No Compliance Summary

Being a member of the European Union, Finland complies with the European Commission (EC) Regulation No. 1606/2002 which requires listed companies to use International Financial Reporting Standards (IFRSs) as endorsed by the European Union in their consolidated accounts. The provisions of Regulation No. 1606/2002 were incorporated in the Finnish Accounting Act which came into force at the end of 2004. The 2008 EC report on the implementation of Regulation No. 1606/2002 points out that Finland permits IFRSs in the annual accounts for listed companies (except insurance companies) and in the annual and consolidated accounts for all other companies that are audited by certified auditors. Companies that choose not to apply IFRSs adhere to an accounting framework governed by the Accounting Act and the Accounting Ordinance, the requirements of which, according to a 2002 KPMG report, differ from IFRSs. As indicated in the 2009 PricewaterhouseCoopers publication, no plans for convergence of the local requirements with the international standards have been announced.

General Overview

K. Pajunen in her 2007 paper “The Internationalization of Finnish Accounting Culture in 1973-2005” provides a description of the regulatory and legal frameworks for accounting in Finland. According to the author, the regulatory responsibilities for the accounting lie with the Ministry of Finance, Ministry of Justice, and Ministry of Trade and Industry (superseded by the Ministry of Employment and Economy, or TEM). In addition, as indicated on the website of the TEM, the Accounting Standards Board “give[s] instruments and opinions on the application of the Accounting Act. The Board may also, for a special reason, grant exemptions from certain statutory provisions of the Accounting Act for a fixed period of time. The Board’s general guidelines, published opinions and exemptions are available on the website of the Accounting Board.” The legal framework for financial reporting in Finland is contained in a number of laws, including the Companies Act, the Accounting Act, the Auditing Act, the Securities Market Act, the Company Income Tax Act, and other official regulations, instructions and statements of the Finnish Accounting Board, as well as the recommendations of auditors.

In addition, being a member of the European Union, Finland has to comply with the EU requirements in the area of financial reporting. Specifically, on July 19, 2002, European Commission (EC) Regulation No. 1606/2002 was passed by the European Parliament and the European Council of Ministers, requiring the adoption of International Financial Reporting Standards (IFRSs) (formerly International Accounting Standards, or IASs) issued by the International Accounting Standards Board (IASB). As a result of the regulation, beginning January 2005, all EU listed companies are required to prepare their consolidated financial statements following IFRSs as endorsed by the EC. In 2004, amendments were made to Finnish legislation making the application of IFRSs mandatory in the consolidated accounts of Finnish listed companies. The 2008 EC report on the implementation of Regulation No. 1606/2002 points out that Finland permits IFRSs in the annual accounts for listed companies (except insurance companies) and in the annual and consolidated accounts for all other companies that are audited by certified auditors. Other companies must adhere to the accounting requirements specified in the above-mentioned laws, which, as explained in the 2002 KPMG report, are less detailed than IFRSs and in some instances differ from the international standards. As indicated in the 2009 PricewaterhouseCoopers publication, no plans for convergence of the local requirements with the international standards have been announced.

According to a description of the regulatory framework provided in the 2005 self-assessment of the Finnish Institute of Authorized Public Accountants (KHT-yhdistys-Föreningen CGR ry or, KHT), under the Securities Markets Act the Finnish Financial Supervision Authority (FIN-FSA) regulated the securities and banking sectors. The FIN-FSA supervised compliance with the Accounting Act for credit institutions, consortia of co-operative banks, investment companies, and mutual funds. According to a 2005 FIN-FSA paper on the regulatory outline of financial statements, "the [FIN-FSA] issues regulations, guidelines and interpretations on the financial statements and annual report of unlisted credit institutions. In addition, the [FIN-FSA] issues regulations, guidelines and interpretations on the interim financial reports of deposit banks. These are based on the Accounting Act, the Act on Credit Institutions, the Act on Investment Firms and the Government Decree on the Annual Accounts and Consolidated Annual Accounts of Credit Institutions and Investment Firms" (p. 4). Empowered by the Insurance Company Act, the insurance sector was regulated by the Insurance Supervisory Authority (Vakuutusvalvonta, or ISA). However, on January 1, 2009 both the FIN-FSA and the ISA merged to form a single supervisory authority for the Finnish financial markets in order to ensure effective supervision of financial and insurance entities. The newly established Financial Supervisory Authority (FIN-FSA) took over the responsibilities of its predecessors.

According to a 2008 report by the Central Chamber of Commerce (Centralhandelskammaren Keskuskauppakamari, or CCC), the Finnish Institute of Authorized Public Accountants (KHT), is a private professional body responsible for setting national auditing standards and ethics requirements based on the International Federation of Accountants (IFAC) recommendations and standards. Further, the 2006 KHT self-assessment notes that the KHT translates and publishes IFRSs and other IASB pronouncements into Finnish and develops guidance regarding the international standards. Per the CCC paper, the regulatory oversight of the accountancy profession is performed by the CCC's Auditing Board, which ensures compliance with the Auditing Act and other professional requirements of the KHT and regional auditors of the Registered Association of Certified Auditors (HTM). According to the KHT 2006 self-assessment, the KHT adopted the 2004 IFAC code of conduct with modifications. However, the code was subsequently revised, and, as at the time of the completion of the self-assessment, the KHT was in the process of amending its ethical requirements in accordance with the revised IFAC Code. The KHT and the HTM are listed as members on the IFAC website.

The Principles

IIIFRS 1: First-time Adoption of International Financial Reporting Standards (revised 2009)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IIIFRS 2: Share-based Payment (revised 2009)

According to the 2002 KPMG report, "disclosure requirements are less extensive than under IAS" (p. 14). However, there is no further information on exactly how Finnish requirements conform to or deviate from their international equivalent.

NCIFRS 3: Business Combinations (revised 2009)

According to the 2002 KPMG report, among other differences, "pooling of interests accounting is fairly common [and] fair value adjustments may be subsumed within goodwill" (p. 7).

IIIFRS 4: Insurance Contracts (effective 2006)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

NCIFRS 5: Non-current Assets Held for Sale and Discontinued Operations (revised 2009)

According to the 2002 KPMG report, "there are no specific rules for discontinuing operations" (p. 16).

IIIFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

NCIFRS 7: Financial Instruments: Disclosures (effective 2007)

According to the 2002 KPMG report, "there are only limited disclosure requirements for financial instruments" (p. 16).

NCIFRS 8: Operating Segments (effective 2009)

According to the 2002 KPMG report, "there is no specific guidance on identifying reportable segments" (p. 15).

IIIAS 1: Presentation of Financial Statements (revised 2009)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IIIAS 2: Inventories (effective 2005)

According to the 2002 KPMG report, among other differences "cost may include only variable costs" (p. 11). The IASB subsequently revised the IFRSs and there is no further information on exactly how Finnish requirements conform to or deviate from its international equivalent.

NCIAS 7: Cash Flow Statements (effective 1994)

According to the 2002 KPMG report, "there are no specific rules concerning the form of a financial analysis. A sources and application of funds statement is adequate" (p. 6).

IIIAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

NCIAS 10: Events after the Reporting Period (effective 2005)

According to the 2002 KPMG report, "other than for dividends, there are no specific rules relating to accounting for events after the balance sheet date" (p. 9).

IIIAS 11: Construction Contracts (effective 1995)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

NCIAS 12: Income Taxes (effective 2001)

According to the 2002 KPMG report, among other differences, "current tax amounts are not recognized directly in equity [and] some tax items are presented as operating expenses" (p. 15).

NCIAS 16: Property, Plant and Equipment (revised 2009)

According to the 2002 KPMG report, among other differences, "cost generally may include only variable costs [and] the estimated cost of dismantling and removing an asset and restoring the site usually is not capitalized" (p. 9).

NCIAS 17: Leases (effective 2005)

According to the 2002 KPMG report, among other differences, "the classification of leases into finance or operating leases is optional. There are no specific requirements on the treatment of lease incentives" (p. 15).

IIIAS 18: Revenue (effective 1995)

According to the 2002 KPMG report, among other differences, "the percentage-of-completion method is optional for contract accounting. The completed contract method is allowed instead" (p. 13). No further information on Finland's compliance with this principle is publicly available.

NCIAS 19: Employee Benefits (revised 2009)

According to the 2002 KPMG report, among other differences, "there are no specific requirements on accounting for employee benefits except for insurance companies and pension foundations" (p. 14).

IIIAS 20: Accounting for Government Grants and Disclosure of Government Assistance (revised 2009)

According to the 2002 KPMG report, "there are no significant differences from IAS in practice" (p. 14). However, no further information on the extent of Finland's compliance with this principle is publicly available.

NCIAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

According to the 2002 KPMG report, among other differences, in Finland there are no rules for accounting for hyperinflation.

IIIAS 23: Borrowing Costs (revised 2009)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

NCIAS 24: Related Party Disclosures (effective 2005)

According to the 2002 KPMG report, among other differences, "the definition of related parties is more limited than under IAS" (p. 16).

IIIAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IIIAS 27: Consolidated and Separate Financial Statements (revised 2009)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IIIAS 28: Investments in Associates (revised 2009)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IIIAS 29: Financial Reporting in Hyperinflationary Economies (revised 2009)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

IIIAS 31: Interests in Joint Ventures (revised 2009)

There is insufficient information publicly available that directly addresses Finland's compliance with this principle.

NCIAS 32: Financial Instruments: Disclosure and Presentation (revised 2009)

According to the 2002 KPMG report, among other differences, "there are only limited accounting rules for financial instruments" (p. 11).

NCIAS 33: Earnings per Share (effective 2005)

According to the 2002 KPMG report, among other differences, "EPS [earnings per share] is not disclosed on the face of the income statement" (p. 16).

NCIAS 34: Interim Financial Reporting (effective 1999)

According to the 2002 KPMG report, under Finnish requirements, "no separate equity statement or financial analysis is required" (p. 17).

NCIAS 36: Impairment of Assets (revised 2009)

According to the 2002 KPMG report, "impairment losses for non-current assets are recognized only when they are expected to be permanent" (p. 11). Other differences were also noted.

NCIAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

According to the 2002 KPMG report, "there are no specific rules on the recognition of contingent assets or liabilities" (p. 13).

NCIAS 38: Intangible Assets (effective 2004)

According to the 2002 KPMG report, "internally generated intangible assets, e.g. development costs, may be expensed or capitalized" (p. 10). Other differences were also noted.

NCIAS 39: Financial Instruments: Recognition and Measurement (revised 2009)

According to the 2002 KPMG report, there are differences between Finnish requirements and IAS 39 in accounting for financial instruments.

NCIAS 40: Investment Property (revised 2009)

According to the 2002 KPMG report, "Finnish GAAP does not deal specifically with investment property" (p. 10).

NCIAS 41: Agriculture (revised 2009)

According to the 2002 KPMG report, "there are no regulations regarding biological assets, although there are guidelines on certain aspects of accounting for cattle" (p. 11).