Understanding the Basics of Accounting Rules for the European Union

While the finance and accounting field is a worldwide industry that all sectors are a part of, different countries and regions usually have a few differences in how they set accounting policies and regulations – the same can be said for the European Union (EU).  

 The EU has 27 countries that share more or less the same fiscal policies, such as having the same currency, an interconnected market and one fiscal calendar for all countries to follow.  

With this, it is only natural that countries in the EU also follow the same finance and accounting rules. This smoothens their economic relations with one another as companies operating within the EU or dealing with EU partners are expected to adhere to the same rules.  

If you are looking to deal with European countries, here are some of the most basic accounting rules to follow. 

Read: How Offshore Accounting Helps You Become Globally Competitive 

Accounting Regulations in the European Union 

EU Accounting Directive Provisions  

The EU Accounting Directive set by the European Parliament last 2013 sets the standard for financial reports, financial statements and transactions within the EU. The overall goal of the directive? To provide a comprehensive report that contains all the information anyone needs about the financial status of an entity.  

This directive gives a rundown of the necessary information needed, the format and other requirements that all companies must adhere to for all financial dealings. 

Alongside this, the directive also included disclosure requirements regarding a company’s dealings that must be included in their reports. The required disclosure clause encompasses environmental, social and human rights issues, and anti-corruption and bribery matters that a company may have. 

International Financial Reporting Standards (IFRS) 

The IFRS are accounting rules that are generally followed even outside the EU. It is a widely accepted list of policies that companies have to follow which state the information needed in financial dealings such as income documentation, cash-flow, equity changes and financial position and reports. 
 
Alongside the Generally Accepted Accounting Principles (GAAP), which is commonly used by the United States and companies dealing with the United States, the IFRS remains to be one of the most credible standards in the finance and accounting industry. 

The Annual EU Budget and Finance Lifecycle  

When dealing with certain non-government and government agencies in the EU, it is important to note that when they pertain to an annual budget, the lifecycle of the said budget can span up to 3 years.  

The planning for a budget takes several months prior to the year stated with the implementation to follow spanning for one year at least. The audit and closing requirements are done after the year of implementation, making the entire process a lengthy one. 

 This preparation is a lengthy one as the implementation of some non-governmental and governmental budgets applies to more than one country with all EU countries coming together to plan, implement and assess the stated budget.  

Forming an economic relationship with countries in the EU present its own set of challenges and adjustments, however, the EU remains to have the third largest economy in the world and establishing a relationship with them offers your own company avenues for growth and expansion for your operations as well as financial diversification and security.  

 By adhering to the finance and accounting requirements in dealing with the EU, you will be able to position your company as globally competitive in today’s ever-evolving landscape.  

Read Next: Understanding the Regulatory Changes in Accounting  

We have a wide expertise in handling the numbers of companies across various countries. We also make it our mandate to stay up to date on any changes to the finance and accounting industry on a global scale to ensure compliance at all times. Contact us today and we’ll help you find the right solution for your needs. 

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