Skip to main content Skip to navigation


<?xml version="1.0"?>

<!DOCTYPE TEI.2 SYSTEM "base.dtd">





<publicationStmt><distributor>BASE and Oxford Text Archive</distributor>


<availability><p>The British Academic Spoken English (BASE) corpus was developed at the

Universities of Warwick and Reading, under the directorship of Hilary Nesi

(Centre for English Language Teacher Education, Warwick) and Paul Thompson

(Department of Applied Linguistics, Reading), with funding from BALEAP,

EURALEX, the British Academy and the Arts and Humanities Research Board. The

original recordings are held at the Universities of Warwick and Reading, and

at the Oxford Text Archive and may be consulted by bona fide researchers

upon written application to any of the holding bodies.

The BASE corpus is freely available to researchers who agree to the

following conditions:</p>

<p>1. The recordings and transcriptions should not be modified in any


<p>2. The recordings and transcriptions should be used for research purposes

only; they should not be reproduced in teaching materials</p>

<p>3. The recordings and transcriptions should not be reproduced in full for

a wider audience/readership, although researchers are free to quote short

passages of text (up to 200 running words from any given speech event)</p>

<p>4. The corpus developers should be informed of all presentations or

publications arising from analysis of the corpus</p><p>

Researchers should acknowledge their use of the corpus using the following

form of words:

The recordings and transcriptions used in this study come from the British

Academic Spoken English (BASE) corpus, which was developed at the

Universities of Warwick and Reading under the directorship of Hilary Nesi

(Warwick) and Paul Thompson (Reading). Corpus development was assisted by

funding from the Universities of Warwick and Reading, BALEAP, EURALEX, the

British Academy and the Arts and Humanities Research Board. </p></availability>




<recording dur="01:15:06" n="9419">


<respStmt><name>BASE team</name>



<langUsage><language id="en">English</language>

<language id="es">Spanish</language>

<language id="el">Greek, Modern</language>

<language id="de">German</language>

<language id="it">Italian</language>

<language id="fr">French</language>



<person id="nm1112" role="main speaker" n="n" sex="m"><p>nm1112, main speaker, non-student, male</p></person>

<person id="su1113" role="participant" n="s" sex="u"><p>su1113, participant, student, unknown sex</p></person>

<person id="su1114" role="participant" n="s" sex="u"><p>su1114, participant, student, unknown sex</p></person>

<person id="su1115" role="participant" n="s" sex="u"><p>su1115, participant, student, unknown sex</p></person>

<person id="sm1116" role="participant" n="s" sex="m"><p>sm1116, participant, student, male</p></person>

<person id="sm1117" role="participant" n="s" sex="m"><p>sm1117, participant, student, male</p></person>

<person id="sf1118" role="participant" n="s" sex="f"><p>sf1118, participant, student, female</p></person>

<person id="sf1119" role="participant" n="s" sex="f"><p>sf1119, participant, student, female</p></person>

<person id="sf1120" role="participant" n="s" sex="f"><p>sf1120, participant, student, female</p></person>

<person id="sm1121" role="participant" n="s" sex="m"><p>sm1121, participant, student, male</p></person>

<personGrp id="ss" role="audience" size="s"><p>ss, audience, small group </p></personGrp>

<personGrp id="sl" role="all" size="s"><p>sl, all, small group</p></personGrp>

<personGrp role="speakers" size="12"><p>number of speakers: 12</p></personGrp>





<item n="speechevent">Lecture</item>

<item n="acaddept">Economics</item>

<item n="acaddiv">ss</item>

<item n="partlevel">UG3/PG</item>

<item n="module">unknown</item>




<u who="nm1112"> let's make a start </u><u who="su1113" trans="latching"> <gap reason="inaudible" extent="1 sec"/></u><u who="nm1112" trans="latching"> if there's any <pause dur="0.9"/> please look at them later all right and we will go through them <pause dur="0.8"/> okay well welcome to the second term of this course <pause dur="1.6"/> # <pause dur="1.4"/> this <trunc>cour</trunc> this part of the course as i mentioned to you last term <pause dur="0.3"/> is concerned mainly with <pause dur="0.2"/> <trunc>con</trunc> convergence last last term we looked at <pause dur="0.8"/> how <pause dur="0.2"/> accounting systems were different <pause dur="1.1"/> we looked at France and Germany and the Netherlands and so forth to see how the financial reports are different <pause dur="0.2"/> this term we're looking particularly at <pause dur="0.5"/> what pressures there are or have been in the world <pause dur="0.7"/> to make <pause dur="0.4"/> accounting comparable between different countries <pause dur="1.1"/> and we're going to do this in two stages first of all we're going to look at <pause dur="0.9"/> the process of trying to harmonize accounting <pause dur="0.2"/> within Europe <pause dur="1.3"/> and that process has effectively ended so we're really dealing with history <pause dur="1.4"/> and then <gap reason="name" extent="1 word"/> is going to talk to you about current issues in <pause dur="0.5"/> <trunc>s</trunc> bringing accounting systems together which is <pause dur="0.2"/> through the work of the I-F-C <pause dur="0.3"/> and you'll have that in

two weeks time <pause dur="0.5"/> and you've already had a lecture with him <pause dur="0.8"/> so <pause dur="0.2"/> i'm going to spend this week and next week <pause dur="0.2"/> looking at the European Union <pause dur="0.2"/> harmonization process <pause dur="1.4"/> because it has <pause dur="0.9"/> many # <pause dur="0.2"/> points i think that are important for the future about relative success and failure <pause dur="1.7"/> # <pause dur="0.8"/> and what we're going to do is it's going to be excruciatingly boring <pause dur="0.7"/> is we're going to <event desc="student enters room" n="su1114" iterated="n"/> come in we're going to look <pause dur="0.7"/> at <pause dur="1.5"/> two of the main instruments of harmonization <pause dur="0.7"/> within Europe <pause dur="0.9"/> the first is something called the Fourth Directive which i'm going to look at this week <pause dur="0.7"/> and the second is the Seventh Directive that i'll look at next week and then we shall look at some developments in the European Commission <pause dur="0.8"/> # <pause dur="0.4"/> that <pause dur="0.9"/> tie pieces together <pause dur="1.0"/> right <pause dur="0.2"/> so it's not i better warn you it's not <shift feature="voice" new="laugh"/>going to be a terribly exciting <shift feature="voice" new="normal"/><pause dur="0.6"/> area but i think it's good for the soul <pause dur="0.7"/> you may find it quite interesting <pause dur="0.4"/> to see why these things <pause dur="0.5"/> have had relative success or failure <pause dur="1.1"/> right well what i want to do first is just to because i know <pause dur="0.2"/> some of some of you are not from the European Union at all <pause dur="0.6"/> some of you are <pause dur="0.6"/> from the European Union

countries <pause dur="0.6"/> # i just want to take a very simple view <pause dur="0.5"/> of what the European Union consists of <pause dur="0.9"/> and <vocal desc="cough" iterated="n"/> <pause dur="0.3"/> the first point is that <pause dur="1.3"/> it's been called various names in its history <pause dur="0.9"/> the European Communities Common Market the European Community the single market and we're now called the European Union <pause dur="0.9"/> but in its origin <pause dur="1.0"/> <kinesic desc="writes on board" dur="7" iterated="y"/> it started <pause dur="0.7"/> with a treaty <pause dur="0.4"/> signed by <pause dur="0.8"/> a small number of continental countries <pause dur="0.2"/> basically the Benelux countries <pause dur="0.4"/> France Italy <pause dur="0.2"/> and Germany <pause dur="1.4"/> who signed a Treaty of Rome <pause dur="1.8"/> and the political aspect to it was <pause dur="0.2"/> that of course it was <pause dur="0.7"/> the idea that there should be no more war in Europe <pause dur="0.2"/> after the Second World War but we're going back to nineteen-fifty-seven for that <pause dur="0.2"/> we're going some way <pause dur="1.2"/> and the original Treaty of Rome had three <pause dur="0.3"/> central economic objectives <pause dur="1.5"/> there was a political dimension but it had three <pause dur="0.3"/> basic objectives now <pause dur="0.3"/> do you know what they are <pause dur="0.3"/> what was the original idea <pause dur="0.4"/> come on you're you're from European <pause dur="0.5"/> Union countries what's the </u><u who="sm1116" trans="overlap"> <gap reason="inaudible" extent="1 word"/> energy i think <pause dur="0.3"/> <trunc>someth</trunc> something about energy </u><pause dur="0.7"/> <u who="nm1112" trans="pause"> well there was </u><u who="sm1116" trans="overlap"> <gap reason="inaudible" extent="1 word"/> steel </u><u who="nm1112" trans="latching"> yeah you're right in fact there were <trunc>t</trunc> that's why it's called communities </u><u who="sm1116" trans="latching"> yeah </u><u who="nm1112" trans="latching">

there was European Economic Community and the European Coal and Steel Community <pause dur="0.8"/> but if i take the European Economic Community what was the aim what were the three central points <pause dur="0.3"/> shh <pause dur="1.6"/> what was the three central points </u><u who="sm1117" trans="latching"> is that the <trunc>com</trunc> <pause dur="0.2"/> common policy # <pause dur="0.4"/> <gap reason="inaudible" extent="1 sec"/></u> <pause dur="4.8"/><u who="nm1112" trans="pause"> # very easy to remember honestly they all begin the word free <pause dur="2.0"/> free something <pause dur="0.3"/> free something <pause dur="0.4"/> free something <pause dur="1.6"/><shift feature="voice" new="whisp"/> come on <shift feature="voice" new="normal"/></u> <pause dur="2.7"/><u who="su1115" trans="pause"> free</u> <pause dur="0.7"/> <u who="nm1112" trans="pause"> free </u> <pause dur="0.5"/> <u who="sf1118" trans="pause"> <gap reason="inaudible" extent="4 secs"/> </u><pause dur="0.7"/> <u who="nm1112" trans="pause"> you're on the right lines the word is free trade <pause dur="0.6"/> <kinesic desc="writes on board" dur="5" iterated="y"/> it was the removal <pause dur="0.8"/> of <pause dur="0.4"/> tariff barriers <pause dur="0.5"/> and quotas between the member states that would allow free trade without restriction <pause dur="1.0"/> so that was one <pause dur="1.3"/> the second one was <pause dur="2.3"/> right i'll give you a clue <pause dur="1.3"/> what is it that underpins <pause dur="0.3"/> the fact that you are <trunc>soc</trunc> the Socrates scheme <pause dur="0.5"/> you're here studying in the U-K </u><pause dur="0.4"/> <u who="sm1116" trans="pause"> <gap reason="inaudible" extent="1 sec"/><pause dur="0.8"/> movement of <gap reason="inaudible" extent="1 word"/></u><u who="nm1112" trans="latching"> good free movement of labour <pause dur="6.4"/> <kinesic desc="writes on board" iterated="y" dur="8"/> good <pause dur="1.3"/> and there was a third one </u><pause dur="0.6"/><u who="sm1116" trans="pause"> free transportation of goods</u> <pause dur="0.5"/> <u who="nm1112" trans="pause"> no i don't know </u><u who="ss" trans="overlap"> <gap reason="inaudible, multiple speakers" extent="2 secs"/></u><u who="nm1112" trans="overlap"> well i think that comes under free trade doesn't it <pause dur="1.2"/> free <pause dur="0.6"/> movement of </u> <pause dur="2.0"/> <u who="sm1116" trans="pause"> money</u><pause dur="1.1"/> <u who="nm1112" trans="pause"> i like it <pause dur="0.2"/> yeah <pause dur="0.2"/> free movement <pause dur="1.1"/> of <pause dur="0.2"/><kinesic desc="writes on board" iterated="y" dur="4"/> capital <pause dur="1.0"/> so these were the three central <pause dur="0.7"/> ideas in <trunc>ter</trunc> economic terms before we ever had the idea of a single market

before we had the idea of a euro <pause dur="0.7"/> this was the starting point <pause dur="0.7"/> of the European Economic Community <pause dur="0.5"/> right now i want to ask you this question i want to think <pause dur="1.4"/> the European Communities later Union <pause dur="0.9"/> embarked upon a process <pause dur="0.2"/> of the harmonization of company law <pause dur="0.7"/> in the member states <pause dur="2.7"/> why <pause dur="0.9"/> how <pause dur="0.6"/> how did that they started right from the beginning <pause dur="1.9"/> what had that got to do with this <pause dur="1.0"/> why would the European Economic Community <pause dur="0.3"/> be interested in trying to bring accounting systems company law in each of the member states why would it think about <pause dur="0.9"/> bringing them together harmonizing them <pause dur="1.7"/> can you construct a rationale <pause dur="0.4"/> looking at these </u><pause dur="0.6"/> <u who="sm1117" trans="pause"> <gap reason="inaudible" extent="1 sec"/></u><pause dur="0.9"/> <u who="nm1112" trans="pause"> a bit more </u><u who="sm1117" trans="latching"> in order to <pause dur="0.4"/> come free movement of capital <pause dur="0.4"/> only for someone from England or <gap reason="inaudible" extent="1 word"/> <pause dur="0.4"/> <gap reason="inaudible" extent="1 sec"/> France and <pause dur="0.5"/> invest in France </u><pause dur="0.5"/> <u who="nm1112" trans="overlap"> <trunc>abs</trunc> </u><u who="sm1117" trans="overlap"> and share a common <pause dur="0.5"/> government system </u><pause dur="0.3"/> <u who="nm1112" trans="pause"> absolutely right <pause dur="0.5"/> the idea was this the free movement of capital was originally about <pause dur="0.4"/> <trunc>s</trunc> <pause dur="0.2"/> you know getting rid of <trunc>th</trunc> exchange control so the money flows would be free within the European Community <pause dur="0.7"/> but then it led on to the the following idea <pause dur="0.8"/> if i am somebody with some funds in the U-K <pause dur="1.1"/>

and i am thinking of investing in a company <pause dur="2.0"/> this principle <pause dur="0.2"/> should mean that there should be no barriers to my investing in a British company or French company or an Italian company <pause dur="2.3"/> however the decision about where i'm going to invest my funds is critically dependent <pause dur="0.5"/> upon the fact that the companies are comparable <pause dur="1.8"/> and that the financial information that those companies provide to me <pause dur="0.7"/> are <pause dur="0.3"/> of a kind and a nature that i can make a comparison between them <pause dur="0.7"/> to find the best investment opportunity <pause dur="2.0"/> so this argued therefore for harmonizing company law <pause dur="0.9"/> and for getting equivalent kinds of financial information for me to be able to make a decision <pause dur="0.9"/> that <pause dur="0.2"/> was in a sense a consequence of this central principle <pause dur="1.2"/> and indeed we find this idea of harmonizing company law <pause dur="0.5"/> in the Treaty of Rome <pause dur="0.3"/> <kinesic desc="writes on board" iterated="y" dur="6"/> in a very obscure section <pause dur="0.6"/> article <pause dur="0.5"/> fifty-four section three subsection G <pause dur="0.6"/> forever engraved on your hearts <pause dur="0.7"/> this is the origin <pause dur="0.4"/> of <pause dur="0.3"/> the company law harmonization

programme <pause dur="0.8"/> now <pause dur="0.9"/> again just by way of introduction <pause dur="2.2"/> i don't know how familiar you are with the <pause dur="0.2"/> institutions of the European <pause dur="0.4"/> Communities or or <pause dur="0.3"/> European Union <pause dur="0.3"/> are you <pause dur="1.8"/> isn't it i mean isn't it shameful you should say that they should be ashamed here they are parts of a European Union <pause dur="0.5"/> with all kinds of political institutions and they haven't the faintest idea what the what these institutions are <pause dur="0.5"/> well let's do it very quickly i'm not here to give you a <shift feature="voice" new="laugh"/>course on Europe<shift feature="voice" new="normal"/><pause dur="0.6"/> but i think it's important to understand the institutional background if we're to get into the <pause dur="0.8"/> to the actual things that govern <pause dur="0.8"/> accounting <kinesic desc="writes on board" iterated="y" dur="7"/> or the accounting harmonization <pause dur="0.8"/> <vocal desc="cough" iterated="n"/> okay well <trunc>s</trunc> <pause dur="0.5"/> let me <pause dur="0.6"/> lead you a little <pause dur="1.1"/> centrally within the European Union <pause dur="0.5"/> there are four <pause dur="0.5"/> main institutions <pause dur="1.4"/> can you guess what they might be <pause dur="0.3"/> three main <pause dur="0.5"/> institutions of the Union <pause dur="0.5"/> or <trunc>a</trunc> of the European Communities as they then was <pause dur="0.3"/> <gap reason="inaudible" extent="1 word"/><pause dur="2.9"/> <shift feature="voice" new="whisp"/>come on come on <shift feature="voice" new="normal"/> <pause dur="1.7"/>

name anything that you remember from Europe <pause dur="1.2"/> the cover </u><u who="sf1119" trans="overlap"> parliament</u><pause dur="0.3"/> <u who="nm1112" trans="pause"> good there you are it's not so difficult <pause dur="0.5"/><kinesic desc="writes on board" iterated="y" dur="4"/> directly elected parliament <pause dur="1.7"/> right <pause dur="0.7"/> three more </u><pause dur="1.2"/> <u who="sf1120" trans="pause"> justice court</u><u who="nm1112" trans="latching"> yes a European Court of Justice <kinesic desc="writes on board" iterated="y" dur="5"/><pause dur="2.3"/> which was <pause dur="0.3"/> is a court of law <pause dur="0.3"/> to deal with issues of European law <pause dur="0.6"/> two more <pause dur="3.7"/> if i say to you Brussels <pause dur="1.9"/> duh <pause dur="1.9"/> big building <pause dur="1.6"/> bureaucrats <pause dur="1.4"/> what does that tell you </u><pause dur="0.9"/><u who="sm1116" trans="pause"> commission</u><u who="nm1112" trans="latching"> yes the European Commission <pause dur="0.7"/> <kinesic desc="writes on board" iterated="y" dur="3"/> which is <pause dur="0.2"/> a kind of <pause dur="0.4"/> civil service <trunc>fonc</trunc> the <distinct lang="fr">fonction publique</distinct> <pause dur="1.2"/> and <vocal desc="cough" iterated="n"/> <pause dur="0.3"/> one more <pause dur="1.2"/> in fact the most <trunc>por</trunc> important one <pause dur="1.5"/> but not one that most people know <pause dur="1.3"/> well it's called the Council <pause dur="0.2"/> of Ministers <kinesic desc="writes on board" iterated="y" dur="5"/><pause dur="4.2"/> so <pause dur="0.8"/> <vocal desc="cough" iterated="n"/> <pause dur="0.6"/> these are the four main institutions directly elected <pause dur="0.6"/> court of law <pause dur="0.2"/> a civil service <pause dur="0.8"/> and the Council of Ministers now the Council of Ministers <pause dur="0.7"/> is a body <pause dur="0.3"/> that consists of the <pause dur="0.8"/> national ministers

from each of the member states <pause dur="0.2"/> and the council <pause dur="0.2"/> then will reflect the topic under discussion so if it's <pause dur="0.4"/> if there is an agricultural issue <pause dur="0.9"/> that is to be decided like the common agricultural policy <pause dur="0.5"/> the council will consist of the Minister of Agriculture from Britain the Minister of Agriculture from Belgium the Minister of Agriculture from <pause dur="1.1"/> # Italy and so forth <pause dur="1.9"/> now <vocal desc="cough" iterated="n"/> these <pause dur="0.8"/> are the four institutions <pause dur="1.4"/> and under the Treaty of Rome and everything subsequent to it <pause dur="0.7"/> the European Communities or as it's now called European Union <pause dur="0.5"/> can produce law <pause dur="1.2"/> which <pause dur="0.9"/> affects all of the member states of the Union <pause dur="0.7"/> and <pause dur="0.2"/> very simply and i am oversimplifying here <pause dur="0.5"/> there are two kinds of law <pause dur="0.4"/> that can be produced <pause dur="1.6"/> and this law of course <kinesic desc="writes on board" iterated="y" dur="6"/> can be tested <pause dur="0.5"/> in the European Court of Justice <pause dur="0.9"/> which is not the European Court of Human Rights let me tell you <pause dur="1.1"/> the first type of law <pause dur="0.5"/> are something called regulations <pause dur="0.8"/> and the second <kinesic desc="writes on board" iterated="y" dur="4"/> type of law <pause dur="2.1"/> is called directives so we have <pause dur="0.5"/> European Regulations and European Directives <pause dur="0.5"/> does

anyone know what the difference is <pause dur="0.6"/> you come across these phrases </u><pause dur="3.6"/><u who="sm1121" trans="pause"> <gap reason="inaudible" extent="1 sec"/> <pause dur="0.4"/> i see the directive's not as a obligation <pause dur="0.7"/> it's just </u><u who="nm1112" trans="overlap"> it's an interesting yeah</u><u who="sm1121" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> <trunc>dire</trunc> direction of </u><pause dur="1.6"/> <u who="nm1112" trans="pause"> well it certainly it <shift feature="voice" new="laugh"/>sounds right doesn't it for<shift feature="voice" new="normal"/><pause dur="0.8"/> <trunc>i</trunc> <pause dur="0.3"/> actually you there's something in what you say is right but something that's quite wrong <pause dur="0.2"/> but you so you've got it half right <pause dur="0.9"/> well let me <pause dur="0.3"/> say <pause dur="0.5"/> that <pause dur="0.8"/> the first <pause dur="0.5"/> deal with the the regulations these deal with <pause dur="0.6"/><kinesic desc="writes on board" iterated="y" dur="9"/> minor <pause dur="1.0"/> technical matters <pause dur="4.8"/> and once they are decided <pause dur="0.2"/> once they are published in something called the Official Journal <pause dur="2.0"/> they are <pause dur="0.3"/><kinesic desc="writes on board" iterated="y" dur="10"/> immediately binding <pause dur="3.4"/> they may go out for consultation <pause dur="2.1"/> to <pause dur="0.7"/> the member states but once the <trunc>u</trunc> the European Union decides on a regulation <pause dur="0.2"/> by publishing it in the Official Journal <pause dur="0.4"/> it has immediate legal effect <pause dur="1.6"/>

and the sources of regulations can either be the Commission <pause dur="0.2"/><kinesic desc="writes on board" iterated="y" dur="1"/> can issue one <pause dur="0.9"/> on its own <pause dur="0.9"/> or <pause dur="0.2"/> a Council of Ministers can issue one <pause dur="0.3"/> on its own <pause dur="1.6"/> and once they are published in the Official Journal <pause dur="0.8"/> they have legal effect <pause dur="0.9"/> and they tend to be <pause dur="0.6"/> used for let's say minor matters like <pause dur="0.3"/> let's think of a silly example of one recently <pause dur="0.2"/> the amount of real cream <pause dur="1.0"/> in the ice cream that you buy <pause dur="1.1"/> the amount of pig meat <pause dur="0.2"/> in a sausage <pause dur="1.1"/> all right <pause dur="0.2"/> these are technical minor things that come <pause dur="0.5"/> and once the regulation has been issued that's it <kinesic desc="clicks fingers" iterated="n"/><pause dur="0.2"/> has effect in the U-K in Belgium and in Spain or wherever <pause dur="1.7"/> so these are minor matters <pause dur="0.5"/> but for important issues <pause dur="0.6"/> the legal instrument is a directive <pause dur="1.7"/> right <pause dur="7.9"/> <kinesic desc="writes on board" iterated="y" dur="13"/> and these are only binding <pause dur="0.4"/> i'll write it so it's clear for you <pause dur="3.2"/> and this is half your point actually <pause dur="0.8"/> oh binding only when <pause dur="1.5"/> <vocal desc="cough" iterated="n"/> <pause dur="1.2"/><kinesic desc="writes on board" iterated="y" dur="17"/> they are <pause dur="1.2"/> enacted <pause dur="2.8"/> by <pause dur="0.7"/> the parliaments <pause dur="5.1"/> of the

member states <pause dur="1.4"/> i'm running out of <pause dur="0.2"/> pens here <pause dur="7.8"/><kinesic desc="writes on board" iterated="y" dur="6"/> right <pause dur="0.7"/> in other words once a directive <pause dur="1.2"/> is published in the Official Journal <pause dur="0.5"/> of the European Union <pause dur="0.3"/> it has no legal effect <pause dur="1.0"/> what has to happen is that the <pause dur="0.2"/> individual parliaments have to <trunc>cr</trunc> <pause dur="0.4"/> put it into national law <pause dur="0.8"/> and they normally have a delay <pause dur="0.9"/> in which to do it they must do it <pause dur="1.3"/> but they have time <pause dur="0.4"/> to put it into national law using national phrasing <pause dur="1.2"/> right <pause dur="0.7"/> now these are for important issues and the procedures for <pause dur="0.3"/> for actually <pause dur="0.3"/> these directives being published or the word is adopted <pause dur="0.5"/> by the European Union <pause dur="0.8"/> are quite complicated <pause dur="0.3"/> and <pause dur="0.3"/> normally what happens is this <pause dur="1.7"/> the commission the civil service has an idea <pause dur="0.4"/> for a directive <pause dur="0.9"/> right <pause dur="0.6"/> it publishes a draft <pause dur="1.1"/> first draft <pause dur="0.6"/> the draft <pause dur="0.4"/> goes to the parliament for consultation <pause dur="0.8"/><kinesic desc="writes on board" iterated="y" dur="17"/> goes back to the commission <pause dur="2.0"/> and then it may go backwards and forwards several times <pause dur="1.1"/> and then the commission <pause dur="0.4"/> puts a draft to the Council of Ministers and it goes <pause dur="0.2"/> back <pause dur="0.7"/> and it goes back again <pause dur="1.8"/> and it is a vote of the Council of Ministers <pause dur="0.9"/> not the <trunc>commiss</trunc> the commission can't do it on its own the parliament can't

do it on its own it's only the Council of Ministers <pause dur="1.0"/> that <pause dur="0.4"/> adopts notice the verb <pause dur="0.5"/> adopts the directive <pause dur="1.0"/> once they adopt the directive <pause dur="0.2"/> it's published in the Official Journal of the European Communities <pause dur="0.8"/> or the European Union as it now is <pause dur="0.5"/> and then there is an obligation on the governments of the member states to put it into national law <pause dur="0.5"/> into their own national law <pause dur="2.2"/> so very <pause dur="0.2"/> are there any questions on that <pause dur="0.4"/> anyone i i'm sketching and oversimplifying <pause dur="0.3"/> but i want you to understand <pause dur="0.5"/> what a directive is how roughly how it happens particularly the notion of a draft <pause dur="1.0"/> the notion of adoption <pause dur="0.6"/> and then the requirement for national legislates <pause dur="0.4"/> to <pause dur="0.2"/> enact it or put it into national law <pause dur="2.0"/> <vocal desc="cough" iterated="n"/> okay <pause dur="0.5"/> no questions <pause dur="0.9"/> it's a lot of fun isn't it <pause dur="1.9"/> right <pause dur="0.4"/> well let's look at what this <pause dur="1.0"/> harmonization programme on company law <pause dur="0.5"/> and the <trunc>direct</trunc> <pause dur="0.2"/> under <trunc>de</trunc> the directive system has been <pause dur="0.7"/> for <pause dur="0.2"/> <vocal desc="cough" iterated="n"/> the European Communities <pause dur="0.7"/> and if you look at the first page of the handout

you'll see a list <pause dur="0.6"/> of <pause dur="0.2"/> the principal directives that <pause dur="0.6"/> <trunc>ac</trunc> been emitted <pause dur="0.2"/> from or adopted and enacted <pause dur="0.8"/> from # the European Communities <pause dur="0.3"/> and you'll see that they cover quite a long time period <pause dur="0.7"/> each directive the first one in sixty-eight the last one ten just over ten years ago <pause dur="0.8"/> and you'll see they're each given a number <pause dur="1.4"/> you'll also see that some of them <pause dur="0.3"/> have never been adopted <pause dur="0.6"/> in other words the Council of Ministers has never said yes <pause dur="0.9"/> they only exist in draft <pause dur="1.0"/> so for example the Fifth Directive <pause dur="0.6"/> which would have brought <pause dur="0.4"/> employees <pause dur="0.3"/> onto company boards of directors if they were public companies <pause dur="0.8"/> has never been agreed the Council of Ministers <pause dur="1.6"/> actually that's Mrs Thatcher <pause dur="0.5"/> she wouldn't allow it to be a directive <pause dur="0.5"/> to be adopted <pause dur="0.8"/> and the Ninth and the Tenth equally <pause dur="1.6"/> well what i want to do is just to go through and pick out the important ones <pause dur="0.2"/> <vocal desc="cough" iterated="n"/> <pause dur="0.8"/> first of all let me talk about the First Directive very early on <pause dur="1.2"/> it did three things two of which are mentioned here and the third which isn't <pause dur="1.5"/> first of all it defined what companies could do <pause dur="0.3"/> whether they were Italian <pause dur="0.7"/> or French or

German or British or any of them <pause dur="1.1"/> their powers <pause dur="0.2"/> that defined also <pause dur="0.3"/> the powers and duties of directors of <pause dur="0.2"/> companies <pause dur="0.9"/> those two points are mentioned <pause dur="1.4"/> the third point which is not mentioned is an accounting point <pause dur="1.6"/> the First Directive made it an obligation <pause dur="0.8"/> on national governments <pause dur="0.5"/> to establish <pause dur="0.2"/> a company registry <pause dur="0.2"/> or registries <pause dur="0.8"/> into which companies would file their accounts <pause dur="0.7"/> for public disclosure <pause dur="2.3"/> now for some countries like <pause dur="0.3"/> although the U-K wasn't a member of the # the European Communities of that date <pause dur="0.5"/> some countries there has always been a company registry <pause dur="1.2"/> there has <trunc>co</trunc> there's Companies House in the U-K where companies must deposit their accounts <pause dur="1.7"/> in France <vocal desc="cough" iterated="n"/> you've always had some <pause dur="0.8"/> but you know that that they are local <pause dur="0.9"/> <distinct lang="fr">les Tribunaux de Commerce</distinct><pause dur="0.6"/> okay <pause dur="0.7"/> in other countries like Greece <pause dur="0.4"/> before this was enacted in Greece <pause dur="0.2"/> there there were never any company registries but this was the first point <pause dur="0.6"/> you know how could you ensure <pause dur="0.3"/> to get

free movement of capital <pause dur="0.8"/> then an investor could actually get hold of accounts if there wasn't some place where they were deposited <pause dur="0.4"/> the accounts were deposited <pause dur="0.7"/> and you know this is not common <pause dur="0.5"/> well it is common in some countries but there's plenty countries in the world <pause dur="0.2"/> don't have them <pause dur="0.6"/> so for example if you wanted to look up the accounts of a Vietnamese company <pause dur="0.6"/> forget it <pause dur="0.4"/> you're not going to be able to find it <pause dur="2.1"/> the Second Directive is one we've already come across <pause dur="0.6"/> and it sets minimum capital requirements on the formation of a company <pause dur="0.7"/> it also defined distributable profit although that's not mentioned here but more importantly <pause dur="1.0"/> it gave a common constitution throughout all the member states <pause dur="0.9"/> between a private company and a public company between a P-L-C limited <distinct lang="fr">S-A</distinct> <distinct lang="it">S-R-L</distinct> <pause dur="0.3"/> <distinct lang="de">A-G</distinct> <distinct lang="de">G-M-B-H</distinct> <pause dur="1.3"/> all similar <pause dur="1.1"/> right <pause dur="0.4"/> and that's useful so that any investor now <pause dur="0.3"/> will know what kind of company <pause dur="0.4"/> he or she is dealing with <pause dur="1.4"/> okay <pause dur="1.2"/> the Third Directive was a one that only affected

Benelux and France it's deals with something well you'll know about that <pause dur="0.8"/> # <pause dur="0.2"/> in France it deals with something called <distinct lang="fr">fusion</distinct> <pause dur="1.0"/> and mergers <pause dur="1.2"/> the Fourth Directive is the big one <pause dur="1.1"/> dealing with <pause dur="0.7"/> when the accounts are published <pause dur="0.4"/> what <pause dur="1.0"/> financial information must be <pause dur="0.3"/> disclosed what the content of the annual accounts is going to be <pause dur="0.7"/> and that's where we'll be looking at a little later <pause dur="1.1"/> but at the bottom of the page you'll see <pause dur="0.5"/> although the Fourth Directive was <pause dur="0.3"/> adopted <pause dur="0.7"/> by the Council of Ministers in nineteen-seventy-eight <pause dur="0.8"/> it was given a delay was given <pause dur="0.2"/> for <pause dur="0.4"/> countries to put it into national law so <pause dur="0.3"/> Denmark and the U-K were the first countries <pause dur="0.7"/> Sweden Austria and Finland who joined quite recently <pause dur="0.3"/> European Union of # just <pause dur="0.8"/> recently <pause dur="0.7"/> and you may notice Italy <pause dur="0.5"/> Italy <pause dur="0.5"/> took <pause dur="0.5"/> thirteen years <pause dur="0.5"/> <shift feature="voice" new="laugh"/>to put this<shift feature="voice" new="normal"/> # directive into national law they were even going to be taken to the Court of Justice <pause dur="0.5"/> 'cause they were so late <pause dur="1.4"/> <vocal desc="cough" iterated="n"/> so we're going to look at the Fourth Directive today <pause dur="0.4"/> the Fifth

hasn't been # adopted <pause dur="0.2"/> the Sixth is a minor one that deals with something called <pause dur="0.3"/> again i just speak to the French <distinct lang="fr">scission</distinct> <pause dur="0.4"/> <trunc>de</trunc> de-mergers if you've done <distinct lang="fr">scission</distinct> <pause dur="1.2"/> the Seventh Directive is the other great one it deals with consolidated accounts <pause dur="0.8"/> group accounts and we shall look at that next week <pause dur="1.1"/> and again if you look at the bottom of the page <pause dur="0.6"/> you'll see the dates of enactment there the Seventh was adopted in nineteen-eighty-three <pause dur="0.9"/> and you'll see the dates <pause dur="0.2"/> when it was put into national law <pause dur="1.0"/> # <pause dur="0.2"/> and you'll notice that some countries that you've dealt with <pause dur="0.5"/> actually put them in together <pause dur="0.5"/> so if you look at the case of Germany <pause dur="0.7"/> Germany waited <pause dur="0.3"/> to put <pause dur="0.2"/> the Fourth Directive into national law <pause dur="0.6"/> into their national law <pause dur="1.0"/> until the Seventh had come out <pause dur="0.4"/> and then they did the two together <pause dur="1.0"/> and that you may remember when <gap reason="name" extent="1 word"/> did Germany <pause dur="0.5"/> you came across the <distinct lang="de">Bilanzrichtlinie-Gesetz</distinct> of nineteen-eighty-five <pause dur="0.5"/> that's the one <pause dur="0.9"/> that <pause dur="0.3"/> # puts in both <pause dur="1.8"/> the Eighth Directive is the third

is the third big one <pause dur="0.6"/> Fourth the Seventh and the Eighth <pause dur="0.2"/> and this deals with <pause dur="0.6"/> common qualifications for auditors <pause dur="0.3"/> and their appointment <pause dur="0.3"/> procedures for appointment and procedures for their dismissal <pause dur="2.0"/> Ninth and Tenth <pause dur="0.8"/> # aren't haven't been introduced <pause dur="0.4"/> the Eleventh is very minor <pause dur="0.2"/> <vocal desc="cough" iterated="n"/> the Twelfth <pause dur="0.6"/> is a minor one although it's had quite an impact in some countries <pause dur="0.9"/> # <pause dur="1.0"/> the idea of a company is that you have two <pause dur="0.2"/> shareholders minimum of two <pause dur="1.5"/> the Twelfth Directive introduced the idea that <pause dur="1.1"/> you can have a one-person company where there's only one shareholder <pause dur="0.4"/> and create company as a shell <pause dur="1.0"/> # <pause dur="0.6"/> in some countries in the European Union there's a name for this i'm going to ask the French <pause dur="0.7"/> what's it called in France <pause dur="1.4"/> <distinct lang="fr">E-U-R-L</distinct> <pause dur="0.8"/> <distinct lang="fr">Entreprise unipersonnelle à responsabilité limitée</distinct> <pause dur="0.9"/> the U-E # E-U-R-L <pause dur="1.1"/> you can spot one of these <kinesic desc="writes on board" iterated="y" dur="2"/> if you see a French business and it's got the name and it's got this behind the name <pause dur="0.8"/> then it's a one-person company <pause dur="2.1"/> right <vocal desc="cough" iterated="n"/> so i mean that's the background now we're going to go

in <pause dur="0.5"/> to the Fourth Directive 'cause that's the big one <pause dur="0.7"/> and what i'm going to do with you <pause dur="0.2"/> and you're going to hate this <pause dur="0.6"/> you really are going to hate this <pause dur="0.7"/> is i'm going to we are going to read <pause dur="0.2"/> the directive <pause dur="0.2"/> together <pause dur="1.4"/> we're going to go through a certain number of articles and i'm going to ask questions and think i want you to think back <pause dur="0.5"/> to France and to Germany <pause dur="0.8"/> and to the Netherlands <pause dur="0.4"/>

we did those countries <pause dur="0.9"/> because it's by going through it <pause dur="0.9"/> that you can see <pause dur="0.2"/> the potential for success and the potential for failure <pause dur="0.7"/> in terms of bringing accounting systems together <pause dur="0.8"/> now what you have in front of you is a copy of the Fourth Directive <pause dur="0.8"/> i don't propose to go through it all <pause dur="1.5"/> i'm going to go through depending on the time we have <pause dur="0.2"/> up to about article forty-two i'm not going to consider each article <pause dur="0.6"/> i'm just going to pick out and ask you to think <pause dur="1.1"/> about the consequences the implications <pause dur="0.4"/> of <pause dur="0.4"/> the basic <pause dur="0.8"/> <vocal desc="cough" iterated="n"/> <pause dur="0.2"/> things that are contained <pause dur="0.8"/> right <vocal desc="laugh" iterated="n"/> how are

you feeling <pause dur="1.3"/> happy <pause dur="1.0"/> pleased <pause dur="0.3"/> content it's a lovely new year and we're going to enjoy ourselves <pause dur="1.1"/> right <vocal desc="cough" iterated="n"/> let's just <pause dur="0.8"/> start <pause dur="0.3"/> by looking just the words coming out <reading>Fourth Council Directive</reading> <pause dur="0.5"/> 'cause it's the Council of Ministers <pause dur="1.1"/> <reading>based on article fifty-four-three-G of the Treaty</reading> <pause dur="1.6"/> and then this wonderfully pompous phrasing <pause dur="0.3"/> <reading>the Council <pause dur="0.7"/> having regard to the Treaty <pause dur="0.6"/> having regard to a draft from the Commission having regard to an opinion of the parliament</reading> <pause dur="0.3"/> all of this preliminary stuff <pause dur="0.9"/> then says <pause dur="1.7"/> <reading>whereas the coordination of national provisions concerning</reading> watch the words <pause dur="0.7"/> <reading>presentation <pause dur="2.1"/> content of annual accounts and annual reports <pause dur="0.7"/> valuation methods <pause dur="0.6"/> and publication <pause dur="0.4"/> is of special importance</reading> <pause dur="0.4"/> three <pause dur="0.2"/> four key words there <pause dur="0.7"/> the directive is going to deal with the way the accounts are presented <pause dur="1.5"/> what their content is <pause dur="0.7"/> what rules are going to be used for the valuation of assets and liabilities <pause dur="0.8"/> and <pause dur="0.2"/> the details of publication <pause dur="0.9"/> so in the very first introduction you know what this is about <pause dur="3.4"/> the next paragraph <pause dur="0.3"/> says <pause dur="1.2"/> <reading>whereas <pause dur="0.3"/> simultaneous coordination is necessary</reading> well try telling

that to the Italians <pause dur="0.7"/> they <shift feature="voice" new="laugh"/>took thirteen years<shift feature="voice" new="normal"/> to put this in as i mentioned <pause dur="0.9"/> and then it goes dum-de-dum-de-dum-de-dum and then the last part says <pause dur="0.5"/> <reading>whereas moreover the necessity and the urgency of <trunc>cu</trunc> such coordination has been recognized and confirmed <pause dur="0.6"/> by article two of Directive sixty-eight-one-five-one</reading> <pause dur="0.9"/> what is Directive sixty-eight<pause dur="0.3"/>-one-five-one <pause dur="0.2"/> what would you guess </u><pause dur="1.6"/><u who="sm1117" trans="pause"> <gap reason="inaudible" extent="1 sec"/></u><pause dur="0.3"/> <u who="nm1112" trans="pause"> yeah which which directive is it </u><pause dur="3.8"/> <u who="sm1117" trans="pause"> first </u><pause dur="0.3"/> <u who="nm1112" trans="pause"> it's the first now that's telling you something interesting it's telling you that the European Communities as they <trunc>we</trunc> then were <pause dur="0.9"/> were trying to <pause dur="0.3"/> they had in mind the Commission at least had in mind a whole series of interconnected directives <pause dur="0.8"/> they weren't just <pause dur="0.5"/> oh that's a good idea and now here's another good idea <pause dur="0.6"/> they were thinking them through <pause dur="0.3"/> as they were <pause dur="1.2"/> working on one they were thinking of the next <pause dur="1.3"/> right the next paragraph <pause dur="0.7"/> <reading>whereas it is necessary moreover <pause dur="0.5"/> to establish in the community</reading> <pause dur="0.3"/> now watch <pause dur="0.3"/>

three <pause dur="0.2"/> words <pause dur="0.7"/> <reading>minimum <pause dur="0.9"/> equivalent <pause dur="0.7"/> legal <pause dur="0.5"/> requirements <pause dur="0.8"/> as regards the extent of the financial information</reading> <pause dur="1.3"/> right <pause dur="0.7"/> again this gives you a clue to the harmonization process first of all <pause dur="1.4"/> it's going to concentrate on basic things <pause dur="0.2"/> minima <pause dur="2.8"/> it's not intending <pause dur="0.2"/> to go through and <trunc>lo</trunc> cover all the accounting issues that are involved <pause dur="0.5"/> in the balance sheet P and L notes <pause dur="0.7"/> it's minima <pause dur="1.1"/> right <pause dur="1.0"/> second the second word is equivalent <pause dur="0.3"/> it's not trying to make <pause dur="0.4"/> the requirements the same in each of the member states it's trying to make them equivalent one to another <pause dur="1.1"/> so that's actually quite a limited process <pause dur="1.8"/> it's not saying that in France <pause dur="0.5"/> you must depreciate buildings over twenty years and also in England you must <trunc>be</trunc> depreciate buildings over twenty years it's just trying to make things equivalent <pause dur="1.4"/> and then the third thing <pause dur="0.3"/> is legal <pause dur="0.9"/> the harmonization process is through the amendment of company law <pause dur="0.9"/> now <pause dur="2.2"/> can you see a problem <pause dur="2.9"/> with that word legal <pause dur="0.6"/> can you see a problem <pause dur="0.8"/> with

this <pause dur="0.2"/> approach to bringing accounting systems together <pause dur="0.8"/> making them converge <pause dur="0.6"/> using <pause dur="0.6"/> a requirement of <trunc>chan</trunc> using legal requirements <pause dur="1.4"/> come on </u><pause dur="1.9"/><u who="sm1117" trans="pause"> i think the problem is # who is # <pause dur="2.0"/> # <pause dur="0.2"/> who is giving the law for accounting in this country <pause dur="0.3"/> <gap reason="inaudible" extent="1 word"/> some in France come from <pause dur="1.0"/> the <pause dur="2.1"/> government <pause dur="0.9"/> the government issues <pause dur="0.5"/> # and from something in the U-K is coming from # they look at the <pause dur="0.8"/> the boards of accountants <pause dur="0.4"/><gap reason="inaudible" extent="1 sec"/></u> <u who="nm1112" trans="overlap"> well not the boards of accountants come on what's it coming from <pause dur="0.4"/><vocal desc="sniff" iterated="n"/> <pause dur="0.4"/> you're right you're exactly on the right track <pause dur="1.9"/> what's the point <trunc>y</trunc> <trunc>y</trunc> you're absolutely right i just want i want the words</u><u who="sm1117" trans="overlap"> <gap reason="inaudible" extent="2 secs"/> <pause dur="0.6"/> # <gap reason="inaudible" extent="1 word"/><pause dur="1.4"/> the <gap reason="inaudible" extent="1 word"/></u> <pause dur="0.5"/> <u who="nm1112" trans="pause"> <vocal desc="laughter" n="sl" iterated="y" dur="2"/> it's the Christmas holidays being too long <pause dur="1.0"/> <vocal desc="laughter" n="ss" iterated="y" dur="1"/> all right there you got the point i mean the </u><u who="sm1117" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> SAPs and</u><pause dur="0.5"/> <u who="nm1112" trans="pause"> yeah SAPs are a bit old </u><u who="sm1117" trans="overlap"> yeah</u><u who="nm1112" trans="overlap"> we don't talk SAPs now <pause dur="0.7"/> yeah the point is this in <pause dur="0.6"/> in many member states in the European <pause dur="0.7"/> Communities as they then were <pause dur="1.1"/> # <pause dur="0.5"/> accounting regulation is entirely by law <pause dur="0.9"/> in Germany <pause dur="0.3"/> in Italy <pause dur="0.2"/> in Spain <pause dur="0.2"/> in France </u><pause dur="0.4"/><u who="sm1117" trans="pause"> Greece </u><u who="nm1112" trans="overlap"> and the point about and in Greece thank you <pause dur="0.8"/> and you you know in France there's a <distinct lang="fr">Code de Commerce</distinct> there's the <distinct lang="fr">Plan Comptable Général</distinct> there's the <distinct lang="fr">Comité de Reglementation Comptable</distinct> all these things we've talked about it's all government driven <pause dur="1.1"/> but in the U-K and Ireland <pause dur="0.3"/> and to a lesser

extent in the Netherlands <pause dur="0.3"/> the principal detail governing accounting <pause dur="0.4"/> doesn't come from law it comes from accounting standards <pause dur="0.5"/> generated in the U-K by the Accounting Standards Board <pause dur="2.0"/> and that's the problem <pause dur="0.9"/> there's only a certain amount that's covered by company law <pause dur="0.3"/> in the in in the Anglo-Saxon element <pause dur="0.2"/> of the European Community <pause dur="0.7"/> so <pause dur="0.3"/> it tells you <pause dur="0.2"/> <vocal desc="laugh" iterated="n"/> <pause dur="0.3"/> you're not going to get harmonization <pause dur="0.2"/> how can you require how can you <trunc>re</trunc> <pause dur="0.4"/> require U-K accounting to change by changing its law <pause dur="0.6"/> when for the actual thing that governs accounting in the U-K is not law <pause dur="1.4"/> and it changes very quickly we get more and more standards coming out <pause dur="1.8"/> it tells you in a sense that inherently in this process <pause dur="0.6"/> the success if any is going to be very limited <pause dur="0.3"/> and it also re-emphasizes the point about minima <pause dur="0.2"/> you couldn't capture <pause dur="0.6"/> accounting regulation by simply changing the law <pause dur="0.2"/> in the U-K <pause dur="0.3"/> so i think that's a very significant phrasing <pause dur="1.4"/> right the next paragraph tells you a little bit

more about the content and it says <reading>whereas annual accounts must give a true and fair view</reading> <pause dur="1.1"/> right <pause dur="1.1"/> so we got that's <pause dur="0.2"/> that's Anglo-Saxon in origin isn't it this notion of a true and fair view <pause dur="1.2"/> next part <reading>whereas to this end a mandatory layout</reading> a prescribed format <pause dur="1.0"/> that's German <pause dur="0.8"/> and French <pause dur="1.2"/> so there's an element of a compromise <pause dur="0.2"/> coming and you see there's both <pause dur="0.7"/> Anglo-Saxon and continental inputs into this <pause dur="1.3"/> <reading>whereas there is a minimum content of the notes <pause dur="0.2"/> and whereas <pause dur="0.2"/> <trunc>de</trunc> derogations may be granted</reading> and derogations means exemptions in English <pause dur="0.7"/> # for certain companies of minor <trunc>e</trunc> economic and <trunc>so</trunc> <pause dur="0.2"/> social importance <pause dur="1.7"/> and then the next paragraph says <pause dur="1.3"/> <reading>whereas the different methods I-E rules <pause dur="0.3"/> for the valuation of assets and liabilities must be coordinated <pause dur="0.6"/> dum-de-dum-de-dum-de-dum <pause dur="0.3"/> disclose <pause dur="0.3"/> comparable <pause dur="0.4"/> and equivalent <pause dur="0.2"/> information</reading> <pause dur="2.4"/> comparable and equivalent <pause dur="0.7"/> it does not say <pause dur="0.9"/> disclose the same information <pause dur="1.2"/> it just means

that they should be comparable <pause dur="0.4"/> one to another <pause dur="0.6"/> and equivalent <pause dur="0.5"/> so again very limited objectives <pause dur="0.6"/> so <gap reason="inaudible" extent="1 sec"/> have to give it <pause dur="1.5"/> and the next paragraph <pause dur="0.2"/> is well yes <pause dur="1.4"/> <reading>whereas the annual accounts must be published in accordance with the First Directive</reading> yes <pause dur="0.4"/> <reading>whereas however certain derogations <pause dur="0.2"/> exemptions <pause dur="1.1"/> can be given for small and medium-size companies</reading> <pause dur="0.5"/> now what's that telling us <pause dur="1.7"/> what do you think that's telling us <pause dur="2.4"/> i know is this wording is strange and a little <pause dur="0.2"/> official but what's it telling us then <pause dur="3.3"/> <reading>whereas the annual accounts of all companies to which this directive applies must be <trunc>pub</trunc> must be published <pause dur="0.2"/> in accordance with <pause dur="0.3"/> the First Directive <pause dur="0.3"/> whereas however certain derogations <pause dur="0.6"/> may likewise be granted in this area for small and medium-size companies</reading> <pause dur="0.5"/> what's that telling us <pause dur="5.6"/> go on have a go </u><pause dur="1.3"/><u who="sm1117" trans="pause"> it's not very important so <pause dur="0.5"/> # <pause dur="0.8"/> because <pause dur="1.5"/> maybe they'll all think of cost so is one a medium-size company <pause dur="0.2"/> matter four of clause four <pause dur="0.3"/> what <gap reason="inaudible" extent="2 secs"/></u><u who="nm1112" trans="overlap"> well we haven't got to <trunc>au</trunc> you're right actually haven't got to audit yet <pause dur="0.4"/> but you're right <pause dur="0.5"/> it is about costs <pause dur="1.5"/> what it's basically saying First Directive says if you are a company you

must file your accounts in the registry <pause dur="0.9"/> what this is saying effectively <pause dur="0.2"/> is that if you are <pause dur="1.0"/> under the criteria of size small or medium-size you don't have to give so much detail <pause dur="1.4"/> that's what it means all of the detail <pause dur="0.6"/> that you would normally publish <pause dur="0.3"/> if you're small <pause dur="0.6"/> # <pause dur="0.2"/> not so much detail <pause dur="1.5"/> and your audit point is the next point <pause dur="0.6"/> <reading>whereas annual accounts must be audited by authorized persons <pause dur="0.9"/> whose minimum qualifications shall be subject of <pause dur="0.4"/> shall be the subject of subsequent coordination</reading> <pause dur="1.5"/>

which subsequent coordination <pause dur="4.8"/> <reading>whereas annual accounts must be audited by authorized persons whose minimum qualifications <pause dur="0.6"/> will be the subject of subsequent coordination</reading> <pause dur="0.9"/> which <pause dur="0.2"/> what are they looking forward to <pause dur="1.0"/> go to your list of directives </u><pause dur="0.4"/> <u who="sm1117" trans="pause"> # </u><pause dur="0.9"/> <u who="nm1112" trans="pause"> which one </u><pause dur="0.5"/> <u who="sm1117" trans="pause"> i think it's # <vocal desc="cough" iterated="n"/> <pause dur="0.4"/> <gap reason="inaudible" extent="1 sec"/> # </u><u who="nm1112" trans="latching"> which one <pause dur="8.7"/> the Eighth <pause dur="0.7"/> can you see it <pause dur="0.5"/> look <pause dur="0.2"/> on the list of directives <pause dur="0.4"/> so <pause dur="0.3"/> this Fourth Directive is looking back to the First and looking forward to the Eighth it's saying that the programme <pause dur="0.8"/> of harmonization is going to include the coordination between the member states of <pause dur="0.4"/> the qualifications of auditors <pause dur="0.4"/> the Eighth <pause dur="1.2"/> okay <pause dur="0.2"/> again emphasizing <pause dur="0.4"/> that the programme is seen as a whole <pause dur="1.3"/> so <reading>whereas the annual accounts must be audited by authorized persons whose minimum qualifications will be the subject of subsequent coordination whereas only small companies may be relieved of this audit obligation</reading> <pause dur="0.2"/> so what it's saying is the Fourth Directive <pause dur="1.1"/> is going to permit member states <pause dur="0.8"/> to allow small companies <pause dur="0.3"/>

not to be audited <pause dur="2.0"/> and that already is telling you there's going to be a difference <pause dur="1.4"/> in the U-K <pause dur="0.9"/> all companies no matter what size <pause dur="0.9"/> have to have their accounts audited <pause dur="1.5"/> and the Fourth Directive is going to <trunc>al</trunc> may <pause dur="0.3"/> # <pause dur="0.5"/> is going to allow member states to relieve <pause dur="0.3"/> very small companies from having to be audited <pause dur="0.5"/> can you give me an example of a country that does that </u><pause dur="3.5"/> <u who="sm1117" trans="pause"> <gap reason="inaudible" extent="1 word"/> <pause dur="0.4"/> Greece </u><pause dur="0.2"/> <u who="nm1112" trans="pause"> Greece <pause dur="0.2"/> can you give me an example of a country that does that </u><pause dur="0.6"/> <u who="sf1118" trans="pause"> <gap reason="inaudible" extent="1 word"/></u><u who="nm1112" trans="latching"> France thank you <pause dur="0.3"/> very good <pause dur="0.4"/> come on a bit further <pause dur="0.5"/> and then we'll take a break <pause dur="0.7"/> # <pause dur="1.6"/> the next <trunc>para</trunc> the next paragraph at the end <pause dur="0.4"/> <reading>whereas when a company belongs to a group <pause dur="1.2"/></reading> right <reading>it's desirable that group accounts should be published <pause dur="0.7"/> whereas however pending the entry into force of a Council Directive on <pause dur="0.2"/> consolidated accounts</reading> which directive <pause dur="5.9"/> the </u><pause dur="1.2"/><u who="sm1117" trans="pause"> seventh</u><u who="nm1112" trans="latching"> seventh yeah so again it's looking forward okay <pause dur="0.9"/> # they're making some transition arrangements <pause dur="0.7"/> right well at that exciting point <pause dur="0.9"/> we'll <pause dur="0.3"/>

take a break <pause dur="0.3"/> for ten minutes and then we're going to dive in and as i said i don't want you to be frightened by the words but i think it's quite useful to do this because <pause dur="0.4"/> at each stage you can stop and think okay now how's that going to work <pause dur="0.6"/> or what problems is that going to throw up and in doing that <pause dur="0.3"/> you actually see <pause dur="0.7"/> as i say the <pause dur="0.2"/> advantages and disadvantages of the process <pause dur="1.0"/> so <pause dur="0.4"/> we'll meet again at <pause dur="1.2"/> twelve o'clock </u><gap reason="break in recording" extent="uncertain"/> <u who="nm1112" trans="pause">

clear what we're doing <pause dur="1.6"/> okay leave the case studies we'll deal with them later <pause dur="0.2"/> let's go back <pause dur="0.4"/> to <pause dur="0.6"/> right so we looked at the preamble we've already got some clues as to the way that this directive's going to shape up <pause dur="1.1"/> and what i want to do first is to look at article one which looks very long <pause dur="1.6"/> and it says <pause dur="1.7"/> it's got two sections and it says the coordination measures notice the word coordination what the directive is doing is not making everything the same it's coordinating between the different member states <pause dur="1.1"/> coordination members shall apply to the laws <pause dur="0.3"/> et cetera et cetera <pause dur="0.4"/> of the member states relating to the following types of <pause dur="0.2"/> companies <pause dur="1.2"/> and then you've got the companies that were <trunc>m</trunc> the countries that were members of the European Community then <pause dur="1.6"/> and what do you notice about those companies <pause dur="1.3"/> either in France or <pause dur="0.4"/> Greece or Germany or Britain <pause dur="0.7"/> what's the common characteristic </u><pause dur="2.8"/> <u who="sm1117" trans="pause"> <gap reason="inaudible" extent="1 sec"/> a a limited liability company </u><u who="nm1112" trans="latching"> yeah they're all limited liability companies <pause dur="0.8"/> right <pause dur="1.3"/> so it's only

limited liability companies that are being captured by this directive as a requirement <pause dur="1.0"/> so general partnerships <pause dur="0.7"/> no <pause dur="0.5"/> sole traders <pause dur="0.4"/> no <pause dur="1.6"/> unlimited liability companies no <pause dur="0.3"/> they're not subject to this directive <pause dur="1.3"/> okay <pause dur="1.2"/> however <pause dur="1.0"/> and this is a point of difference <pause dur="0.2"/> there's nothing in this <trunc>dir</trunc> in this article <pause dur="0.2"/> that prevents member states <pause dur="0.3"/> from applying the directive <pause dur="0.8"/> to these <trunc>c</trunc> <pause dur="0.2"/> other sorts of businesses <pause dur="2.3"/> is there <pause dur="1.2"/> all it says is that <pause dur="0.4"/> this <trunc>a</trunc> must apply to these limited liability companies but there's nothing to stop <pause dur="0.2"/> a country saying <pause dur="0.3"/> oh well <pause dur="0.3"/> we'll make it apply <pause dur="1.1"/> to everybody <pause dur="1.5"/> and that's what's happened some countries <pause dur="0.2"/> have applied the directive <pause dur="1.0"/> aside from publication requirements <pause dur="0.4"/> to every enterprise <pause dur="0.9"/> that's the case in France and the case in Greece <pause dur="4.3"/> yeah <pause dur="0.7"/> Greek businesses even if <pause dur="0.8"/> they <pause dur="0.4"/> even if they're not limited liability companies <pause dur="0.4"/> will have <pause dur="0.3"/> the basic rules here applied <pause dur="0.4"/> through your <pause dur="0.6"/> Greek <pause dur="0.3"/> general accounting plan <pause dur="0.5"/> the French <pause dur="0.4"/> general accounting plan <pause dur="1.3"/> is

consistent with this <pause dur="0.2"/> so the only difference is that that everybody uses it in France and Greece the directive <pause dur="0.5"/> the only difference is that <pause dur="0.3"/> if it's not a limited liability company <pause dur="0.7"/> they don't have to publish their accounts <pause dur="0.8"/> okay <pause dur="0.9"/> you might like to think about <pause dur="0.3"/> why does this directive only apply to limited liability companies <pause dur="0.8"/> i'll leave you to think about that </u><pause dur="3.9"/><u who="sm1117" trans="pause"> why </u><pause dur="0.2"/> <u who="nm1112" trans="pause"> why <pause dur="0.2"/> why only limited liability companies <pause dur="8.2"/> limited liability businesses <pause dur="0.9"/> why doesn't it apply to everybody <pause dur="2.0"/> why didn't why didn't the European Communities make it apply to everybody <pause dur="0.9"/> partnerships sole traders unlimited liability companies nationalized industries <pause dur="4.3"/> well it's okay i said i'll let you think about it it's basically because when an earner has limited liability <pause dur="0.4"/> creditors need protection <pause dur="1.7"/> because a shareholder is only limited up to a <shift feature="voice" new="laugh"/> certain amount<shift feature="voice" new="normal"/> <pause dur="1.6"/> it <pause dur="0.3"/> it's <trunc>po</trunc> it's for the protection of creditors <pause dur="1.4"/> that's why it's here <pause dur="0.9"/> and you'll notice in section two <pause dur="1.6"/> that there is <pause dur="0.2"/>

<reading>pending subsequent coordination the member states need not apply the provisions of this directive to banks <pause dur="0.6"/> or to insurance companies</reading> <pause dur="0.5"/> why <pause dur="1.9"/> why do you think <pause dur="0.9"/> that they <trunc>w</trunc> you know needn't apply to banks and insurance companies </u><pause dur="0.5"/><u who="sm1117" trans="pause"> got special #<pause dur="0.5"/><gap reason="inaudible" extent="1 word"/></u> <u who="nm1112" trans="overlap"> they've got special accounting special legal requirements to <pause dur="1.0"/> state-run banks <pause dur="1.1"/> protection of depositors protection of policy holders the accounting issues are very very different <pause dur="0.7"/> but what's happened is <trunc>th</trunc> <pause dur="0.3"/> the European Communities and then the European Union has published a Fourth Directive <pause dur="0.7"/> for banks and a Fourth Directive for insurance companies separate <pause dur="1.5"/> okay let's move to article <pause dur="0.6"/> two which is section one general provisions <pause dur="0.7"/> and article two is really the heart <pause dur="0.4"/> of the directive <pause dur="0.2"/> and it needs to be read very carefully i'm going to point out some words to you and then i'm going to ask you to think <pause dur="0.8"/> of the implications and consequences <pause dur="1.3"/> right <pause dur="1.5"/> so the first one <pause dur="0.2"/> <reading>the annual accounts shall comprise the balance sheet <pause dur="0.5"/> P and L

account <pause dur="0.2"/> and notes</reading> <pause dur="1.8"/> what's missing </u><pause dur="1.6"/> <u who="sm1117" trans="pause"> cash flow</u><pause dur="0.6"/> <u who="nm1112" trans="pause"> cash flow statement why is it missing <pause dur="1.9"/> why do you think it's missing <pause dur="3.8"/> why didn't they put cash flow statement <pause dur="0.8"/> as a requirement <pause dur="4.2"/> well the answer is historical <pause dur="0.8"/> the cash flow statement was really only developed in the nineteen-nineties <pause dur="0.4"/> the first requirement in the world for a cash flow statement <pause dur="0.5"/> was S-F-A-S-ninety-five in the U-S <pause dur="0.3"/> they didn't have it then <pause dur="1.6"/> but in fact <trunc>y</trunc> <pause dur="0.2"/> a country very <trunc>re</trunc> last year <pause dur="0.3"/> Norway which is not a country in the European Union <pause dur="0.4"/> has actually <pause dur="0.2"/> because of trading and all the rest and making sure funds can flow <pause dur="0.5"/> has enacted <unclear>the</unclear> into Norwegian law a Fourth Directive <pause dur="0.2"/> but it's added <pause dur="1.5"/> a legal requirement for the cash flow statement <pause dur="0.5"/> but cash flow statements weren't around <pause dur="1.1"/> and that's telling you something rather interesting <pause dur="0.2"/> it's telling that this is essentially a one-off directive <pause dur="0.3"/> it hasn't been amended <pause dur="1.7"/> seventy-eight it was adopted <pause dur="0.2"/> we're now two-thousand <pause dur="1.0"/> i'm not very good at sums but <pause dur="0.3"/> that's <pause dur="0.2"/> twenty-two

years isn't it <pause dur="1.2"/> nothing's changed <pause dur="3.1"/> telling you perhaps that the process of getting agreement on these things is actually very <shift feature="voice" new="laugh"/>difficult<shift feature="voice" new="normal"/> <pause dur="1.4"/> and then the second statement i'll just ask you to remember this <reading>these documents shall constitute a composite whole</reading> in other words <pause dur="0.5"/> the annual accounts are not to be thought of individually as a balance sheet and P and L notes they're <pause dur="0.6"/> all together <pause dur="0.2"/> they're a whole <pause dur="0.2"/> you'll see the importance of that in a minute <pause dur="1.4"/> right article two says section two says <reading>they shall be drawn up clearly in accordance with the provisions of this directive</reading> that's German in origin <pause dur="1.2"/> and now <pause dur="0.4"/> look at this this is the key one <pause dur="1.0"/> <reading>the annual accounts shall give a true and fair view <pause dur="0.5"/> of the companies' assets comma liabilities comma <pause dur="0.4"/> financial position and profit or loss</reading> <pause dur="1.3"/> where is this come from <pause dur="1.2"/> from the U-K <pause dur="0.2"/> okay <pause dur="1.0"/> so it's a true and fair view which comes from the U-K's Companies House <pause dur="1.0"/> but there are several things to say about this <pause dur="0.8"/> first of all <pause dur="0.2"/>

you're reading the English language version <pause dur="2.1"/> of the Fourth Directive <pause dur="0.8"/> but there is obviously <pause dur="0.7"/> a French version and a Greek version and a Finnish version <pause dur="1.8"/> and in the European Communities or European Union <pause dur="0.2"/> they all have <pause dur="0.2"/> equal authority <pause dur="0.8"/> the Finnish version is exactly the same authority as the English version <pause dur="1.3"/> it's exactly the same as the Greek or the French <pause dur="0.7"/> can you see a problem </u><pause dur="1.1"/><u who="sm1117" trans="pause"> translation of the true and fair view </u><u who="nm1112" trans="overlap"> translation of true and fair view <pause dur="0.5"/> <distinct lang="el">di pragmatiki eikona</distinct> <pause dur="0.4"/> <distinct lang="fr">une image fidèle</distinct> <pause dur="0.4"/> <distinct lang="es">la</distinct> <pause dur="0.2"/> do you remember the Spanish case <pause dur="0.5"/> <distinct lang="es">la imagen fiel</distinct> <pause dur="0.8"/> the you don't remember this i talked about it last time <pause dur="0.6"/> Spanish translated this phrase as <pause dur="0.2"/> the <pause dur="0.5"/> faithful picture <pause dur="1.0"/> there's only one <pause dur="0.2"/> the <pause dur="1.8"/> and you get it by applying the rules <pause dur="0.2"/> in the Spanish <pause dur="0.4"/> law <pause dur="0.9"/> whereas the English version says a true and fair view <pause dur="0.7"/> so you're going to get differences <pause dur="0.7"/> and each version <pause dur="0.5"/> is equally authoritative <pause dur="1.5"/> do you do you understand <trunc>be</trunc> because the the criterion <pause dur="0.3"/> is expressed in a different way <pause dur="0.4"/> it could lead to different numbers

in the accounts different ways of doing things <pause dur="0.8"/> yeah <pause dur="1.3"/> what about <pause dur="0.2"/> <trunc>i</trunc> <pause dur="0.5"/> you did a lecture with <gap reason="name" extent="1 word"/> on the I-S-C <pause dur="1.2"/> do different languages have equal authority for international accounting standards <pause dur="3.1"/> can you remember <pause dur="0.3"/> no they don't <pause dur="1.0"/> they're published in English <pause dur="2.5"/> so <pause dur="0.2"/> that's quite interesting <pause dur="0.8"/> because there's always a base <pause dur="0.2"/> in international accounting standards that you can refer to it's it's the English version that has authority <pause dur="0.6"/> and everything must fit with it <pause dur="0.7"/> but in the European Union the European Communities they're all of equal authority so they can be taken <pause dur="0.4"/> the phraseology can be taken differently <pause dur="0.6"/>

and this is the first point <pause dur="1.2"/> <trunc>e</trunc> despite despite it being of Anglo-Saxon origin <pause dur="0.7"/> the second point <pause dur="0.2"/> is the words # see if you can remember this <pause dur="0.4"/> if i show this to British students <pause dur="0.7"/> and i say <pause dur="0.2"/> of the company's assets liabilities financial position <pause dur="0.9"/> they look a bit odd they say to me <pause dur="0.9"/> well <pause dur="1.2"/> what's the difference assets and liabilities do represent financial position <pause dur="0.9"/> so why is the words being repeated <pause dur="2.7"/> but <pause dur="0.3"/> in a lot of other language versions <pause dur="0.2"/> assets comma liabilities are translated by a single word <pause dur="0.5"/> can you remember what it is <pause dur="2.9"/> i'm looking at the French </u><pause dur="2.2"/><u who="sf1120" trans="pause"> <distinct lang="fr">actif passif</distinct><pause dur="0.8"/> <distinct lang="fr">actif passif</distinct></u><u who="nm1112" trans="latching"> <distinct lang="fr">non</distinct> <pause dur="1.6"/> <distinct lang="fr">non</distinct> that would be the straight translation <distinct lang="fr">actif passif</distinct> <pause dur="1.6"/> here's the word you should remember it <pause dur="9.7"/> <kinesic desc="writes on board" iterated="y" dur="9"/> you told me this is the same word in Greek <pause dur="0.8"/> i remember <pause dur="1.6"/> the words assets comma liabilities translated by the word <pause dur="0.2"/> a single word <pause dur="0.2"/>

patrimony now what's the significance of this patrimony idea <pause dur="4.6"/> well it refers to things that are legally owned <pause dur="0.2"/> or legally owed <pause dur="1.5"/> right <pause dur="2.2"/> take me a bit further <pause dur="5.4"/> no you don't follow the point <pause dur="0.6"/> what it means is that you can only put something on the balance sheet if it's legally owned it can only appear as an asset if it's legally owned <pause dur="1.2"/> which is the reason why you can't capitalize finance leases <pause dur="2.3"/> but we don't have that restrictive notion of patrimony <pause dur="1.4"/> so we can put more things on the balance sheet <pause dur="1.5"/> do you not <trunc>underst</trunc> do you not follow don't you remember this <pause dur="1.3"/> come on let me <trunc>gi</trunc> <pause dur="0.3"/> you're sure <pause dur="2.2"/> don't remember this <pause dur="1.4"/> all right let me give you a better example to make you remember <pause dur="0.3"/> are you do any do you know anything about <trunc>co</trunc> </u><u who="sm1117" trans="overlap"> it's about leases <pause dur="0.7"/> leases</u><pause dur="0.2"/> <u who="nm1112" trans="pause"> <trunc>lea</trunc> finance leases absolutely right you can't capitalize finance leases <pause dur="0.4"/> under the restrictive notion of patrimony <pause dur="0.4"/> and that's that's what appears <pause dur="0.4"/> in the French and Greek versions <pause dur="0.8"/> and Spanish and Italian <pause dur="0.8"/> so it's telling

you that because of a <trunc>for</trunc> a <trunc>lang</trunc> a translation problem <pause dur="0.7"/> you're not going to get <shift feature="voice" new="laugh"/>harmonization<shift feature="voice" new="normal"/> <pause dur="2.1"/> do you understand this point about patrimony <pause dur="0.9"/> no all right well then i'll give you just just <trunc>refresh</trunc> i <pause dur="0.3"/> i'm going to take a football example <pause dur="0.6"/> right <pause dur="0.7"/> this <trunc>foot</trunc> do you know anything about football <pause dur="1.6"/> i <vocal desc="laughter" n="ss" iterated="y" dur="2"/> don't know i i don't know <trunc>anythi</trunc> you know anything about football <pause dur="1.0"/> all right well look <vocal desc="cough" iterated="n"/> i'll tell you this 'cause this is what my son tells me <pause dur="0.8"/> there is a famous football player in the U-K called Alan Shearer <pause dur="0.6"/> he's <trunc>cap</trunc> you're nodding your head he's captain of the England football team <pause dur="1.4"/> and <pause dur="0.3"/> he <pause dur="0.6"/> plays for <pause dur="0.2"/> Newcastle United <pause dur="0.6"/> doesn't mean anything to me </u><u who="sm1117" trans="overlap"> <gap reason="inaudible" extent="1 sec"/></u><u who="nm1112" trans="overlap"> you yeah # you remember the story ah the story is this <pause dur="1.3"/> could Newcastle United <pause dur="0.8"/> put <pause dur="0.3"/> Alan Shearer <pause dur="0.2"/> as an asset <pause dur="0.9"/> on Newcastle United's balance sheet <pause dur="0.8"/> <vocal desc="laughter" iterated="y" dur="1"/><pause dur="0.8"/> now if i ask the question to the French or Greeks <pause dur="0.4"/> or to

the Chinese <pause dur="0.6"/> you say <pause dur="0.6"/> of course not <pause dur="1.4"/> and you would say <pause dur="0.3"/> Newcastle United doesn't own <pause dur="0.4"/> <trunc>new</trunc> <pause dur="0.2"/> Alan Shearer he's not part of the patrimony <pause dur="1.5"/> right <pause dur="0.7"/> but in the U-K <pause dur="0.6"/> our notion of an asset <pause dur="0.2"/> is far more flexible <pause dur="0.3"/> to be an asset </u> <pause dur="1.0"/><u who="sm1117" trans="pause"> <gap reason="inaudible" extent="1 word"/></u><u who="nm1112" trans="overlap"> you have to have a resource that you can control <pause dur="1.1"/> and to which you can give a reliable monetary value <pause dur="0.5"/> does Newcastle United controlled <pause dur="1.5"/> Alan Shearer yeah he's under contract <pause dur="0.7"/> can you give a reliable monetary value yes he was transferred to Newcastle United for fifteen-million pounds <pause dur="0.8"/> is he going to produce economic benefits for the club <pause dur="0.2"/> yes <pause dur="0.5"/> bang <pause dur="0.3"/> put him on the balance sheet <vocal desc="laughter" iterated="y" dur="1"/> <pause dur="2.0"/> yes <pause dur="0.3"/> but you can't do that when you have a notion of patrimony which is very restrictive <pause dur="0.8"/> and the fact <shift feature="voice" new="laugh"/>that<shift feature="voice" new="normal"/> <pause dur="0.7"/> you got a <trunc>la</trunc> you got a translation issue here <pause dur="0.2"/> assets comma liabilities is English patrimony <pause dur="0.6"/> is French and Greek and Spanish and Italian and Belgian <pause dur="0.4"/> and almost <trunc>e</trunc> and Greek and <trunc>ev</trunc> almost every other country in the

European Union <pause dur="0.3"/> so it's already telling you that there's going to be a problem <pause dur="0.7"/> you're not going to get harmonization because of this conceptual difference <pause dur="1.0"/> yeah <pause dur="0.8"/> now the third point <pause dur="0.3"/> about this statement is this i want you to connect <pause dur="0.8"/> this section <pause dur="0.7"/> <reading>the annual accounts shall give a true and fair view</reading> <pause dur="0.6"/> with the first section <pause dur="2.2"/> can you see a problem <pause dur="2.3"/> the annual accounts shall give a true and fair view </u><pause dur="0.2"/> <u who="sm1117" trans="pause"> <gap reason="inaudible" extent="1 word"/>accounts</u><pause dur="0.8"/> <u who="nm1112" trans="pause"> a little more <pause dur="0.3"/> yeah i like it <pause dur="0.2"/> i like it</u><u who="sm1117" trans="overlap"> <gap reason="inaudible" extent="1 word"/> <pause dur="0.4"/> <gap reason="inaudible" extent="1 sec"/> sections there doesn't say a true and fair view in the notes of the accounts </u><pause dur="0.9"/> <u who="nm1112" trans="pause"> well what it <trunc>s</trunc> the first section says <pause dur="2.7"/> therefore <pause dur="0.3"/> from section three <pause dur="0.8"/> the accounts as a whole must give a true and fair view <pause dur="2.1"/> right <pause dur="2.5"/> what does that allow <pause dur="3.6"/> think France think Germany <pause dur="4.5"/> well what it means is <pause dur="0.3"/> it's possible <pause dur="0.6"/> to have one part of the accounts <pause dur="0.2"/> that is not true and fair <pause dur="1.4"/> provided that another part of the accounts <pause dur="0.2"/> corrects it <pause dur="0.7"/> so that overall <pause dur="0.5"/> the accounts are true and fair <pause dur="2.0"/> do you follow that <pause dur="0.2"/> can you think of anything where that might apply <pause dur="4.5"/>

three letters <pause dur="1.5"/> T </u><pause dur="0.4"/> <u who="sf1118" trans="pause"> tax</u><pause dur="0.3"/> <u who="nm1112" trans="pause"> thank you <pause dur="0.4"/> tax <pause dur="0.6"/> it's possible for something to be tax-polluted in one part of the accounts provided <pause dur="0.6"/> that the correction to that tax pollution is made in the notes <pause dur="0.3"/> so that overall <pause dur="0.7"/> you give a true and fair view <pause dur="2.2"/> yeah <pause dur="0.4"/> <vocal desc="laughter" iterated="y" dur="1"/> <pause dur="0.3"/> and it's only in close reading of this that you see the potential <pause dur="0.5"/> for divergence if i didn't make you do this you wouldn't even think of it <pause dur="0.2"/> so whereas you've got what seems to be harmonization the words <pause dur="0.7"/> are expressed in such a way that the potential for divergence is there <pause dur="2.7"/> okay <pause dur="0.2"/> <vocal desc="cough" iterated="n"/> <pause dur="0.3"/> let's <pause dur="0.9"/> go on a bit # sections four five and six say four says well if it you don't get a true and fair view got to add additional information <pause dur="0.7"/> that's <pause dur="0.2"/> <trunc>b</trunc> <pause dur="0.2"/> that's section four section five says <pause dur="0.7"/> <reading>where in exceptional cases <pause dur="0.3"/> you don't get a true and fair view by applying the provisions of the directive <pause dur="0.6"/> you must depart from the directive</reading> <pause dur="5.8"/> but national governments have said <pause dur="1.4"/> in Germany <pause dur="1.1"/> we don't have any

exceptional <shift feature="voice" new="laugh"/> cases <shift feature="voice" new="normal"/><pause dur="1.3"/> so <pause dur="0.3"/> section five doesn't apply <pause dur="1.8"/> difference is <shift feature="voice" new="laugh"/>interpretation <shift feature="voice" new="normal"/><pause dur="0.9"/> we're getting <pause dur="0.9"/> all right well that <pause dur="0.5"/> is <pause dur="0.2"/> just giving you a flavour of some of the areas <pause dur="0.5"/> # let's go on we've got section two which is about some general provisions of the balance sheet <pause dur="0.5"/> # we'll leave <pause dur="0.2"/> most of those away <pause dur="0.7"/> # <pause dur="2.7"/> look at article six <pause dur="0.3"/> what does this remind you of <pause dur="1.9"/> this is a potential for divergence <pause dur="0.4"/> i wonder if you can think of a difference <pause dur="11.1"/> what's that remind you of <pause dur="6.3"/> <reading>member states may authorize or require <pause dur="1.6"/> adaptation of the layout of the balance sheet and P and L in order to include the appropriation of profit or treatment of loss</reading> </u><pause dur="1.1"/><u who="sm1117" trans="pause"> <gap reason="inaudible" extent="1 word"/> </u><pause dur="1.0"/> <u who="nm1112" trans="pause"> yeah well a bit more you're right what you've just done the French case study <pause dur="2.1"/> what kind of balance sheet is a French balance sheet </u><pause dur="0.6"/><u who="sm1117" trans="pause"> tax </u><pause dur="1.2"/> <u who="nm1112" trans="pause"> it's before appropriation <pause dur="0.7"/> in other words the net profit <pause dur="1.1"/> is put straight into equity <pause dur="0.2"/> without any appropriation

of that profit <pause dur="0.8"/> yeah <pause dur="0.5"/> and you had to do that little exercise of finding the dividends do you remember <pause dur="1.0"/> whereas in the U-K <pause dur="0.5"/> which is a which has taken article six <pause dur="0.6"/> from the net profit after tax we show proposed dividends we retain profits the retained profits slot into equity <pause dur="0.7"/> and the proposed dividends go into </u><pause dur="1.5"/><u who="sm1117" trans="pause"> current liability </u> <pause dur="0.3"/> <u who="nm1112" trans="pause"> current liabilities <pause dur="1.0"/> so you've got <pause dur="0.2"/> already <pause dur="1.1"/> an exemption which is going to mean that the accounts are going to be different <pause dur="2.3"/> one country's done it another country hasn't <pause dur="2.3"/> okay section three <pause dur="0.9"/> says talks about the layout <pause dur="0.7"/> of the balance sheet <pause dur="0.4"/> right and basically there are two layouts possible <pause dur="2.5"/> article nine is the two-sided balance sheet <pause dur="0.2"/> assets on the left <pause dur="0.4"/> capital and liabilities on the right <pause dur="1.2"/> and article ten <pause dur="0.7"/> is the vertical balance sheet <pause dur="1.5"/> right <pause dur="0.3"/> so the <pause dur="0.3"/> European Union <pause dur="0.6"/> the European Communities as was are saying you can choose your layout <pause dur="0.6"/> horizontal <pause dur="0.4"/> or vertical <pause dur="1.4"/> and <pause dur="1.5"/> it's saying in article eight <pause dur="2.0"/> that member states can say either one or both <pause dur="1.5"/> well that's

not going to make things very easy is it <pause dur="4.4"/> i mean <pause dur="1.0"/> you know in in <pause dur="0.2"/> most continental countries <pause dur="0.7"/> it's <pause dur="0.2"/> horizontal <pause dur="0.4"/> only one layout <pause dur="1.6"/> but in Denmark <pause dur="0.2"/> and the Netherlands and Ireland and the U-K <pause dur="1.2"/> both <pause dur="0.4"/> layouts have been permitted <pause dur="1.2"/> and what do most British companies choose </u><pause dur="0.4"/> <u who="sm1117" trans="pause"> vertical </u><pause dur="0.4"/> <u who="nm1112" trans="pause"> the vertical <pause dur="0.6"/> so <trunc>y</trunc> <shift feature="voice" new="laugh"/>you <shift feature="voice" new="normal"/> in practice then <pause dur="0.3"/> you <sic corr="try">cry</sic> and compare a French balance sheet with a with a British one or <trunc>sp</trunc> <pause dur="0.6"/> Portugese with a British one <pause dur="0.5"/> we're going to be laid out in <pause dur="0.2"/> in a slightly different way which is not going to make it easy <pause dur="0.5"/> to understand the accounts <pause dur="1.3"/> and even if you look at the detail of the ordering you'll see that there are lots of strange things <pause dur="1.6"/> look at article nine number B <pause dur="2.2"/> it says <reading>formation expenses</reading> <pause dur="1.3"/> right start-up costs <pause dur="1.3"/> <reading>as defined by national law <pause dur="0.9"/> and in so far as national law permits their being shown as an asset</reading> <pause dur="1.1"/> can you show it as an asset in Germany </u><pause dur="1.3"/><u who="sm1117" trans="pause"> mm </u><pause dur="0.4"/> <u who="nm1112" trans="pause"> yes you can </u><pause dur="0.2"/><u who="sm1117" trans="pause"> yes <pause dur="0.3"/> mm </u><u who="nm1112" trans="overlap"> can you do it in France <pause dur="2.9"/> yes you can can you do it in

Greece <pause dur="1.3"/> yes you can can you do it in Britain </u><pause dur="0.3"/><u who="sm1117" trans="pause"> no </u><u who="nm1112" trans="latching"> no you can't <pause dur="1.3"/> so the </u><u who="sm1117" trans="overlap"> it's a tax <gap reason="inaudible" extent="1 word"/><vocal desc="laughter" n="sl" iterated="y" dur="1"/> </u><u who="nm1112" trans="latching"> well i know it's a tax issue for you <pause dur="0.7"/> but it it's just saying okay here it's recognizing that there are going to be differences anyway <pause dur="0.3"/> <reading>in so far as national law permits their being shown as an asset <pause dur="0.6"/> national law may also provide for formation expenses to be shown somewhere else</reading> <pause dur="0.7"/> well this is pretty weak stuff isn't it <pause dur="2.4"/> and if you read down the order you'll see there are lots of alternative places <pause dur="0.6"/> which doesn't actually help <pause dur="0.7"/> if you're making things comparable <pause dur="1.0"/> so you may say ask yourself the question well look heavens if the European Community was trying to harmonize couldn't they just at least harmonize this <pause dur="1.6"/> couldn't they have just done a common layout <pause dur="1.0"/> why do you think it was so difficult <pause dur="6.7"/> go on <pause dur="1.9"/>

here are all these voluntary members of the European Union subscribing to <pause dur="0.7"/> nine years all of <pause dur="0.2"/> signing up to the Treaty of Rome Treaty of Maastricht and later on # why are they having so much difficulty <pause dur="8.5"/> well i think i i mean there are a number of reasons for it one the British didn't want to get involved in too much regulation by law <pause dur="1.5"/> secondly <pause dur="0.2"/> each <pause dur="0.8"/> each country had a certain national pride in the way they had been <shift feature="voice" new="laugh"/>doing <shift feature="voice" new="normal"/> accounts and didn't see why they should change <pause dur="1.9"/> right <pause dur="2.2"/> and thirdly and perhaps a very important point <pause dur="2.4"/> well you've already <trunc>se</trunc> <trunc>w</trunc> <trunc>w</trunc> let me rephrase the question you've already seen that there are going to be divergences <pause dur="2.2"/> and so <pause dur="0.4"/> the effect has been that if i look at a set of French accounts or Greek accounts or British or German or Italian they look different they got different numbers in them <pause dur="1.3"/> why <pause dur="1.7"/> why do you think <pause dur="0.9"/> you know at root <pause dur="1.3"/> the thing has proved to be so difficult <pause dur="2.9"/> i know there are different traditions i know that <pause dur="0.7"/> i mean you have different regulatory systems for accounting but what <pause dur="0.2"/> what <pause dur="0.3"/> what would you suggest is <pause dur="0.2"/> #

is another reason perhaps more fundamental reason</u><pause dur="0.2"/> <u who="sm1117" trans="pause"> tax </u><pause dur="1.4"/> <u who="nm1112" trans="pause"> <trunc>y</trunc> <pause dur="0.3"/> <trunc>y</trunc> you're right it is related to tax but go a bit further <pause dur="3.1"/> you're you're you're right <pause dur="0.5"/> 'cause we've seen that <pause dur="0.5"/> several places <pause dur="3.0"/> think back to some <pause dur="0.6"/> lecture lecture that <gap reason="name" extent="1 word"/> gave <pause dur="0.2"/> right at the beginning of</u><u who="sm1117" trans="overlap"> <gap reason="inaudible" extent="1 sec"/> # <pause dur="0.4"/> number <pause dur="0.2"/> so it's <pause dur="0.4"/> better for this country's <pause dur="0.6"/> <gap reason="inaudible" extent="1 sec"/> of this country's to <pause dur="0.6"/> to begin a <pause dur="1.3"/> something </u><pause dur="2.4"/><u who="nm1112" trans="pause"> yeah </u><u who="sm1117" trans="latching"> for example if the U-K has a <trunc>go</trunc> <pause dur="0.2"/> very big # capital market and in </u><u who="nm1112" trans="latching"> yes yes <pause dur="0.2"/> it's <trunc>th</trunc> # <pause dur="0.2"/> okay it's the capital market <pause dur="0.6"/> tax creditor orientation issue <pause dur="0.7"/> 'cause underlying the problems in pulling all this together <pause dur="0.9"/> is the idea that <pause dur="0.4"/> accounting serves <pause dur="0.2"/> different <pause dur="0.2"/> purposes in different <pause dur="0.2"/> countries <pause dur="0.2"/> the primary purpose <pause dur="0.5"/> historically <pause dur="0.6"/> and currently <pause dur="0.7"/> in France and Germany <pause dur="0.9"/> and Greece <pause dur="1.3"/> for individual company accounts is to ensure that the tax authorities <pause dur="0.6"/> have information <pause dur="0.7"/> to make an assessment of taxable profit <pause dur="1.9"/> and <pause dur="0.2"/> also <pause dur="0.6"/> to provide some creditor protection <pause dur="0.7"/> the primary purpose of accounts <pause dur="0.3"/> in Anglo-Saxon countries <pause dur="0.3"/> and the Netherlands <pause dur="0.7"/> is to provide useful information to shareholders <pause dur="1.5"/> and that's the problem <pause dur="0.4"/> because no matter how much you try and regulate

or harmonize <pause dur="1.1"/> those fundamental objectives will only change very slowly <pause dur="1.1"/> and in accordance with <pause dur="0.7"/> social and economic conditions that prevail so you can <pause dur="0.3"/> legislate as much as you like <pause dur="2.6"/> but you're going to get those interests being protected and particularly that orientation issue <pause dur="0.6"/> and you can see it all the way through as we go through <pause dur="0.4"/> let's pick up some more examples <pause dur="1.1"/> # <pause dur="1.8"/> if i <pause dur="1.7"/> jump <pause dur="0.2"/> to <pause dur="0.4"/> let's see <pause dur="3.2"/> if i <pause dur="0.3"/> yeah if i jump to article twenty-two here's the P and L accounts <pause dur="11.6"/> <vocal desc="cough" iterated="n"/> <pause dur="1.8"/> and what the Fourth Directive <pause dur="3.7"/> says <pause dur="1.7"/> if you look at article twenty-two twenty-three twenty-four twenty-five twenty-six <pause dur="1.4"/> is it says <pause dur="0.3"/> here are some layouts for P and L accounts <pause dur="1.6"/> member states <pause dur="0.6"/> and there are four <pause dur="0.3"/> member states can put into their law just one <pause dur="0.7"/> or two or three or all of them <pause dur="1.4"/> and <pause dur="0.7"/><kinesic desc="writes on board" iterated="y" dur="34"/> here they are <pause dur="8.4"/> vertical horizontal <pause dur="23.8"/> tell me which is which <pause dur="0.3"/> article twenty-three twenty-four twenty-five twenty-six <pause dur="4.1"/> which one is article twenty-three </u><pause dur="24.2"/><u who="sm1117" trans="pause"> <unclear>spoken</unclear> by nature </u><u who="nm1112" trans="latching">

it's vertical <pause dur="0.4"/> and it's is it by nature or by function <pause dur="1.9"/> by </u> <pause dur="2.5"/><u who="sf1118" trans="pause"> nature </u> <pause dur="0.4"/> <u who="nm1112" trans="pause"> it's by nature yes <pause dur="6.2"/> <kinesic desc="writes on board" iterated="y" dur="4"/> there's no gross profit figure <pause dur="0.4"/> the analysis of costs is by their nature <pause dur="0.7"/> okay <pause dur="0.8"/> which one is this one <pause dur="1.0"/> by function </u><pause dur="1.2"/><u who="sm1117" trans="pause"> twenty-five </u><pause dur="1.2"/> <u who="nm1112" trans="pause"> sorry </u><pause dur="0.8"/> <u who="sm1117" trans="pause"> twenty-five</u><pause dur="0.8"/> <u who="nm1112" trans="pause"> twenty-five very good <pause dur="4.5"/> <kinesic desc="writes on board" iterated="y" dur="4"/> and this one it starts getting easy now </u><pause dur="2.4"/><u who="sm1117" trans="pause"> was it twenty-four </u><pause dur="0.2"/> <u who="nm1112" trans="pause"> twenty-four <pause dur="4.3"/> <kinesic desc="writes on board" iterated="y" dur="3"/> and <pause dur="0.4"/> this one <pause dur="0.3"/> is therefore by elimination <pause dur="0.9"/><kinesic desc="writes on board" iterated="y" dur="4"/> article <pause dur="1.2"/> twenty-six <pause dur="1.1"/> now the point <pause dur="0.7"/> here is <pause dur="0.7"/> the <pause dur="1.5"/> <vocal desc="cough" iterated="n"/> <pause dur="2.4"/> the the Fourth Directive permits <pause dur="0.4"/> countries to either say just one <pause dur="1.2"/> or some or all <pause dur="1.4"/> right <pause dur="0.2"/> so you have a situation where <pause dur="0.8"/> for example <pause dur="0.5"/> if we take <pause dur="0.3"/> opposites <pause dur="0.6"/> # <pause dur="0.8"/> Portugal <pause dur="0.5"/> has just said <pause dur="0.2"/> <kinesic desc="indicates point on board" iterated="n"/> that's the only one <pause dur="1.5"/> Denmark <pause dur="0.2"/> has said <pause dur="0.5"/> companies can use any of them <pause dur="2.6"/> and depending on whether you go for a by nature or by function format <pause dur="0.2"/>

<shift feature="voice" new="laugh"/>you're not <shift feature="voice" new="normal"/> going to get a lot of comparability <pause dur="0.7"/> because you you remember <pause dur="0.5"/> you know in a by nature format you can work out the value added the gross operating profit <pause dur="0.7"/> but because you don't have a <trunc>g</trunc> cost of sales you can't work out the gross profit which you can in a by function format <pause dur="0.7"/> so again it's not being very helpful in making things comparable <pause dur="0.9"/> and why did Portugal want to have by nature <pause dur="0.7"/> simply because there are so many small and medium-sized companies <pause dur="0.2"/> who couldn't afford the cost of running <pause dur="0.6"/> a costing system <pause dur="0.5"/> which is what you need if you have that kind of <pause dur="0.6"/> structure of P and L <pause dur="1.6"/> and it reflected if you like economic conditions it also in tax terms is more tax <shift feature="voice" new="laugh"/>transparent <shift feature="voice" new="normal"/><pause dur="0.8"/> so it fits very much with the <pause dur="0.8"/> particular economic conditions <pause dur="3.1"/> right are you depressed <pause dur="2.6"/> <vocal desc="laughter" iterated="y" dur="1"/> fed up <pause dur="1.6"/> this is heavy stuff you know this is good stuff <pause dur="1.0"/> let's <pause dur="1.0"/> let's just pick a <pause dur="1.6"/> a few points <pause dur="0.5"/> further on i'm just picking things <pause dur="0.5"/> just to illustrate what this problem of <pause dur="1.2"/>

inherent or inherent problems in trying to get harmonization through law <pause dur="0.7"/> to emphasize the minimum minimal qualities of this and to show why <pause dur="0.7"/> you can look at a set of accounts from another European <shift feature="voice" new="laugh"/>country <shift feature="voice" new="normal"/> and it's not <pause dur="0.4"/> easily comparable with another <pause dur="1.0"/> # <pause dur="0.2"/> ah here's another one let's take <pause dur="0.2"/> # <pause dur="0.3"/> article twenty-nine <pause dur="1.6"/> this concerns certain provisions relating to special provisions relating to certain items in the P and L <pause dur="0.9"/> right <pause dur="0.9"/> <reading>income and charges that arise otherwise than in the course of the companies ordinary activities <pause dur="0.5"/> must be shown under <pause dur="0.6"/> extraordinary income and extraordinary charges <pause dur="1.2"/> unless the income and charges are immaterial <pause dur="0.7"/> explanations of their amount and nature <pause dur="0.4"/> must be given in the notes on the accounts</reading> <pause dur="2.7"/> what's the problem <pause dur="5.6"/> perhaps it's an unfair question because you haven't read the whole of the directive <pause dur="2.8"/> but you know enough about for example you should know enough about U-K accounting and French accounting <pause dur="1.4"/> to recognize <pause dur="0.2"/> one