Accounting in Another Country: The Netherlands

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History

The basic history of accounting backs with the advert of accounting start. Initially it was just a minute assessment and the same should have been treated similar to ordinary and normal books of the moment and examined and then vanished into chronological archives and vanished through minds.

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This was in 1494, Columbus discovered America just two years before that. It was devised that the successful merchant requires these three things:

  • sufficient level of cash or credit,
  • a proper accounting and reporting system that reveals what you are doing, and
  • some good bookkeeper manuals to operate it.

This led to invention of double-entry bookkeeping system. This let to the making of whole system along with trial balance, balance sheet and profit & loss statement.

When these were devised this led to some standards that have to be kept to report the issues to and to have a standard to report them resulting in creation of accounting boards. In year1973 the Financial Accounting Standards Board (FASB) replaced APB, and is the widely accepted body these days.

The Netherlands law, management board for each legal entity is required to maintain books of financial statements for the financial situation of such entity in such a way that the privileges and obligations can be identified and the reform at any particular time: these are enough bookkeeping obligation. Violation for the same would result in heavy liability.

Unless and until the legal entity is the base, management should compile annual accounts and an annual report to conform to the legal requests. Exceptions are for private limited companies.

Current Issues

Financial reporting has seen some exceptional modernisation in the Netherlands during some time. But this is facing issues like off balance sheet financing, accounting for complex capital issues and accounting for brand names these have become matter of substantial problem, these are the some if the very important issues with which the accounting setting boards have to be dealt with.

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Some of the innovation in financial reporting has also creates problems that have to be dealt with due to the fact that these principles tend to contradict with standardisation.

Some new type of contract, Merger accounting, demerger accounting, creative accounting, finance leases and creating problems as some portions of them are not included in the standards. These have created problem because the existing systems have not kept up to the latest developments.

Framework

Dutch Accounting Standard Board uses its own conceptual framework, which is a some what a translation of International Accounting Standard Board, as a guidance to draft new or revised DASB GAAP. The Dutch Accounting Standard Board is basically a reference point for compilers of statements in absence of some specific guidelines. The requirements for the specified transaction is are that to be in harmony with their respective substance, rather than their own legal form. Equity holders are to be considered carefully in determining the accounting transactions. While there are no specific guidelines, in practice Dutch GAAP is not applied to items that are immaterial like IFRS.

Accounting Standards

“The terminologies GAAP (principles) along with GAAP (practices) aren’t defined individually and initially in Netherlands.

As an alternative, Netherlands accounting system is worn to indicate the organisation of practice formulating the basis for shaping what denotes to be a true and fair view.

Accounting practices are formulated on accounting regulations that are laid down. The law that is included in Volume 2 for the Netherlands Civil Code (CC) makes initial level.

Additionally, jurisprudence is made from the verdicts of the Enterprise Chamber; additionally there is a special Chamber of the Court for Justice in the capital of Netherlands.

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Secondly the level involves Council for Annual Reporting (CAR).

This Council has some Guidelines on Annual Reporting (GAR) but it has a lower position than regulation, Council is formed by trade unions, representatives of employers, financial analysts along with auditors, these guiding principle are applied throughout the Netherlands”. (KPMG, 2003) GAAP

Elements of Financial Statements in UK GAAP

  1. Balance sheet;
  2. Income statement;
  3. A statement of changes in equity, or a statement of recognised gains and losses;
  4. Statement of cash flows; and
  5. Notes to the financial statements, including accounting policies. (KPMG, 2003) GAAP

Elements of Financial Statements in DASB GAAP

  1. No statement of the recognised gains and losses required, or the statement of changes in the equity, is necessary as a primary statement.
  2. Generally only huge enterprises do prepare a statement of cash flows.
  3. The exemptions pertaining from preparation of consolidated financial statements are much broader than under IAS. (KPMG, 2003) GAAP

Policies

The requirement for presenting primary financial statements and accounting policies is like IFRS, except the change of owner equity is not required in consolidation. The cash flow and income statement are not required by all reporting companies. These things can be given in notes to the financial statements. An entity is required to present financial statement in consolidated way unless certain criteria are met. Parent entity is required to present the financial statements in full.

Taxation

Non monetary assets are not required to recognize deferred tax arising from the revaluation. Taxable temporary variance from an assets revaluation is ignored, for assessing the recoverability for deferred tax asset. Deferred taxation in cases can be discounted. Presentation in balance sheet for the same is in current asset. Income tax is more or less the same as UK GAAP.

Conclusion

Despite there are some important similarities in standards, but there be some major differences among Netherlands and U.K. this is for legal reporting requirement, compliance mechanisms, accounting standards, along with financial systems.

Regulation in the Netherlands is much less scrupulous than US and UK.

“Britain reveals additional characters of absolute capital-market-based financial structure along with wider extend of corporations that are not pressured by foremost corporation and are an vigorous market for commercial controlling.

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It’s fact that there is a strong capital market in Netherlands having substantial protector offered in the compilation of equity resources that puts off an vigorous market for commercial controlling.

Code of corporate governance system is shareholder-orientated in U.K. and stakeholder oriented in The Netherlands.

In lieu of the given above difference expectation from DASB was that of some what more broad revelation to be made for meeting the necessities of European Union Directives need to be revealed in annual reports of the United Kingdom companies than their Netherland counterpart”. (Camfferman, 1997)

References

Camfferman, K. 1997. Voluntary Annual Report Disclosure by Listed Dutch Companies 1945-1983. New York, NY: Garland.

Hossain, M., L. M. Tan, and M. Adams. 1994. Voluntary disclosure in an emerging capital market: Some empirical evidence from companies listed on the Kuala Lumpur stock exchange. International Journal of Accounting 29: 334-351.

KPMG, IAS compared with US GAAP and Dutch, 2003 GAAP. Web.

Post, H., C. Wilderom, and S. Douma. 1998. Internationalization of Dutch accounting firms. The European Accounting Review 7 (4): 697-707.

Thorell, P., and G. Whittington 1994. The harmonization of accounting within the EU: Problems, perspectives and strategies. The European Accounting Review 3 (2): 215-239.

Van Hulle, K. 1981. The EEC accounting directives in perspective: A view from the European community. The European Accounting Review 1: 161-72.

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BusinessEssay. 2022. "Accounting in Another Country: The Netherlands." February 9, 2022. https://business-essay.com/accounting-in-another-country-the-netherlands/.

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BusinessEssay. "Accounting in Another Country: The Netherlands." February 9, 2022. https://business-essay.com/accounting-in-another-country-the-netherlands/.