Accounting Directive (Implementation) Act takes effect

The European Accounting Directive (Implementation) Act, which came into effect in the Netherlands on the first of November 2015, has introduced a number of changes to Book 2 of the Netherlands Civil Code and selected other laws. The amendments to the accounting and reporting regime are anchored in the introduction of an EU Directive dating back to 2013.

Balance sheet
Certain changes have been made to the amortisation regime, as follows:

• research costs are no longer to be classified as part of intangible fixed assets;
• the amortisation term for development costs and goodwill has been capped at ten years;
• it is no longer permissible to amortise goodwill against shareholders’ equity or charge it to the profit in a single instalment.

Annual report becomes management report
What used to be referred to as the “annual report” will henceforth be called the “management report”. It is up to the (external) auditor to make sure that the management report should be error-free materially, although neither the legislative text nor that of the Directive elaborates on the definition of “material error”.

Shorter deadlines for filing financial statements
The term for publication of the financial statements has been reduced from 13 to 12 months of the relevant financial year end. It is obligatory for the (public or private) limited-liability company’s executive management to ensure that the financial statements should be prepared and made available for (shareholder) inspection within a five-month term of the financial year end. The six-month extension period as per the old regime has been reduced to five months for limited-liability companies and from five to four months for foundations, societies, cooperative associations and mutual benefit associations. The four-month publication term for listed companies has not changed.

Legal entities: size criteria
The obligations pertaining to the financial statements, the management report, the other information and the audit apply to all large-sized legal entities. A mitigated regime has been introduced for micro-enterprises. The thresholds for qualifying as a small or medium-sized legal entity have been raised.

Micro-Enterprise
Two to three of the following criteria need to be satisfied in order for a business to qualify as a micro-enterprise:

• the value of the business’ assets should not exceed € 350,000.00;
• net turnover for the financial year should not exceed € 700,000.00;
• the business should on average have employed fewer than ten employees during the financial year.

Rather than having to prepare a detailed balance sheet, detailed profit and loss account, detailed explanatory notes to the balance sheet and elaborate management report and having to have their financial statements audited by a (chartered) accountant, micro-enterprises may limit themselves to producing a concise balance sheet.

Small enterprise
Two to three of the following criteria need to be satisfied in order for a business to qualify as a small enterprise:

• the value of the business’ assets should not exceed € 6,000,000.00 (increased from € 4,400,000.00);
• net turnover for the financial year should not exceed € 12,000,000.00 (increased from € 8,800,000.00);
• the business should on average have employed fewer than 50 employees during the financial year.

Medium-sized enterprise
Two to three of the following criteria need to be satisfied in order for a business to qualify as a small enterprise:

• the value of the business’ assets should not exceed € 20,000,000.00 (increased from € 17,500,000.00);
• net turnover for the financial year should not exceed € 40,000,000.00 (increased from € 35,000,000.00);
• the business should on average have employed fewer than 250 employees during the financial year.

Large enterprise
Two to three of the following criteria need to be satisfied in order for a business to qualify as a small enterprise:

• the value of the business’ assets should not be less than € 20,000,000.00 (increased from € 17,500,000.00);
• net turnover for the financial year should not be less than € 40,000,000.00 (increased from € 35,000,000.00);
• the business should on average have employed no fewer than 250 employees during the financial year.

Under the new regime the restrictions governing the number of supervisory duties to be performed by executive and non-executive directors of large enterprises will apply less easily as a result of the thresholds for qualification as a large enterprise having been raised.

Amended regime to apply to financial years from first of January 2016 onwards
The amended regime is to apply to financial statements and management reports for financial years whose date of commencement concurs with or postdates the first of January 2016, albeit that it is permissible also to apply them to financial years with an earlier date of commencement than 01 January 2016.