As part of its efforts to contribute to the harmonization of accounting practices in the European Union (EU), the Austrian Parliament enacted the Accounting Law in 1990 followed by an amendment of the Austrian Commercial Code (HGB) in 1999. While the 1990 Law incorporated the 4th and 7th European Union (EU) directives on harmonization of accounting practices, the 1999 amendment of the HGB allowed all Austrian companies, listed or unlisted, to use International Financial Reporting Standards (IFRSs) in preparation of their consolidated financial statements. In 2001, the Vienna Stock Exchange made it a requirement for certain listed entities to apply IFRSs or U.S. Generally Accepted Accounting Principles (GAAP) in consolidated financial statements. However, in accordance with the European Commission (EC) Regulation No. 1606/2002, beginning 2005 all listed companies in the EU are required to use IFRSs in their consolidated accounts. The 2006 EC report on the implementation of the Regulation No. 1606/2002 confirmed that Austria requires IFRSs in the consolidated accounts of listed companies and permits IFRSs in the consolidated accounts of all other companies. IFRSs, however, are not permitted for use in the annual accounts of any type of companies. Therefore, apart from the mandatory application of IFRSs, other companies follow the HGB and financial reporting regulations specified in other laws for financial institutions, insurance companies, and investment funds. Per a 2004 European Committee of Central Balance Sheet Data Offices report on the main differences between IFRSs and national regulations, the Austrian GAAP differ from the international requirements in many respects.

General Overview

In anticipation of the harmonization of accounting practices in the European Union (EU), the Austrian parliament amended the Austrian Commercial Code (Handelsgesetzbuch, or HGB) in 1999 to allow all Austrian companies to use International Financial Reporting Standards (IFRSs) in their consolidated financial statements, subject to certain prerequisites. In fact, the May 2001 IAS Plus website update pointed out that the Vienna stock exchange (Wiener Börse, or WB) moved further and made it mandatory for all domestic and foreign companies listed on the A-market and the Austrian Growth Market to submit consolidated financial statements in accordance with IFRSs or the U.S. Generally Accepted Accounting Principles (GAAP), beginning April 2001. However, beginning 2005, per the European Commission (EC) Regulation No. 1606/2002, all listed companies in the EU are required to use IFRSs in their consolidated accounts. Thus, capital-oriented enterprises in Austria have to create three different sets of annual accounts: (1) tax accounts in accordance with tax law; (2) individual accounts in accordance with the HGB; and (3) consolidated accounts in accordance with IFRSs (CBSO 2007).

Apart from the mandatory application of IFRSs by Austrian listed companies, the 2006 EC report on the implementation of Regulation No. 1606/2002 points out that Austria permits IFRSs in the consolidated accounts of all other companies. However, IFRSs are not permitted in annual accounts of listed or unlisted entities, which must adhere to the national requirements. According to the European Committee of Central Balance Sheet Data Offices (CBSO) 2004 report, the national requirements for accounting differ from IFRSs in many respects.

The 2007 UHY Hacker "Doing Business in Austria" guide explains that Austrian accounting principles are based on the Accounting Act (Rechnungslegungsgesetz, or RLG) and the Basic Principles of Proper Bookkeeping and Accounting (Grundsätze ordnungsgemässer Buchführung und Bilanzierung, or GoB), supplemented by statutory provisions, court rulings, interpretation, and recommendations from the Chamber of Public Accountants (Kammer der Wirtschaftstreuhänder, or KWT). Further, the RLG facilitated the adjustment of Austrian accounting law to the 4th and 7th EU directives on harmonization of accounting practices. Per the UHY Hacker report, the RLG applies to all entrepreneurs registered in the register of commerce and particularly to corporations and partnerships.

According to the description of the regulatory framework provided in the 2005 KWT self-assessment, the Financial Market Authority (Finanzmarktaufsicht, or FMA) is an autonomous integrated authority responsible for the supervision of the financial market. Under the Banking Act (Bankwesengesetz) and the Insurance Supervision Act (Versicherungsaufsichtsgesetz, or VAG), banks and insurance companies respectively must comply with specific requirements for financial reporting. Further, financial statements of banks must be audited by a bank appointed auditor. However, the FMA has the right to object to the appointment. For the insurance sector, the FMA also has the right to object to the authorization of the auditor. However, the assessment pointed out that the FMA has no specific powers for the enforcement of accounting or auditing requirements.

In fact, according to a 2006 presentation by Palmer, there is no enforcement mechanism for financial reporting in Austria. As part of its ongoing efforts to create an adequate system, the FMA chaired a working group on enforcement set up by the Austrian Financial Reporting and Auditing Committee (AFRAC). The AFRAC was established by the Austrian parliament in 2004. Its main functions include the development of national and international accounting, financial reporting, and auditing standards; and advising the relevant ministries on proposed legislation in the field. In accordance with the EU Transparency Directive, the presentation noted that a concept paper for an Austrian Enforcement Law has been developed and the law was likely to be implemented in 2007. The above-mentioned concept paper further detailed the structural aspects of the future enforcement body.

The Austrian Institute of Auditors (Institut Österreichischer Wirtschaftsprüfer, or IWP) and the KWT are the two main professional bodies in Austria. These are private standard-setting bodies and participation is voluntary. One of the functions of these two bodies, as described in the 2000 Fédération des Experts Comptables Européens (FEE) report, is the interpretations of legal regulations. With regard to compliance with the Code of Ethics, the 2006 IWP self-assessment noted that "in Austria the regulations about professional conduct (ethical behavior) of auditors are part of the legal regulations for the profession" (p. 35). These requirements are laid out in the various laws, such the Auditing Law and the Accountants Law, and neither the KWT nor the IWP set any additional requirements. The IWP and the KWT are listed as members on the International Federation of Accountants website.

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IFRS 2: Share-based Payment (effective 2005)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IFRS 3: Business Combinations (effective 2004)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IFRS 4: Insurance Contracts (effective 2006)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 1: Presentation of Financial Statements (effective 2007)

NC

According to the 2004 CBSO, Annex 1, in Austria there are no specific rules requiring disclosure of cash flow statement, and primary statement of changes in equity is not required by national GAAP. Other differences also exist.

IAS 2: Inventories (effective 2005)

NC

According to the 2004 CBSO Annex 1, under Austrian GAAP, "inventory can be valued at replacement cost under national GAAP" (p. 7).

IAS 7: Cash Flow Statements (effective 1994)

NC

According to the 2004 CBSO Annex 1, there are no specific rules requiring disclosure of cash flow statement.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

NC

According to the 2004 CBSO Annex 1, under Austrian GAAP, "extraordinary items may be interpreted more widely than under IAS" (p. 7).

IAS 10: Events after the Reporting Period (effective 2005)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 11: Construction Contracts (effective 1995)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 12: Income Taxes (effective 2001)

NC

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "deferred tax assets on loss carry forwards must not be recognized and certain other deferred tax assets need not be recognized" (p. 7).

IAS 14: Segment Reporting (effective 1998)

NC

According to the 2004 CBSO, Annex 1, differences exist between requirements for accounting for segment reporting under Austrian GAAP and the international equivalent.

IAS 16: Property, Plant and Equipment (effective 2005)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 17: Leases (effective 2005)

II

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "finance lease are defined in terms of tax regulations, such that capitalization occurs only in rare circumstances" (p. 7).

IAS 18: Revenue (effective 1995)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 19: Employee Benefits (effective 2006)

NC

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "employee benefit calculations generally do not take account of expected future salary increases due to promotion under national GAAP"( p. 7).

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

NC

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "foreign currency monetary balances are translated at the worse of the transaction rate and the closing rate, which leads to the non-recognition of unsettled gains in national GAAP" (p. 7).

IAS 23: Borrowing Costs (effective 1995)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 24: Related Party Disclosures (effective 2005)

NC

According to the 2004 CBSO, Annex 1, there are no specific rules requiring disclosures of "related parties transactions other than those with equity participation (affiliated companies) and members of the board" (p. 8).

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

NC

According to the 2004 CBSO, Annex 1, the main difference between Austrian GAAP and the international equivalent arises due to "exclusion of dissimilar subsidiaries from consolidation" (p. 7) under national GAAP.

IAS 28: Investments in Associates (effective 2005)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 31: Interests in Joint Ventures (effective 2005)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

II

According to the 2004 CBSO, Annex 1, under Austrian GAAP "the treatment of own (treasury) shares as assets under national GAAP [and] information about the fair value of financial assets and financial liabilities has to be divulged under IAS and not under national GAAP" (pp. 3-4).

IAS 33: Earnings per Share (effective 2005)

NC

According to the 2004 CBSO, Annex 1, Austrian GAAP does not require information on this matter and there are no specific rules requiring disclosures of earnings per share.

IAS 34: Interim Financial Reporting (effective 1999)

II

There is insufficient publicly available information as to Austria's compliance with this principle.

IAS 36: Impairment of Assets (effective 2004)

NC

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "impairment tests are based on single assets rather than cash generating units, and usually on market values and/or replacement cost rather than discounted cash flows" (p. 7).

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

NC

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "for recognizing a provision, IAS needs a present (legal or constructive) obligation to incur charges as a result of a past event should exist at the balance sheet date and the loss should be probable. Under national GAAP, the probability that the enterprise will incur charges as a result of a past event is sufficient. No obligation needs to exist at the balance sheet date" (p. 4).

IAS 38: Intangible Assets (effective 2004)

NC

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "internally generated intangible assets must not be capitalized" (p. 7).

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

NC

According to the 2004 CBSO, Annex 1, under Austrian GAAP, "trading, available for-sale and derivative financial assets are not recognized at fair value" (p. 7).

IAS 40: Investment Property (effective 2005)

NC

According to the 2004 CBSO, Annex 1, there are no specific rules requiring disclosure of the fair values of investment properties.

IAS 41: Agriculture (effective 2003)

II

There is insufficient publicly available information as to Austria's compliance with this principle.