Fair Value Accounting Directive

The Directive 2001/65/EC was adopted by the Internal Market Council on the 31 May, 2001(Press Release) and was due to be transposed into national law by January 2004.

This Directive amends the following three Directives:

• 78/660/EEC: Annual Accounts of certain types of companies (4^th Directive);
• 83/349/EEC: Consolidated Accounts (7^th Directive);
• 86/635/EEC: Banks and other Financial Institutions.

This Directive gives Member States the option to permit or require the use of fair value valuation methods to account for certain classes of financial instruments in companies' annual financial statements. Up to now the above mentioned Directives only permitted valuation of financial instruments using historical cost methods.

This proposal is based on an International Accounting Standard (IAS) on the use of Fair Value Accounting (IAS 39). This Directive will therefore enable European companies to prepare annual financial statements in accordance with international developments. Companies will be required to provide additional information in the notes to the accounts on the items that have been valued at fair value.

On 30th November, 2004, Michéal Martin, Minister for Enterprise, Trade and Employment, in exercise of the powers conferred on him by section 3 of the European Communities Act, 1972 (No. 27 of 1972), made Regulations entitled the European Communities (Fair Value Accounting) Regulations 2004 giving effect to the Fair Value Accounting Directive. These Regulations come into operation on 1 January 2005.