7. Influence of IFRS on commercial accounting regulations

1. Question

IFRS influences Swiss accounting regulations in many ways. To some extent, IFRS principles and formulations have been incorporated directly into the new accounting law, for example, with regard to the concept of assets and liabilities, valuation of assets with observable market value, provisions or minimum breakdown. Arising here is the question of how such bonds influence the application of these rules in the case of IFRS. Must a concept adopted in the code of obligations and possessing a particular meaning in IFRS be interpreted according to this meaning? This question must be assessed methodically, and is not answered for IFRS.

Accounting law is the outcome of general, statutory provisions which must be applied on the basis of the ideas existent at the time of the application. This reference to proper accounting principles results in a continuous evolution of the law: „Legislature has left it up to practice define what is meant by propriety, and has thus also allowed this notion to be adapted continuously to currently applicable requirements“, according to developments in what is deemed „proper“ or „generally accepted“. Recognised financial reporting standards are more detailed compared with the provisions of the code of obligations. IFRS provides answers to many questions which the code of obligations settles in no detail, if at all. This leads to the question of whether these standards may or must be consulted as a means of interpretation or even indirect rule of law in the scope of application of the code of obligations. After all, the reference to principles of generally accepted accounting, or principles of proper bookkeeping and accounting relates to what is perceived as factually correct by users of the law during the period of validity. The viewpoint for the Swiss GAAP FER was they had crossed the boundary line to practice and become indirect regulatory content in certain issues, through reference to the principles of proper bookkeeping and accounting. Arising here is the question of whether this can also apply to IFRS.

Accounting standards can be invoked as a means of interpretation, regardless of the question of indirect statutory law. According to the Federal Supreme Court, this holds true not only for the Swiss GAAP FER, but also for the IFRS, which are consulted as a means of interpreting items related to balance sheets in an absence of Swiss legal provisions, as long as they are not contradicted. The federal supreme court’s explanation for this is a general tendency prevailing in Switzerland and Europe to approach IFRS standards and the apparent need for a means of interpretation due to the rudimentary rules of Swiss law. The decision may indicate that there are no two separate „worlds“ of the Swiss Code of Obligations and Swiss GAAP FER / IFRS, but a unified legal system in which standards, especially also IFRS, may and must be consulted if the code of obligations provides no answer.

Furthermore, stock market regulations require consolidated financial statements to be prepared according to IFRS in the case of listed companies. As a result, these standards of self-regulation become indirect statutory law due to their mandatory application. The exact impact of this reference will be investigated more closely in this project.

2. Existent research

Research in Switzerland and abroad has traditionally treated the two areas of „commercial accounting“ and „IFRS“ separately. An example which can be cited here is the representation of accounting law in Peter Böckli’s standard work on stock corporation law, where the two areas are even discussed in separate chapters. Though foreign literature also largely separates both areas, it is more open towards a consolidated approach. In his SPR volume titled „Corporate Accounting Law“ and published at the end of 2012, Lukas Handschin achieved a unified representation of both areas by individual topics, and examined the possibility of IFRS influencing commercial accounting rules; however, a scientific discussion of this particular question did not take place.

3. Method

The method is the legal discussion; within its scope, however, the choice of method is a task of the doctoral thesis; this research project therefore does not specify the method. However, the following questions will surely need to be answered as part of this work: A section dealing with fundamentals is to analyze the legal nature of IFRS as a standard of self-regulation, and an embodiment of the principles of proper accounting. Also to be answered is the question of whether IFRS as EU-IFRS is foreign law, or comprises international standards of self-regulation, and how this impacts its influence on the Swiss legal system. In this context, it is also necessary to examine whether a mandatory application of IFRS changes its character for certain listed enterprises and moves it from a norm of self-regulation closer to statutory law. It is necessary to examine the fundamentals whereby IFRS rules may be consulted to determine Swiss accounting law and the principles of proper accounting. This includes an examination of the extent to which very general standards of self-regulation may be consulted during interpretations of Swiss law. This objective necessitates dealing with IFRS regulations. Only this makes it possible to ascertain where evaluations and principles are identical or different. If evaluations are identical to those in Swiss law, an adoption of IFRS principles is easier to justify. One question arising in this context, in particular, is whether IFRS regulations which observe or concretize the principle of prudence in CO should be adopted rather than regulations which are the outcome of transparency-related considerations. Also to be clarified is the issue of whether IFRS regulations may or must be applied, in other words, whether their application is mandatory or optional.

4. Dissertation: Influence of IFRS on commercial accounting regulations

The results of the first sub-project are to be published in a dissertation on the influence of IFRS on commercial accounting regulations.