EU Accounting Standards Explained: Directives, Local GAAP, and What Applies to You
What the Accounting Directive actually requires, where IFRS is mandatory, how national GAAP differs by country, and a decision table for working out which set of rules applies to your company.
There is no single set of EU accounting standards. What exists is a layered system: an EU directive that sets the minimum rules for annual accounts, a regulation that makes IFRS mandatory for the consolidated accounts of listed companies, and 27 national frameworks that fill in everything the directive leaves to member states. A company in the EU prepares its statutory accounts under the national rules of the country where it is registered, and those national rules are what the directive has been turned into locally.
This article explains each layer, shows the size thresholds that decide how much a company has to disclose, and ends with a table for working out which framework applies to you.
Layer one: the Accounting Directive
Directive 2013/34/EU, usually called the Accounting Directive, is the EU-level rulebook for the annual financial statements of limited liability companies. It replaced the Fourth and Seventh Company Law Directives in 2013. A directive does not apply to companies directly; each member state transposes it into national law, and the national law is what a company follows.
The directive fixes a small number of things for everyone:
- General principles: going concern, prudence, accrual accounting, consistency, and substance over form (the last one is a member state option).
- Statement layouts: a choice of balance sheet layouts (Annexes III and IV) and profit and loss layouts (Annexes V and VI). Each member state picks which of these its companies may use.
- Notes to the accounts: a mandatory core set, with more required as the company gets larger.
- A management report for medium and large companies.
- Audit: mandatory for medium and large companies and for public-interest entities. Member states may exempt small companies, and most do.
- Publication: the approved accounts must be filed with the national business register within 12 months of the balance sheet date.
Everything else is left to national law, which is why two companies of the same size in two member states can produce statements that look quite different.
Size categories and the 2024 thresholds
The directive sorts companies into four categories by three criteria: balance sheet total, net turnover, and average number of employees during the year. A company falls into a category when it does not exceed at least two of the three limits at the balance sheet date. It moves to another category only after exceeding or falling below the limits for two consecutive years.
Delegated Directive (EU) 2023/2775 raised the monetary limits by roughly a quarter to correct for inflation. Member states had to apply the new limits to financial years starting on or after 1 January 2024, with an option to apply them a year earlier.
| Category | Balance sheet total | Net turnover | Average employees |
|---|---|---|---|
| Micro | ≤ €450,000 | ≤ €900,000 | ≤ 10 |
| Small | ≤ €5,000,000 | ≤ €10,000,000 | ≤ 50 |
| Medium | ≤ €25,000,000 | ≤ €50,000,000 | ≤ 250 |
| Large | above any two medium limits |
Member states may raise the small-company monetary limits by up to 50 percent, so the small category can extend to €7.5 million balance sheet total and €15 million turnover in some countries. Check the national transposition rather than the directive when a company sits close to a limit.
What each category has to produce
| Obligation | Micro | Small | Medium | Large |
|---|---|---|---|---|
| Balance sheet and P&L | Yes, abridged formats permitted | Yes, abridged formats permitted | Full | Full |
| Notes | May be exempted from most notes | Reduced set | Full set | Full set plus extra disclosures |
| Management report | May be exempted | May be exempted | Required | Required |
| Statutory audit | Exempt in most member states | Exempt in most member states | Required | Required |
| Publication | Balance sheet only, in some member states | Balance sheet and notes; P&L may be withheld | Full set | Full set |
| Cash flow statement | Not required by the directive | Not required by the directive | National option | National option |
The directive does not require a cash flow statement from anyone. Some member states require one from medium and large companies, and IFRS always requires one, which is one reason the same group can have a cash flow statement in its consolidated accounts and none in a subsidiary's statutory accounts.
Layer two: IFRS for listed groups
Regulation (EC) 1606/2002, the IAS Regulation, requires every company with securities admitted to trading on an EU regulated market to prepare its consolidated financial statements under IFRS as adopted by the EU. This has applied since financial years starting in 2005. Because it is a regulation rather than a directive, it applies directly without national transposition.
Two points are often misunderstood:
- The regulation covers consolidated accounts only. A listed parent's own annual accounts, and every subsidiary's annual accounts, follow national GAAP unless the member state has used its option to extend IFRS to them.
- "IFRS as adopted by the EU" is not identical to IFRS as issued by the IASB. Each standard goes through an EU endorsement process, and there have been timing gaps and carve-outs. In practice the differences affect very few companies, but the legal reference is the EU-endorsed version.
Member states may permit or require IFRS for unlisted companies and for annual accounts. Several do permit it, few require it. An unlisted company that volunteers for IFRS usually does so because a parent or an investor reports under it.
Layer three: national GAAP
The national framework is where the real accounting rules live for the vast majority of EU companies. A few examples, one sentence each:
- Germany follows the third book of the Handelsgesetzbuch (HGB), with the tax balance sheet derived from the commercial one and an XBRL taxonomy (the E-Bilanz) for submitting it to the tax office.
- France follows the Plan Comptable Général (PCG), which prescribes a mandatory national chart of accounts and feeds the standardised tax return package (liasse fiscale).
- Lithuania follows the Business Accounting Standards (Verslo apskaitos standartai, VAS), with a recommended national chart of accounts that most companies adopt as published.
- Sweden uses the Bokföringsnämnden frameworks: K2, a simplified rulebook for smaller companies, and K3, the principle-based main rulebook, with K4 for groups applying IFRS.
- The Netherlands combines Book 2 Title 9 of the Civil Code with the Dutch Accounting Standards Board (Raad voor de Jaarverslaggeving) guidelines, and allows small companies to use tax valuation rules in their statutory accounts.
The pattern repeats across the other member states: a national law transposing the directive, a standard-setter issuing detailed guidance, and in many countries a mandatory or recommended chart of accounts. The chart is the part that matters most for software, because it determines how every transaction is coded and how statement rows are built from account balances.
Which framework applies to you
| Your situation | Annual accounts of each company | Consolidated accounts |
|---|---|---|
| Single company, not listed | National GAAP of the country of registration | None required |
| Group of unlisted companies, small group | National GAAP per company | Exempt from consolidation in most member states (small-group exemption) |
| Group of unlisted companies, medium or large group | National GAAP per company | National GAAP consolidation; IFRS permitted in many member states |
| Group with a parent listed on an EU regulated market | National GAAP per company, unless the member state extends IFRS | IFRS as adopted by the EU, mandatory |
| EU subsidiary of a non-EU parent | National GAAP of the subsidiary's country | Depends on whether the EU sub-group is itself exempt; the exemption usually requires the higher parent's consolidated accounts to be equivalent and filed locally |
A small group is defined with the same three criteria as a small company, applied to the group on a consolidated or aggregated basis. Groups just above the small limits are often surprised to find they owe consolidated accounts for the first time.
What changes when you become a group
Consolidation adds work that single-company accounting never needed: combining the members' balance sheets and profit and loss accounts, removing intra-group receivables, payables, sales and purchases, translating members whose books are kept in another currency, and reporting the share of equity that belongs to outside shareholders as non-controlling interest.
The directive sets the rules for consolidated accounts in Chapter 6. IFRS 10 and IAS 21 set them for IFRS groups. Both expect the same mechanical steps, which is why a consolidation engine can serve either framework as long as the reporting entity makes the judgment calls.
Nordlet's group consolidation works at this level: a group owner adds member companies with an ownership percentage and a method (full, with non-controlling interest, proportional, or equity), members in another currency are translated at the closing rate, intra-group balances are flagged for review, and the eliminations you decide on are passed as balanced adjustments. The output is a consolidated balance sheet, profit and loss, and trial balance. Group cash flow and equity-change statements, automatic elimination, and multi-rate currency translation are not produced, and the guide says so.
Where the accounts are filed
Every member state has a business register that receives the approved annual accounts: the Handelsregister and Bundesanzeiger in Germany, the Registre du commerce in France, Erhvervsstyrelsen in Denmark, Bolagsverket in Sweden, the Registrų centras in Lithuania, and so on. Some accept a structured file (inline XBRL is now common), some accept a PDF, and some only take the figures through their own web forms.
Nordlet's country-by-country filing page lists, for each of the 30 countries it covers, whether Nordlet sends the annual accounts itself, builds a file you upload, or shows the figures for you to key in. The answer differs by country because the registers differ: the Danish annual report is sent as inline XBRL, the Swedish one is built as inline XBRL for upload to Bolagsverket, and the Lithuanian statements are keyed in because the register publishes no file format.
How Nordlet handles the layers
Nordlet is built so that one set of books can satisfy the national layer in any of its 30 countries.
- One chart, many layouts. Every company starts from the same chart-of-accounts template, which follows the Lithuanian recommended chart. Account balances are then mapped to the statement rows of the country's statutory layout under Settings → Statement rows, so the balance sheet and profit and loss come out in the format the local register expects.
- Size category from the books. The reports module has a size-category endpoint that classifies the company as micro, small, medium or large from its own figures, which decides which statement layout and disclosures apply.
- Financial statements as a report. The balance sheet and profit and loss are produced by the financial statements report, and the annual accounts filings for each country are generated from them. Which filings go out automatically is on the filing support page.
- Revenue recognition that is 606/15-capable. Deferred income, ratable and milestone schedules, refund liabilities and contract modifications are handled per invoice line by the revenue recognition engine. The software provides the mechanics; the choice of method per contract remains the reporting entity's judgment.
The honest boundary is the same one the directive draws. Software can produce the statements, map the rows and file the package. Deciding whether a company is a small or medium entity under a national option, whether a lease is a finance lease under the local GAAP, or whether a group qualifies for the sub-group exemption is a judgment the company and its accountant make.
FAQ
Is there an EU GAAP?
No. The Accounting Directive sets minimum rules that each member state writes into its own law, and companies follow that national law. IFRS is mandatory only for the consolidated accounts of companies listed on an EU regulated market.
Do small companies in the EU need an audit?
The directive requires an audit for medium and large companies and public-interest entities. It lets member states exempt small companies, and most do, although some set lower national thresholds. Check the national rule for the country of registration.
What are the current EU company size thresholds?
After Delegated Directive 2023/2775, a micro company stays within two of: €450,000 balance sheet total, €900,000 turnover, 10 employees. Small: €5 million, €10 million, 50 employees. Medium: €25 million, €50 million, 250 employees. Member states may raise the small monetary limits by up to 50 percent.
Can an unlisted company use IFRS for its statutory accounts?
Only if the member state allows it. Several do, for annual accounts or for consolidated accounts or both. Where it is allowed, the company usually also has to meet national filing and tax reporting requirements that are built around the national GAAP, so the switch is rarely free of extra work.
Does a group of small companies have to consolidate?
Usually not. The directive exempts small groups from consolidated accounts, and most member states have adopted that exemption. A group just above the small limits does have to consolidate, under national GAAP or, if the member state permits, under IFRS.