Category: European Union

Introduction

Member-States of the European Union established several directives aimed at the harmonization of its accounting regulations and principles that must be followed by every firm in the countries. However, there are several uncertainties as to this unified system of accounting. The following paper is intended to discuss what obstacles the EU accounting harmonization model currently faces and what are the possibilities of its positive outcomes.

Obstacles to the EU Harmonization Effect

To begin with, it is necessary to state that the implementation of the innovative accounting harmonization model in all Member-States of the EU might fail due to different practices used in each country (Pontoppidan & Brusca, 2016). To make the recent legal adjustments efficient, a tremendous amount of work must be done to use the system with all its benefits and intentions. “Different practices produce significant adjustments between the surplus/deficit measures (working balance, WB) calculated at micro-level by Member States following different accounting models” (Sforza & Cimini, 2017, p. 49). Another essential obstacle that must be considered is the leak of data that is possible when all the bases will be reorganized or even replaced according to the new directives. Moreover, such programs always have an adverse impact on the sustainability of some information that can be removed by accident.

Also, the EU harmonization effect can be negatively influenced by uneducated workers. When a new system is provided, it has to be studied by people who will be capable of managing it in the future (Wang, 2014). Therefore, this shift might lead to additional investments required to attract new specialists or educate experienced accountants (Pontoppidan & Brusca, 2016). The last obstacle is presented by limitations of some firms that might not have enough financial means or other resources to adhere to the established directive.

Indicators of Success

Indeed, the new regulations that lead to the harmonization of accounting operations in all the EU Member-States have a wide range of positive implications that are supposed to improve the security of the stored data and different editing processes that are common in this industry (Dabbicco, 2015). Hence, the first success indicator in the new platform is that it will connect all the necessary documents and organize them appropriately so that accountants could have a complementary infrastructure of all the papers and information they work with regularly.

Another benefit of the system is that it will reduce the gap between macro and micro accounting (Pontoppidan & Brusca, 2016). Unfortunately, this gap requires much investment and time to operate different processes. In turn, if the two dimensions are merged, professional accountants will not need to take extra actions to access particular files anymore (Rossi, Cohen, Caperchione, & Brusca, 2016). Moreover, it will also be beneficial for quick and efficient transportation of particular data all over the European Union. Users from different countries will have an ability to share necessary data with their colleagues from other Member-States (Oulasvirta & Bailey, 2016). Although there are many methods to do it now, they are not as secure and relevant as those of what is prescribed in the harmonization directive.

Conclusion

The EU government established a directive that requires every all the Member-States to participate in its accounting harmonization program. There are many advantages and disadvantages to it at the present moment. However, there are no relevant studies or evidence-based research made to prove or refute the new system’s efficiency.

References

Dabbicco, G. (2015). The impact of accrual-based public accounting harmonization on EU macroeconomic surveillance and governments’ policy decision-making. International Journal of Public Administration, 38(4), 253-267.

Oulasvirta, L. O., & Bailey, S. J. (2016). Evolution of EU public sector financial accounting standardisation: Critical events that opened the window for attempted policy change. Journal of European Integration, 38(6), 653-669.

Pontoppidan, C. A., & Brusca, I. (2016). The first steps towards harmonizing public sector accounting for European Union member states: Strategies and perspectives. Public Money & Management, 36(3), 181-188.

Rossi, F. M., Cohen, S., Caperchione, E., & Brusca, I. (2016). Harmonizing public sector accounting in Europe: Thinking out of the box. Public Money & Management, 36(3), 189-196.

Sforza, V., & Cimini, R. (2017). Running the obstacle race towards public accounting harmonization in EU-28: A temporal study. International Journal of Business and Management, 12(3), 49-61.

Wang, C. (2014). Accounting standards harmonization and financial statement comparability: Evidence from transnational information transfer. Journal of Accounting Research, 52(4), 955-992.

European Court of justice decisions on movement of companies within the European Union appears to be inclined towards the incorporation theory over the real seat doctrine. Nonetheless, failure to acknowledge this formally and controversies over particular case laws may still leave the matter open to debate.

In essence, the EU fosters creation of a common market through the movement of people, goods and companies. However, companies are particularly difficult to deal with because of their inherent characteristics. First, they can be prevalent in several member states at a time. Furthermore, some may be incorporated in one country but be administered in another (McEleavy, 2003, 525). Questions on legal recognition and choice of laws to apply from member states come into play. Additionally some companies may wish to move to different member states and similar decisions must be made on laws to be applied (Corburn & Chertok, 2005, 870).

The major themes arising out of ECJ case laws can either fall within the real seat doctrine or the incorporation theory. In the latter, a company has the right to select the law that will be applied to its respective case because it is a legal entity. The country where it was incorporated will be the one that will dictate the laws to be applied. Conversely, the real seat theory holds that companies should be governed only by the laws of the countries where shareholders, directors, promoters and office holders are found; in other words, where their central administration is located (Elbert, 2003, p 51).

Case laws indicate that there appears to be a controversy between Article 48 and 49 of the EC Treaty and the real seat doctrine. In the former article, it is stated that companies will be subjected to the same treatment as real persons if they have been registered and administered in that member state. This means that even if a business was formed and registered in country A but it grows and thrives in country B more than in A, country B will not recognise it as a legal entity unless it is dissolved and reincorporated in country B. These kinds of themes favour countries like the UK which adhere to the incorporation principle and may actually complicate free movement of firms (Gerner-Beuerle & Schilig, 2009, K22).

Examination of the way the ECJ has/ has not upheld justifications for restrictions on freedom of establishment of companies between member states

In the European Commission versus France case, the ECJ found that France was discriminating against member states by considering the seats of respective corporations before deciding on the nature of treatment to be accorded. This clearly impedes movement of companies within the EU. With regard to the freedom of establishment the European Court decided in the Daily mail case that the latter firm (which was established in the UK) could be free to move to another member state even though the UK argued that the Daily mail was doing so in order to circumvent tax laws (Hansen, 2009, 105). However, the court asserted that it needed to look for ways of evading these rules.

On March 9^th 1999, the Court presided over the Centros Ltd v Erhvervs [1999] 1 1459 case where the Centros- a Danish owned company was incorporated in the United Kingdom and then failed to conduct business there instead choosing to do so in Denmark by establishing a branch. The latter country denied it a right of establishment asserting that its intention was to create a principle office not a branch and this would cause it to evade capital requirements. The Court once again supported the corporation stating that denying it a right to establish itself in Denmark was restrictive and discriminatory (Xanthaki, 2001, 64).

On November 5^th 2002, the ECJ presided over Uberseering v Nordic Construction [2002] No. ECR 1-99919. Here a Netherlands incorporated firm called Uberseering contracted business to Nordic which is German based. It sued the latter for poor implementation of the contract and was denied hearing based on its lack of recognition as a legal entity (Gildea, 2004, 107). The ECJ held that this was in contravention to the freedom of establishment although it mostly dealt with legal standings and not company operations (European Court of Justice, 2002, 1-09919). The ruling indicates that the real seat theory may not hold water anymore and that harmonisation of country laws with EU treaties needs to be done so as to eliminate this clash.

References

European Court of Justice (2002). Judgement of the court in Uberseering BV v Nordic Construction Company. European Court Reports, 1-09919.

Gerner-Beuerle, C. & Schilig, M. (2009). The mysteries of freedom of establishment after Cartesio. SSRN working paper, K22.

McEleavy, P. (2003). Current developments in international law, ICLQ, 52, 521-534.

Hansen, S. (2009). The free movement of companies. Stockholm: Stockholm institute of Scandinavian law.

Xanthaki, H. (2001). Centros- is this really the end for the theory of siege reel. Company law journal, 22(1), 2-8.

Elbert, S. (2003). EU-company law and the freedom of establishment. International company & commercial law review, 14(5), 51.

Corburn, T. & Chertok, S. (2005). Jurisdictional competition in the EC. Express papers, 870.

Gildea, A. (2004). Uberseering – a European company passport. Brooklyn International law journal, 5(23), 107.

The United States is the European Union’s (E.U.’s) greatest economic ally, so they do not have a discrete unrestricted trade transaction. The Transatlantic Trade and Investment Partnership (TTIP) discussions commenced in 2013 and were halted three years later, lacking a result. After being reckoned superseded, they were officially disbanded in 2019. Regardless of this, due to World Trade Organization (WTO) limitations, transatlantic trade continues to have one of the least overall levies in the globe (about 3%) (Demertzis and Fredriksson). Exporting the new blood machine from the States to nations in the E.U. would be advantageous as manufacturing costs are slashed by half, and since the market in the E.U. is readily available, all the company would need to pay for are the tariffs for exportation.

Licensing a European firm to work conjointly with the U.S. business would mean that both parties must sign a memorandum of understanding (MOU). The agreement is to help easily facilitate the development of the revolutionary blood machine, which in the long run means profits are shared between them as structured. Every company means to maximize their profits, and by licensing foreign firms, the profits are split but saving on the tariffs on the bright side if exportation from the U.S. was to take place.

Setting up a wholly-owned subsidiary in Europe calls for setting up shop. It would be the best course of action in that the company gets to expand the business. Tapping on both the home market and E.U. market. Setting up a shop calls for heavy investing, including purchasing land or buildings where the manufacturing will occur (Papanastassiou et al.). Since every business is oriented towards a long-term goal, this alternative is the most suitable. The company gets to own the rights of manufacturing and selling the product all in one without sharing their secrets. And with a subsidiary creates more potential in tapping more clients as the business expands.

References

Demertzis, Maria, and Gustav Fredriksson. “The E.U. Response to U.S. Trade Tariffs.” Intereconomics, vol. 53, no. 5, 2018, pp. 260–268.

Papanastassiou, Marina, et al. “Changing Perspectives on the Internationalization of R&D and Innovation by Multinational Enterprises: A Review of the Literature.” Journal of International Business Studies, vol. 51, no. 4, 2019, pp. 623–664.

Introduction

In both economies, the European Union and the United States, transportation services immeasurably contribute to the economy. With manufacturing and service sectors relying on transportation, network efficiency assumes a critical role in achieving optimal value. Intermodal transportation brings competitiveness by playing a significant role in how the E.U. and the U.S. promote attractiveness in their production. The impact attributed to the legal environment associated with intermodal transportation networks resonates in other sectors of the economy. The case study focuses on both the positive and negative impact of regulation or deregulation in the E.U. and the U.S. on intermodal transportation growth.

Regulation

The impact of intermodal transportation regulation has varied in the U.S. and several E.U. countries. To some extent, regulation has limited competition in intermodal transportation. The transport sector has encountered massive public expenditure based on limited competition. Growth has been stalled at national levels, in both regions, due to the inefficiencies attributed to public entities. For example, in the United Kingdom, the bus industry encountered heavy resource waste in the years leading to 1980, resulting from high-level government engagement in the transport sector. Nonetheless, the U.K. government saw the need to control waste and passed the 1980 and 1985 Transportation Acts to monitor the role of the government in the transportation industry (Tudorica & Banacu, 2017). However, there are benefits associated with regulation that cannot be ignored. One positive control regulation aspect in intermodal transportation is the reduction of operation costs (Achahchah, 2018). In the U.S., for instance, the 1991 ISTEA Act was established to promote intermodal transportation (Achahchah, 2018). The act singled out corridors that helped avail funds for improvements resulting in greater efficiency and decreased delays to achieve the promotion.

Deregulation

Similar to regulation, deregulation has positive and negative aspects as well. One advantage of deregulation is that it freely facilitates market demand and supply forces to act. With the two forces interacting, the market experiences efficiency in outcomes, which benefits the well-being of the economies of the two regions. In the E.U., associated policies have an intermodal transportation network that fulfills member state objectives (Tudorica & Banacu, 2017). Tremendous improvements have been encountered in E.U. member states regarding goods and services movements between states. The efficiency linked to the movement of goods and services has resulted in improved economic activities in the E.U., with the economies in the member states significantly growing. Nonetheless, with deregulation, there has been a spurring, to a great extent, of cartel activities that have resulted in the loss of control of some major players in the transportation industry (Achahchah, 2018). For example, many individual careers have gone bankrupt, with others losing much of their labor due to unstable economic and political clout. In the U.S. and the E.U., cartels gained control of the transportation infrastructure when the respective governments privatized transportation activities.

Conclusion

Positive and negative impacts associated with the regulation or deregulation of intermodal transportation growth in the E.U. and the U.S. cannot be denied. Even with deregulation promoting market competition, intermodal transportation vulnerability to cartel-based activities results in unhealthy economic practices. Regulation directs resources to economic sectors that depend on intermodal transportation services to develop. However, with this comes limited competition that leads to public sector inefficiencies. With the inefficiencies, the growth of intermodal transport has been curtailed. Based on the impacts of regulation and deregulation of intermodal transport, stakeholders from both regions must put in place measures that ensure a state of balance between regulating or deregulating the transport sector. The significance of such measures will help achieve intermodal transportation growth.

References

Achahchah, M. (2018). Lean transportation management: Using logistics as a strategic differentiator. Milton: Productivity Press.

Tudorica, A, & Banacu, C. S. (July 01, 2017). The potential of intermodal transport projects in Romania. Proceedings of the International Conference on Business Excellence, 11, 1, 649-659.