Keywords
Summary

Keywords

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Freedom of movement for persons ° Freedom of establishment ° Companies ° Directive 78/660 ° Annual accounts of certain types of companies ° Principle of the true and fair view ° Requirement that only profits made at the balance-sheet date may be included ° Circumstances of the case

(Council Directive 78/660, Art. 31(1)(c)(aa))

Summary

In order to coordinate the content of annual accounts, the Fourth Directive 78/660 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies, as amended by the Seventh Directive 83/349 on consolidated accounts, lays down the principle of the "true and fair view", compliance with which is the primary objective of that directive. Application of that principle must, as far as possible, be guided by the general principles contained in Article 31 of the directive, particularly in Article 31(1)(c), (aa) and (bb), and (d). It is clear from those provisions that taking account of all elements which actually relate to the financial year in question ensures observance of the principle of a true and fair view.

Where

° one company (the parent company) is the sole shareholder in another company (the subsidiary), and controls it,

° under national law, the parent company and the subsidiary form a group,

° the financial years of the two companies coincide,

° the subsidiary' s annual accounts for the financial year in question were adopted by the general meeting before completion of the audit of the parent company' s annual accounts for that year,

° the subsidiary' s annual accounts for the financial year in question, as adopted by its general meeting, show that on the subsidiary' s balance-sheet date ° namely the last day of that financial year ° the subsidiary appropriated profits to the parent company, and

° the national court is satisfied that the subsidiary' s annual accounts for the financial year in question give a true and fair view of its assets and liabilities, financial position and profit or loss,

it is not contrary to the rule laid down in Article 31(1)(c)(aa) of the directive ° according to which, for the purpose of valuing the items shown in the annual accounts, only profits made at the balance-sheet date may be included ° for the national court to consider that the profits in question must be entered in the parent company' s balance sheet for the financial year in respect of which they were appropriated by the subsidiary.