Choosing a reporting framework is rarely the most exciting decision a CFO makes, but it is one you live with every year. Just Audit explains the options under Dutch law and what each choice means for the audit and for your finance team.
A Dutch subsidiary can usually prepare its annual accounts under Dutch GAAP (Title 9 Book 2 BW and the Dutch Accounting Standards) or under IFRS as adopted by the EU (art. 2:362 lid 8 BW). The choice affects how much work the reporting takes, how closely it aligns with group reporting, and what your auditor needs to see.
The Options Under Dutch Law
Dutch law gives companies a few routes:
- Dutch GAAP: the annual accounts follow Title 9 Book 2 BW and the guidelines of the Dutch Accounting Standards Board (RJ).
- IFRS-EU: the company applies all IFRS standards adopted by the EU, with disclosures to match (art. 2:362 lid 8 BW).
- Mixed approach: a company that prepares its consolidated accounts under IFRS-EU may use IFRS measurement principles in its company-only accounts, while presenting them under Dutch law. A company with Dutch GAAP consolidated accounts is not expected to prepare its company-only accounts under IFRS.
Alignment With Group Reporting
If the group reports under IFRS, preparing the Dutch accounts under IFRS-EU means one set of numbers. There is no second set of accounting policies to maintain, and the audit work for the group reporting package and the statutory accounts overlaps almost entirely.
Under Dutch GAAP, the finance team needs a bridge between the group figures and the local accounts. Differences often appear in areas like leases, financial instruments, goodwill. Each difference must be tracked, explained and audited.
The Disclosure Burden
IFRS usually requires more extensive disclosures than Dutch GAAP, especially for smaller and medium-sized companies, which benefit from simplifications under Dutch law. So in short, IFRS is just more work. For a subsidiary with a small finance team, that extra disclosure work is a real cost. It is worth comparing the effort of a full IFRS note set with the effort of maintaining a bridge to Dutch GAAP.
What It Means for the Audit
For your auditor, the framework decides which rules the accounts are tested against. Under Dutch GAAP with group IFRS reporting, the auditor will want to see the reconciliation between the two and test the adjustments. Under IFRS-EU, the auditor will check that every applicable standard is applied, including the disclosures.
Changing framework is not a small step either. The comparative figures must be restated and the opening balance sheet reviewed, so the first year after a change takes more time from both your team and the auditor.
Practical Points Before You Decide
- Group policy: check whether the group already prescribes a framework for its subsidiaries.
- Users of the accounts: banks, investors or grant providers may prefer one framework.
- Language and currency: the accounts may be prepared in a foreign currency if the business justifies it, and in a language other than Dutch if the general meeting decides so (art. 2:362 lid 7 BW).
- Timing: decide before the year starts, not during the year-end close, when nobody has time for a debate about lease accounting.
Choosing the Right Framework
Just Audit B.V. is an independent, audit-only firm with an AFM licence for statutory audits (excluding OOBs). Our auditors are RAs registered with the NBA. Have a look at our page for Dutch subsidiaries or our statutory audit services.
