On 1 November 2015 the Directive on the Annual Accounts Implementation Act (the “Implementation Act”) entered into force in the Netherlands. The Implementation Act implements directive 2013/34/EU on the annual accounts (the “Directive”) and amends book two of the Dutch Civil Code and several other acts.

The Directive aims at modernising, simplifying and harmonising accounting law and reducing its administrative burden. In addition, it provides new rules on the disclosure of payments to governments by undertakings active in the extractive industry or logging of primary forests.

The most significant consequences resulting from the Implementation Act are:

Changes regarding the structure of the annual accounts

The Implementation Act amends the rules governing write-offs. Intangible assets will no longer include research costs. Furthermore, the maximum period over which development costs and goodwill are to be written off will be set at ten years. Goodwill may no longer be written off against equity or written off at once against results.

Annual report will be named management report 

The Implementation Act replaces the term “annual report” with “management report”, the term more commonly used in practice.  

The auditor's examination of the management report will be expanded. The auditor will need to verify whether the management report, in light of the knowledge and understanding of the undertaking and its environment obtained in the course of the audit, contains material misstatements. Neither the Directive nor the Implementation Act clarifies the meaning of “material misstatements”.

Reduction of time limits for publication of annual accounts by one month

The Implementation Act reduces the timeframe for publishing annual accounts to 12 months from the end of the financial year. Previously, the period was 13 months.  

The management boards of public companies ("NV's") and private companies with limited liability ("BV's") must prepare annual accounts and make these available for inspection within five months from the end of the financial year. The Implementation Act reduces the extension period to five months, down from six months under the previous law.

The management boards of foundations, associations, cooperatives and mutual insurance companies must prepare annual accounts and make these available for inspection within six months from the end of the financial year. The Implementation Act reduces the extension period to four months, down from five months under the previous law.

Listed companies will remain subject to a reduced term for publication of four months.  

Exemptions 

The obligations with respect to annual accounts, management reports, additional information and audits apply to all NVs, BVs, commercial foundations and associations, cooperatives and mutual insurance companies, but not to the so-called 'small' and 'medium-sized' legal persons. 

A light reporting regime will be introduced for micro-undertakings and the thresholds for qualification as a 'small' or medium-sized' legal person will be increased based on the categories and requirements set out below:  

Micro-undertaking  

A legal person qualifies as a micro-undertaking if it meets two or three of the following requirements:

  • the value of the assets according to the balance sheet and explanatory notes amounts to not more than EUR 350,000;
  • the net turnover for the financial year amounts to not more than EUR 700,000;
  • the average number of employees during the financial year is less than ten.

Micro-undertakings are exempt from, inter alia, the obligation to prepare an extensive balance sheet, extensive profit and loss accounts, an explanation of the balance sheet, a management report and the obligation to have the annual accounts audited by an auditor. Micro-undertakings must only publish an abridged balance sheet.  

Small legal person

A legal person qualifies as a small legal person if it meets two or three of the following requirements:

  • the value of the assets according to the balance sheet and explanatorynotes amounts to not more than EUR 6,000,000 (previously EUR 4,400.000);
  • the net turnover for the financial year amounts to not more than EUR 12,000,000 (previously EUR 8,800,000);
  • the average number of employees during the financial year is less than 50.

The exemptions remain unchanged.

Medium-sized legal person

A legal person qualifies as a medium-sized legal person if it meets two or three of the following requirements:

  • the value of the assets according to the balance sheet and explanatory notes amounts to not more than EUR 20,000,000 (previously EUR 17,500,000);
  • the net turnover for the financial year amounts to not more than EUR 40,000,000 (previously EUR 35,000,000);
  • the average number of employees during the financial year is less than 50.

The exemptions remain unchanged.  

Large legal person

A legal person qualifies as a large legal person if it meets two or three of the following requirements:

  • the value of the assets according to the balance sheet and explanatory notes amounts to at least EUR 20,000,000 (currently EUR 17,500,000);
  • the net turnover over the financial year amounts to at least EUR 40,000,000 (currently EUR 35,000,000);
  •  the average number of employees during the financial year is at least fifty.

Increase of the thresholds for qualification as a large legal person has an affect on restrictions on the number of supervisory offices that may be held by managing directors and supervisory directors of NV's, BV's and foundations that qualify as large legal persons. As such legal persons are less likely to qualify as large legal persons, there will be more room for additional positions.  

Disclosure of payments to governments 

In order to enhance transparency of payments made to governments, large undertakings and public-interest entities which are active in the extractive industry or the logging of primary forests will be obliged to prepare and publish a report or a consolidated report on payments they make to governments in countries where they operate (country-by-country reporting). Such payments include, inter alia, payments for production entitlements, taxes and royalties.This obligation is separate from the annual accounts and the management report. However, the report is to be published in the same manner as the annual accounts, i.e. within twelve months after the end of the financial year and by deposit at the offices of the trade register.  

Public-interest entities

Exemptions for legal persons which qualify as micro-undertaking, small legal persons or medium-sized legal persons will no longer be available for public interest entities, such as security-issuing institutions, banks and insurers. The same applies to the exemption for group companies from the obligation to prepare extensive annual accounts if the principal holding company has assumed liability for debts of the group company.

Principal holding companies which prepare consolidated annual accounts may, by making use of an exemption for the individual annual accounts, reduce the profit and loss accounts to results from participating interests. This exemption will not be available for public interest entities.

The exemptions from the obligation to consolidate for small groups will no longer be available for insurers and banks.

Changes to apply to the financial years commencing on or after 1 January 2016  

The terms of the Implementation Act will apply to annual accounts and management reports for financial years whichcommence on or after 1 January 2016. However, such terms may be applied to annual accounts and management reports for the financial years which commenced prior to 1 January 2016.

Therefore, annual accounts for financial years which commenced prior to 1 January 2016 must be published no later than thirteen months from the end of the financial year. Annual accounts for financial years which commenced on or after 1 January 2016 will be subject to the reduced period of twelve months, regardless of whether or not the articles of association refer to the current period of thirteen months.