Ch 9' Financial reporting in the Netherlands

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Ch 9. Financial reporting in the Netherlands

• Code of Commerce country ( Law influence) but
  strong international influence
• Accounting quite similar with UK tradition
  influence of the profession, loose standards
• Little tax influence on corporate accounts
  except for small companies.

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9.1. Reporting and the Law

• Before Cy Act of 1970 on the annual accounts
  of enterprises, practically no format and content
  requirements for the Financial Statements. The
  Act was then incorporated in the Dutch Civil Code
  and several times revised to incoporate EU
  regulation.
• This regulation applies to public companies
• ( 1,000) and private companies( 135,000) and
  others not for profit, sole proprietorships

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2.1. Reporting and the law ( continued)

• Similarities with France and Germany on the
  following points
• -Two tier boards managerial system managerial
  directors( draw up the accounts and present them
  to the SH General Assembly) and supervisory
  board, the latter finalizing the accounts
• - Deposit of the FS after approval by General
  Assembly ( within 8 days) at the trade registry.
• - Most of the listed shares are on the bearer
  (not registered)
• - True and fair view ( at least how they
  interpret it see p.199) and true and fair view
  override.

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2.2. The Enterprise Chamber

• Can be regarded as a balance against
  traditional loose and flexible standards, no SEC,
  no standards setting body. Role and function
  should be rethought.
• Its a chamber of the court of justice of
  Amsterdam to whom interested parties may
  complain if they feel that the financ²ial
  statements submitted do not comply with the law.
  The chamber can order rectification of the FS.
  Failures to comply with the Courts rulings may
  be punished by fines or imprisonment.

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2.3.The Accounting Profession and Accounting
Standards

• There is a Council for Annual Reporting providing
  guidance to what are the gaap with employees,
  representative of employers, analysts,
  accountants sitting, financed by the Social and
  Economic Council. Companies are not obliged to
  follow the guidelines definitive pronouncements
  or recommendations nor need they or their
  auditors state that they have been followed.
  Audit reports are not qualified for this reason (
  similar to ICAEW recommendations 1942-1969)
  Actually the Council, if influenced by a bright
  accounting profession has little influence
  compared to the FASB and the french CNC.

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2.4. Annual Reports, Accounting principle and
policies

• -Similarities with France and Germany
  sophistication and disclosure subject to size
  limits, managerial directors report, cash-flow
  statement published by listed companies.
• - Civil code, depreciation rules,
  capitalization of RD permitted, Intangible
  assets, social reporting
• - differences Lifo, revaluation, no legal
  reserves, differed taxation, GW may be written
  off, current cost permitted whenever used then
  applicable to both BS and PLA, Finance leases
  capitalized.

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2.5. Consolidation, IAS

• -Long tradition, entity approach, about the
  same rules than many countries in the EU use of
  full conso for subsidiaries then equity
  accounting for other participating interests( net
  assets method). Proportional conso permissible
  for joint ventures. GW written off or capitalized
  and amortized. Closing rate method for
  translation with PLA usually translated at
  average rates and translation differences taken
  to reserves.
• -Major Cy tend to report according to IAS or
  US GAAP when they need to be listed at the NYSE
  or NASDAQ. Some differences with IAS GW written
  off, proposed dividends accrued, compound
  instruments shown as legal form, provisions can
  be made when no obligation not discounted.