Royal Decree of 5 December 2016 amending the Royal Decrees on the annual accounts of credit institutions, investment firms, management companies of collective investment undertakings, and insurance and reinsurance undertakings

FEDERAL PUBLIC SERVICE ECONOMY, S.M.E., MIDDLE CLASS AND ENERGY [C − 2017/20167] 5 DECEMBER 2016. — Royal Decree amending the Royal Decrees on the annual accounts of credit institutions, investment firms, management companies of collective investment undertakings and insurance and reinsurance undertakings

REPORT TO THE KING

Sire,

The Decree submitted to Your signature for approval aims to make various amendments to the Royal Decree of 23 September 1992 on the annual accounts of credit institutions, investment firms and management companies of collective investment undertakings (hereinafter 'Decree of 23 September 1992') and to the Royal Decree of 17 November 1994 concerning the annual accounts of insurance and reinsurance undertakings (hereinafter 'Decree of 17 November 1994').

The amendments to the aforementioned Decrees proposed to You first aim to bring these Decrees into compliance with the provisions of Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (hereinafter 'Directive 2013/34/EU'). Subsequently, this opportunity is also used to adapt certain provisions of the aforementioned Decrees that need to be updated.

Updating of the Decrees

To update the Decrees, various amendments are proposed. In the Decree of 23 September 1992, the reference to the repealed Act of 22 March 1993 on the status and supervision of credit institutions was replaced by the reference to the corresponding provision in the Act of 25 April 2014 on the status and supervision of credit institutions. In the same way, the reference to the Act of 20 July 2004 concerning certain forms of collective management of investment portfolios was replaced by the corresponding provisions of the Act of 3 August 2012 concerning collective investment undertakings meeting the conditions of Directive 2009/65/EC and investment undertakings in debt claims and the Act of 19 April 2014 concerning alternative investment undertakings and their managers. Furthermore, in this Decree, references to the repealed Act of 17 July 1975 concerning the accounting of undertakings were replaced by the corresponding provisions in the Code of Economic Law. The same applies to the references to the coordinated laws on commercial companies included in this Decree, which were replaced by references to the corresponding provisions of the Companies Code. An incorrect translation in the Dutch text of this Decree was also corrected.

Amendments were subsequently made to the Decrees of 23 September 1992 and 17 November 1994 to replace outdated concepts with the correct, updated concepts. Thus, the concepts of 'bridge pensions' and 'bearer shares' were replaced in both Decrees by the concepts of 'unemployment with occupational supplement' and 'dematerialized shares'.

Transposition of Directive 2013/34/EU

Regarding the transposition of Directive 2013/34/EU, it should first be noted that this Directive has formed the basis of European financial reporting law (formerly known as annual accounts law) since its entry into force. The former Fourth Directive 78/660/EEC of the Council of 25 July 1978 concerning the annual accounts of certain types of companies (hereinafter 'Directive 78/660/EEC') and the Seventh Directive 83/349/EEC of the Council of 13 June 1983 concerning the consolidated annual accounts (hereinafter 'Directive 83/349/EEC'), which before the entry into force of Directive 2013/34/EU formed the basis of European financial reporting law, were repealed by Directive 2013/34/EU.

Due to their specific nature, the European financial reporting requirements for, on the one hand, credit institutions and other financial institutions, and, on the other hand, insurance undertakings, are supplemented by additional specific European regulations. For credit institutions, these specific regulations are laid down in Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions. For insurance undertakings, the specific regulations are laid down in Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings. These specific regulations always take precedence over the provisions of Directive 2013/34/EU in the event of incompatibility or contradiction. This principle is also explicitly included in the seventh recital of Directive 2013/34/EU.

The amendments intended to integrate the new financial reporting requirements included in Directive 2013/34/EU into Belgian annual accounts law for institutions and undertakings first concern the principle of the prohibition of offsetting. This principle states that offsetting or netting off assets or liabilities, rights and obligations, and expenses and income included in the annual accounts is in principle always prohibited. This possibility can only be used when offsetting is expressly permitted. Article 6, second paragraph, of Directive 2013/34/EU now stipulates that institutions or undertakings that proceed to offsetting or netting in cases where offsetting or netting is expressly permitted must state the amounts to be offset as gross amounts in the notes to the annual accounts. The Decree submitted to You amending the Decrees of 23 September 1992 and 17 November 1994 aims to integrate this new obligation into these Decrees.

It is then also possible that an asset or liability item, or an expense or income, can be included under several headings in the balance sheet or in the income statement. In such cases, the asset or liability item, or the expense or income, must be included under the heading that is most suitable in the light of the principle of a true and fair view. Article 12, first paragraph, of Directive 2013/34/EU now stipulates that in such cases the link with the other headings must be stated in the notes. The provisions included in the present Decree meet this requirement.

In Article 12, twelfth paragraph, of Directive 2013/34/EU it is clarified that a provision recorded at the balance sheet date must represent the best estimate of the costs considered likely or, in the case of an obligation, the best estimate of the amount required to meet that obligation at the balance sheet date. The present Decree makes the same clarification in the Decrees of 23 September 1992 and 17 November 1994.

Directive 2013/34/EU also has consequences for the accounting treatment of research costs. These costs can no longer be capitalized. The present Decree makes the necessary amendments to the Decrees of 23 September 1992 and 17 November 1994 to comply with this requirement.

The present Decree also makes amendments to the depreciation regime of capitalized development costs and goodwill. Directive 2013/34/EU stipulates in Article 12, eleventh paragraph, second paragraph, that development costs and goodwill must in principle always be depreciated over their useful life. When this useful life cannot be estimated with certainty in exceptional cases, these assets must be depreciated over a maximum period to be determined by the Member States of at least five years and at most ten years. The present Decree sets this maximum period at ten years. The period over which goodwill is depreciated must also be explained in the notes to the annual accounts. Depreciation and impairment of goodwill are not reversed.

Finally, Directive 2013/34/EU also requires that institutions and undertakings include additional information in the notes to the annual accounts so as to ensure that the recipients of the annual accounts are properly informed about their financial position.

Thus, the present Decree introduces a new note on the relationships of institutions and undertakings with associated undertakings within the meaning of Article 12 of the Companies Code. This note meets the requirement of Article 16, first paragraph, d), of Directive 2013/34/EU which stipulates that financial obligations not included in the balance sheet and incurred by the institution or undertaking towards associated undertakings must be stated separately in the notes. The present Decree, however, goes further than what is strictly required by Directive 2013/34/EU. Institutions and undertakings are not only asked to state their obligations towards associated undertakings that are not included in the balance sheet, but they must also provide additional information about their relationships with these associated undertakings (such as the amount of financial fixed assets, the amount of receivables and payables, the amount of personal and commercial guarantees and other significant financial obligations).

Institutions and undertakings must also include a new note in which they must provide information on the nature and financial impact of material events that occurred after the balance sheet date and which are not reflected in the income statement or the balance sheet. This note is imposed by Article 17, first paragraph, q), of Directive 2013/34/EU.

Directive 2013/34/EU also expands the information that institutions and undertakings must provide about their financial relationships with their directors and managers. Whereas institutions and undertakings previously only had to communicate the amount at the end of the financial year regarding the receivables of the institutions or undertakings towards their directors or managers, any liabilities in their favor and for other significant obligations incurred in their favor, they must now, pursuant to Article 16, first paragraph, e), of Directive 2013/34/EU, provide the following information: the amount at the end of the financial year of receivables outstanding to directors and managers, as well as guarantees allowed in their favor and other significant obligations incurred in their favor, with indication of the interest and the duration of these receivables, the main conditions and any repaid amounts or amounts waived.

Finally, Directive 2013/34/EU stipulates in Article 6, first paragraph, j), that the general rules of this Directive regarding the recognition, measurement, presentation and disclosure of information need not be complied with if the effect of compliance is not material. Article 6, fourth paragraph, of Directive 2013/34/EU, however, stipulates that Member States may limit the application of the materiality principle referred to in the previous sentence to the presentation of the financial statements and the disclosure of information. You are proposed to make use of this option for Member States and not to introduce the materiality principle for the recognition and measurement of information in the annual accounts. Given the importance for the financial system of the institutions and undertakings falling within the scope of the Decrees of 23 September 1992 and 17 November 1994, it is desirable to subject these institutions and undertakings to the widest financial reporting obligations.

Furthermore, Directive 2013/34/EU has an impact on the accounting treatment of research costs. Henceforth, these costs can no longer be capitalized. The present Decree makes the necessary amendments to the Decrees of 23 September 1992 and 17 November 1994 to satisfy this prescription.

The present Decree also aims to modify the depreciation regime of goodwill and capitalized development costs. Directive 2013/34/EU indeed provides in its Article 12, paragraph 11, paragraph 2, that development costs as well as goodwill must in principle be amortized over their useful life. In exceptional cases, when the useful life cannot be estimated reliably, these assets must be amortized over a maximum period fixed by the Member State. This maximum period cannot be less than five years and cannot exceed ten years. The present Decree sets this maximum period at ten years. In addition, an explanation of the amortization period of goodwill must be provided in the notes to the annual accounts. Amortizations and value reductions on goodwill are not reversed.

Finally, Directive 2013/34/EU also requires that establishments and companies provide additional information in their annual accounts in order to allow the recipients of the annual accounts to be well informed of their financial situation.

Thus, the present Decree introduces a new note concerning the commitments of establishments and companies towards associated companies within the meaning of Article 12 of the Companies Code. This note meets the requirements of Article 16, paragraph 1, point d), of Directive 2013/34/EU, which provides that financial commitments not included in the balance sheet and which have been contracted by the establishments or companies towards associated companies, must be mentioned separately in the note. The present Decree, however, goes further than what is strictly required by Directive 2013/34/EU. Establishments and companies are not only required to mention in the note the commitments not included in the balance sheet that they have contracted towards associated companies, but also to provide additional information concerning their commitments contracted towards these associated companies (such as the amount of financial fixed assets, the amount of debts and receivables, the amount of personal or real guarantees as well as other significant financial commitments).

Establishments and companies are furthermore required to include a new note providing information concerning the nature and financial impact of significant events subsequent to the balance sheet date which are not taken into account in the income statement or in the balance sheet. These additional information are required pursuant to Article 17, paragraph 1, point q), of Directive 2013/34/EU.

Directive 2013/34/EU also establishes that establishments and companies must provide more extensive information concerning financial commitments taken towards their administrators and managers. Whereas, in the past, establishments and companies were only required to communicate the amount at the end of the financial year concerning the receivables of establishments and companies towards their administrators or managers, the possible liabilities in their favor and the other significant commitments contracted in their favor, they are now required, pursuant to Article 16, paragraph 1, point e), of Directive 2013/34/EU, to provide the following information: the amount at the end of the financial year of the outstanding receivables on administrators and managers as well as the guarantees granted in their favor and the other significant commitments contracted in their favor, with indication of the interest rate and the duration of these receivables, the main conditions and any repaid amounts or amounts waived.

Finally, Directive 2013/34/EU stipulates in Article 6, first paragraph, j), that the general rules of this Directive regarding recognition, measurement, presentation and disclosure of information need not be complied with if the effect of compliance is not material. Article 6, fourth paragraph, of Directive 2013/34/EU, however, stipulates that Member States may limit the application of the materiality principle referred to in the previous sentence to the presentation of the financial statements and the disclosure of information. You are proposed to make use of this option for Member States and not to introduce the materiality principle for the recognition and measurement of information in the annual accounts. Given the importance for the financial system of the establishments and companies falling within the scope of the Decrees of 23 September 1992 and 17 November 1994, it is indeed desirable to subject these establishments and companies to the widest financial reporting obligations.

BELGIAN GAZETTE — 17.02.2017 − Ed. 2 — BELGISCH STAATSBLAD 25061