The Role and Current Status of IFRS in the Completion of National Accounting Rules – Evidence from Denmark

Abstract

I analyse the influence of IFRS on the Danish accounting regulation based on the EU Accounting Directive. In Denmark, the EU Accounting Directive is brought into force through the Danish Financial Statements Act. The analysis shows that the provisions in the Act are aligned with the IFRS to a great extent. It also shows that the Danish legislators extensively refer to IFRS and that they consider the IFRS to be the source to use for completing the national rules. I additionally show that the enforcers of the Danish Financial Statements Act look to the IFRS for guidance when they interpret the provisions, and that many important stakeholders have a positive attitude towards the use of IFRS for non-listed companies. The conclusion is that IFRS standards play a decisive role and have strong legitimacy in Denmark.

Keywords:

• IFRS
• EU Accounting Directive 2013/34/EU
• harmonisation
• Denmark

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes

1 The Danish Business Authority is an agency under the Ministry of Business entrusted with certain dedicated and administrative tasks. The Danish Business Authority’s mission is to make it easy and attractive to establish and conduct business activities throughout Denmark. One important task is to participate in the legislative process and prepare draft legislation within the business area. Another is to be involved in the governmental supervision and enforcement of regulations within the business area.

2 The Danish Organisation of approved auditors (‘FSR – Danske Revisorer’) has issued accounting standards for small and medium-sized entities. However, no legislative power has been delegated to the organisation, and the accounting standards hence have no formal status.

3 The classification is based on an entity not exceeding two out of three of the following thresholds in two consecutive financial years (total assets/net revenue/number of employees): Micro (3.6/7.2/10), Small (5.9/11.9/50) and Medium (20.8/41.7/250). Total assets and net revenue in million Euros converted from DKK to Euros using an exchange rate of 7.5 DKK/Euro.

4 The TV transmitted hearing can be seen here: http://www.ft.dk/webtv/video/20131/eru/tv.2670.aspx?from=10-04-2015&to=10-04-2015&selectedMeetingType=&committee=-1&as=1#player.

5 The draft bill with the legislators’ remarks is available here: http://www.ft.dk/RIpdf/samling/20141/lovforslag/L117/20141_L117_som_fremsat.pdf.

6 The comment letters can be found here: http://www.ft.dk/samling/20141/lovforslag/l117/bilag/1/1490262.pdf

7 The Danish Chamber of Commerce (‘Dansk Erhverv’) is a business organisation and employers’ association representing 17,000 companies and 100 trade organisations within commerce and other areas.

8 DI is a trade organisation and an employers’ association that represents 10,000 member companies.

9 The Danish Bankers Association is a professional organisation representing the banks in Denmark.