In line with the European Commission Regulation No. 1606/2002, listed companies in the Netherlands are required to use International Financial Reporting Standards (IFRSs) in their consolidated accounts. In 2006, the European Commission published a report on the implementation of IFRSs in European Union (EU) member states, in which it points out that the Netherlands permits IFRSs in the annual accounts for listed companies and annual and consolidated accounts for all other companies. Dutch law allows the option to use either IFRSs or Dutch Generally Accepted Accounting Principles (GAAPs). The Dutch GAAP refer largely to the Dutch Civil Code and the Guidelines on Annual Reporting issued by the Dutch Accounting Standards Board (DASB). According to a 2006 KPMG publication, between 1998 and 2003, Dutch GAAPs were rapidly converging with IFRSs. However, with the implementation of the EU regulation on IFRSs, the focus of the DASB has shifted to establishing requirements for unlisted companies and ensuring consistency with Dutch law and regulations. The KPMG report observes that, as a consequence, the differences between IFRSs and Dutch GAAPs have been growing over the last few years, and they are likely to increase in the future.

General Overview

As described in the 2005 self-assessment by the Netherlands Institute of Registered Accountants (Koninklijk Nederlands Instituut van Registeraccountants, or NIVRA), the legal framework for financial reporting in the Netherlands is largely based on the Dutch Civil Code, Registered Accountants Act, Accounting Firms (Supervision) Act, Code of Conduct for Accountants, and Dutch Independency Code. Dutch Generally Accepted Accounting Principles (GAAPs) primarily refer to the Dutch Civil Code and the framework and Guidelines on Annual Reporting (GARs) issued by the Dutch Accounting Standards Board (DASB). According to a 2006 KPMG publication, between 1998 and 2003, Dutch GAAPs were rapidly converging with International Financial Reporting Standards (IFRSs). However, with the implementation of the European Union (EU) regulation on IFRSs, the focus of the DASB has shifted to establishing requirements for unlisted companies and ensuring consistency with Dutch law and regulations. The KPMG report observed that, as a consequence, in the last few years the differences between IFRSs and Dutch GAAPs have been growing and are likely to increase in the future. As explained in the report, "the DASB will first consider whether new IFRSs are appropriate for unlisted companies, whether alternatives should be provided, and whether new IFRSs are consistent or conflict with the Dutch Civil Code" (p. 1). A 2005 Ernst and Young report also pointed out to a number of differences between IFRSs and Dutch law and regulations. The report observed that "a large number of changes (as part of the Improvements Project, among other things) became effective under IFRS in 2005, which have not yet been implemented in Dutch law and regulations" (p. 9). Furthermore, the KPMG report explains that, unlike the IFRSs, Dutch GAAPs contain many exemptions for small- and medium-sized enterprises (SMEs) and a separate set of GARs exist for small entities.

On July 19, 2002, European Commission (EC) Regulation No 1606 of 2002 was passed by the European Parliament and Council of Ministers requiring the adoption of IFRSs as endorsed by the EC in EU member states. In line with the EC regulation, listed companies in the Netherlands are required to use IFRSs in their consolidated accounts. The 2006 EC report on the implementation of Regulation No. 1606 of 2002 points out that the Netherlands permits IFRSs in the annual accounts for listed companies and annual and consolidated accounts for all other companies. For companies not required to follow IFRSs, the Dutch law gives an option to choose between Dutch GAAPs and international standards.

The Accounting Firms (Supervision) Act (AFSA) came into effect in October 2006 and introduced the shared responsibility for the supervision of the accounting profession by the NIVRA and the Netherlands Authority for Financial Markets (Autoriteit Financiele Markten, or AFM). Under the Act on Financial Supervision (Wet op het financieel toezicht, or WFT) which came into effect on January 1, 2007, the AFM regulates financial sector in the Netherlands. According to the 2005/06 Annual Report of the NIVRA, "this not only meant a new regime for accounting firms but also a new era for the public profession, with self-regulation now being supplemented by public accountability and external supervision of the statutory audit function" (p. 6). The 2006 NIVRA self-assessment further explains that "under the new law, the AFSA, the audit firm will be subject of the public oversight system, but individual accountants will be monitored as well, if and when their work is reviewed as part of the oversight" (p.4).

The DASB is a private, non-governmental organization that sets national accounting standards and issues accounting guidelines. Each year in December, the DASB issues two sets of guidelines for large and medium-sized enterprises and small entities. According to the 2004 Bebbington and Song report, the Chartered Accountants Act of 1962 created the NIVRA. The NIVRA does not issue accounting standards; however it participates in accounting guidelines through membership in the DASB, previously known as the Council for Annual Reporting (CAR). According to the NIVRA Annual Report of 2005-2006, a new code of ethics was published in August 2006 under the name of Code of Conduct Regulation, known by its Dutch acronym of VCG. The VCG is based on International Federation of Accountants (IFAC) code of ethics. As explained in the 2006 NIVRA self-assessment, "as a result the proposed code equals the IFAC-code and a few extras" (p. 38). NIVRA is listed as a member on the IFAC website.

The Principles

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

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There is insufficient publicly available information addressing this principle.

IFRS 2: Share-based Payment (effective 2005)

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According to the 2005 Ernst and Young report, the Dutch GAAP differ from IFRS 2 as "the Dutch Guidelines do not contain any specific rules on share-based payments" (p. 211).

IFRS 3: Business Combinations (effective 2004)

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According to the 2006 KPMG publication, differences exist between IFRS 3 and the corresponding Dutch GAR. As explained in the report, "unlike IFRSs, the uniting-of-interests methods can still be used in exceptional circumstances" (p. 25).

IFRS 4: Insurance Contracts (effective 2006)

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According to the 2006 KPMG publication, several differences exist between IFRS 4 and the corresponding Dutch GAR. For instance, "unlike IFRSs, the definition of an insurance contract is based on its legal form and the transfer of significant insurance risk is not relevant" (p. 115).

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

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According to the 2006 KPMG report, differences exist between IFRS 5 and the equivalent Dutch standard. As explained in the report, "unlike IFRSs, there is no accounting concept of non-current assets or disposal groups held for sale" (p. 99).

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

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According to the 2006 KPMG report, there are many differences between IFRS 6 and the equivalent Dutch guidelines. As explained in the report, "unlike IFRSs, no specific guidance is provided for exploration and evaluation expenditure (E&E) expenditure, and the general standards apply" (p. 119).

IFRS 7: Financial Instruments: Disclosures (effective 2007)

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According to the 2006 KPMG publication, differences exist between IFRS 7 and the corresponding Dutch GAR, and requirements in the Civil Code.

IAS 1: Presentation of Financial Statements (effective 2007)

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According to the 2006 KPMG publication, differences exist between IAS 1 and the corresponding Dutch GAR and requirements in the Civil Code.

IAS 2: Inventories (effective 2005)

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According to the 2006 KPMG publication, differences exist between IAS 2 and the corresponding Dutch GAR and requirements in the Civil Code. The report noted that, unlike IAS 2, inventories can also be measured at current value in the Netherlands.

IAS 7: Cash Flow Statements (effective 1994)

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According to the 2006 KPMG publication, IAS 7 and the corresponding Dutch GAR are very similar. However, some differences exist.

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

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According to the 2006 KPMG publication, differences exist between IAS 8 and the corresponding Dutch GAR and requirements in the Civil Code.

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

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According to the 2006 KPMG publication, differences exist between IAS 10 and the corresponding Dutch GAR and requirements in the Civil Code. As explained in the report, "unlike IFRSs, if a subsidiary or associate declares a dividend after the balance sheet date in respect of a previous period, it is an adjusting event in the parent's /investor's financial statements" (p. 35).

IAS 11: Construction Contracts (effective 1995)

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There is insufficient publicly available information addressing this principle.

IAS 12: Income Taxes (effective 2001)

EN

According to the 2006 KPMG publication, the Dutch GAAP is similar to IAS 12.

IAS 14: Segment Reporting (effective 1998)

EN

According to the 2006 KPMG publication, the Dutch GAAP is similar to IAS 14.

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

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According to the 2006 KPMG publication, differences exist between IAS 16 and the corresponding Dutch GAR, and requirements in the Civil Code.

IAS 17: Leases (effective 2005)

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According to the 2006 KPMG publication, there are a few differences between the Dutch GAAP and IAS 17.

IAS 18: Revenue (effective 1995)

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There is insufficient publicly available information addressing this principle.

IAS 19: Employee Benefits (effective 2006)

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According to the 2006 KPMG publication, there are a few differences between the Dutch GAAP and IAS 19.

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

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According to the 2006 KPMG publication, there are a few differences between the Dutch GAAP and IAS 20.

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

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According to the 2006 KPMG publication, a few differences exist between IAS 21 and the corresponding Dutch GAR. As explained in the report, "unlike IFRSs, no hedge accounting rules exist, except for some general rules regarding foreign currency hedging" (p. 55).

IAS 23: Borrowing Costs (effective 1995)

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There is insufficient publicly available information addressing this principle.

IAS 24: Related Party Disclosures (effective 2005)

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According to the 2006 KPMG report, there are few differences between IAS 24 and the equivalent Dutch guidelines.

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

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There is insufficient publicly available information addressing this principle.

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

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According to the 2006 KPMG publication, differences exist between IAS 27 and the corresponding Dutch GAR, and requirements in the Civil Code.

IAS 28: Investments in Associates (effective 2005)

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According to the 2006 KPMG publication, differences exist between IAS 28 and the corresponding Dutch GAR, and requirements in the Civil Code.

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

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According to the 2006 KPMG publication, "like IFRSs, when an entity's functional currency is hyperinflationary its financial statements must be adjusted to state all items in the measuring unit current at the balance sheet date" (p. 19). However, differences do exist.

IAS 31: Interests in Joint Ventures (effective 2005)

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According to the 2006 KPMG publication, differences exist between IAS 31 and the corresponding Dutch GAR, and requirements in the Civil Code.

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

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According to the 2006 KPMG publication, differences exist between IAS 32 and the corresponding Dutch GAR, and requirements in the Civil Code.

IAS 33: Earnings per Share (effective 2005)

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According to the 2006 KPMG publication, the Dutch GAAP differs from IAS 33. As explained in the report, "unlike IFRSs, there is no requirement to present EPS for discounting operations" (p. 97).

IAS 34: Interim Financial Reporting (effective 1999)

EN

According to the 2006 KPMG publication, the Dutch GAAP and IAS 34 are very similar.

IAS 36: Impairment of Assets (effective 2004)

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According to the 2006 KPMG publication, the Dutch GAAP differs from IAS 36.

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

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According to the 2006 KPMG publication, the Dutch GAAP differs from IAS 37.

IAS 38: Intangible Assets (effective 2004)

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According to the 2006 KPMG publication, differences exist between IAS 38 and the corresponding Dutch GAR, and requirements in the Civil Code.

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

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According to the 2006 KPMG publication, differences exist between IAS 39 and the corresponding Dutch GAR, and requirements in the Civil Code.

IAS 40: Investment Property (effective 2005)

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According to the 2006 KPMG publication, differences exist between IAS 40 and the corresponding Dutch GAR, and requirements in the Civil Code.

IAS 41: Agriculture (effective 2003)

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According to the 2006 KPMG publication, differences exist between IAS 41 and the corresponding Dutch GAR, and requirements in the Civil Code. As explained in the report, "unlike IFRSs, there is no specific guidance for biological assets other than agricultural produce" (p. 59).