This essay is meant to give a brief overview of accounting in The Netherlands. Accounting is examined under its background in the economy, politics, auditing, legal framework and institutions involved in accounting regulations. In times of globalisation and harmonisation accounting has to be taken in consideration as an important factor. The Netherlands as a founder of the IAS and the EU was always interested in moving towards harmonisation. The Netherlands accounting system, which is unique and difficult to classify, has a good reputation world-wide.
Table of Contents
Introduction
Economic backround
Politics and institutions involved in setting accounting standards
Historical issues of accounting in the 20th century
Legal Framework related to accounting
Professionals and auditing
Principles and practices including unique features
Replacement cost accounting and inflation accounting
Goodwill
Research and development
Stock and work in progress
Group accounting and consolidation
Conclusion and evaluation
Objectives and Topics
This paper provides a comprehensive analysis of the Dutch accounting system, examining its structural, legal, and institutional foundations within the context of an open, internationally oriented economy.
- Economic and historical background of the Dutch accounting framework.
- Roles of political institutions and standard-setting bodies like the Council for Annual Reporting.
- Legal requirements and the influence of professional auditing bodies.
- Unique accounting practices, including replacement cost valuation and treatment of goodwill.
- Challenges and opportunities related to international harmonisation and EU directives.
Excerpt from the Book
Replacement cost accounting and inflation accounting
The Netherlands is the only country with a low inflation rate where a system of replacement accounting is in use. In addition, it is an alternative treatment of the problem of inflation accounting. Replacement accounting has a long tradition and was actually developed on basis of business economics and not as reaction to the inflation problem. The use of current costs is limited to financial and tangible fixed assets and inventory. The Civil Code allows historical and current costs, but set requirements do not exist for use in current value accounting. In practice most companies use current values only partial. For example the multinational company Phillips changed their accounts in 1992 into historical costs to improve communications to shareholders and to simplify accounting systems and procedures in accordance with international accounting practice.
Summary of Chapters
Introduction: Provides a brief overview of Dutch accounting as a unique system with a strong global reputation, emphasizing its historical commitment to harmonization.
Economic backround: Analyzes the Netherlands' status as a small, highly industrialized, and internationally oriented economy with significant multinational enterprises.
Politics and institutions involved in setting accounting standards: Explores the role of the Social Economic Council and the Council for Annual Reporting in shaping accounting regulations.
Historical issues of accounting in the 20th century: Traces the evolution of Dutch accountancy from the influence of Professor Theodore Limperg to the integration of statutory laws in the 1975 Civil Code.
Legal Framework related to accounting: Describes the Dutch legal system's basis in Roman law and the traditionally ambiguous yet flexible nature of the Civil Code regarding commercial matters.
Professionals and auditing: Discusses the roles and requirements of the NIVRA and NOVAA as the primary institutes for chartered accountants in the Netherlands.
Principles and practices including unique features: Examines the business economics approach to accounting and the influence of Anglo-Saxon standards and EU directives.
Replacement cost accounting and inflation accounting: Details the unique Dutch usage of replacement values as an alternative approach to dealing with inflation.
Goodwill: Explains the various treatments of goodwill originating from acquisitions, including capitalization and amortization practices.
Research and development: Outlines the criteria under which R&D costs can be capitalized as assets rather than expensed.
Stock and work in progress: Describes the valuation methods used for inventory and long-term projects, including full absorption and percentage of completion methods.
Group accounting and consolidation: Discusses the long tradition of consolidated accounts and the use of purchase, proportional, and equity methods.
Conclusion and evaluation: Evaluates the balance between flexibility and comparability in the Dutch system and reflects on future trends in international harmonization.
Keywords
Accounting, Netherlands, NIVRA, Harmonization, Replacement cost, Civil Code, Auditing, Consolidation, Goodwill, Business economics, Annual reporting, Financial standards, Multinational enterprises, Inflation accounting, Corporate law
Frequently Asked Questions
What is the primary focus of this paper?
The paper provides an overview of the accounting system in the Netherlands, analyzing how it is shaped by the nation's economic environment, legal framework, and political institutions.
What are the central themes covered?
The work covers standard-setting bodies, the role of professional auditors, unique valuation practices like replacement cost accounting, and the harmonization of Dutch standards with international norms.
What is the primary research goal?
The goal is to explain how a unique, flexible accounting system functions in a highly industrialized, open economy and how it maintains a good reputation worldwide.
Which scientific method does the author employ?
The paper employs a descriptive and analytical review of literature, legal texts, and institutional frameworks to classify the Dutch accounting system.
What does the main body of the work address?
The main body examines historical development, legal structures, auditing standards, and specific accounting treatments for items such as goodwill, stock, and R&D.
Which keywords best characterize this work?
Key terms include accounting, Netherlands, NIVRA, replacement cost, harmonization, and corporate law.
How does the Dutch system handle inflation compared to other countries?
The Netherlands uniquely utilizes replacement cost accounting, which was originally developed based on business economics principles rather than merely as a response to inflation.
What is the role of the Enterprise Chamber in Dutch accounting?
Established in 1975 as a section of the Court of Justice, it adjudicates cases related to accounting requirements and has exerted a significant influence on the development of accounting standards.
- Quote paper
- Jens Gehrmann (Author), 2000, Accounting in The Netherlands, Munich, GRIN Verlag, https://www.grin.com/document/2660
