the balance sheet if the company has a legal or contractual obligation to prevent , reduce or repair environmental damage or if the company's management has committed itself to doing so. The Commission intends to issue at a later date a separate recommendation on environmental matters in financial reporting. The Communication also shows that the Directives are compatible with International Accounting Standards in all but a few non-significant cases.