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

Abstract

In this paper, the influence of IFRS on Swedish national accounting rules is analyzed. The lawmaker’s and standard setters’ response to EU Accounting Directive 2013/34/EU is studied, as well as the use of IFRS in enforcement. The conclusion is that IFRS have a strong position and legitimacy in Swedish financial reporting.

Keywords:

• Sweden
• EU Accounting Directive 2013/34/EU
• IFRS
• SME

Disclosure Statement

No potential conflict of interest was reported by the author.

ORCID

Jan Marton http://orcid.org/0000-0002-6557-7981

Notes

1 RFR has eight members. Four represent preparers, three are from the accounting profession, and one represents users (financial analysts). The work of RFR is supported by a permanent technical expert group. Sponsoring organizations, who also finance the work of RFR, include Nasdaq OMX Stockholm (the main stock exchange), as well as associations for the accounting profession, listed firms, banks, insurance companies, and stock brokers.

2 BFN has eleven members. They come from the accounting profession, industry, academia, and government authorities such as the tax authority, the economic crime authority, judges from the court system, and the ministry of finance.

3 It may seem paradoxical that BFN chooses to use IFRS for SME for firms that apply K3, i.e. large firms. This is based on the idea that IFRS for SME is suitable for entities without public accountability, regardless of size. In addition, as noted, in Sweden the term ‘large’ encompasses both ‘large’ and ‘medium-sized’ entities as defined in Directive 2013/34/EU.

4 Two court cases about revenue recognition are used as examples. The first case (reference number RÅ 2003 not. 127) involves a long-term service contract. A firm received payment in advance for the obligation to provide port-related services over a period of 50 years. The tax authority considered the amount to be taxable income in year 1, while the firm wanted to apportion income over 50 years. Based on implicit reasoning from IAS 18, the court decided that revenue should be recognized over the time period when services are rendered, i.e. over 50 years. In a different case (reference number RÅ 2002 ref. 84), a farmer received payment in advance for letting an energy company put a windmill on the land for 25 years. The tax authority wanted the amount to be taxable income in year 1, while the farmer claimed this was taxable over a 25-year period. The court implicitly based its discussion on IAS 18, focusing on the issue of whether any future service performance was required by the farmer. The court decided that giving somebody the right to have a windmill on the land is viewed as a rental agreement, and therefore constitutes a continuous performance so that revenue should be recognized over a 25-year period.