Article 27 of Law 46/1998 of 17 December on the introduction of the euro deals with measures in relation to accounting obligations, establishing that the accounting aspects derived from the changeover to the single currency develop regulations.

For the elaboration of these rules, the Inter-Ministerial Commission for the Coordination of Euro-Induction Activities in the Public Administrations created a Special Committee on Accounting, Records and Statistics, the conclusions of which were obtained from the work carried out within the Institute of Accounts and Audit of Accounts, which constituted a working group that analyzed the different accounting issues that needed to be treatment or, where appropriate, clarification, on the occasion of the changeover to the euro.

The rules on the accounting aspects of the introduction of the euro, which this Royal Decree approves, sets out specific guidelines on the accounting reflection of the situations arising from this event, taking into account the reality of the Spanish entities.

Likewise, these developments are within the framework of the accounting regulations in force in our country and are in line with the pronouncements that the European Commission has made on these aspects. In short, this is a rule that complements the basic accounting standard, the General Accounting Plan, for the purposes of the introduction of the euro.

In the structure of these rules, three chapters differ:

Chapter I, "the currency in which the annual accounts are expressed", addresses this aspect in accordance with the option set out in Article 27 of Law 46/1998 of 17 December on the introduction of the euro, which allows, during the transitional period, which the accounting subjects choose to express their annual, individual and consolidated accounts in euro or in pesetas.

Chapter II, "the currency in which the books are expressed", also develops the provisions of the aforementioned Law, so that during the transitional period the accounting subjects may write in the books of accounting for transactions carried out, expressing their values in euro or in pesetas.

Chapter III, 'valuation of certain assets as a result of the introduction of the euro', sets out point-of-value aspects of the changeover to the single currency, such as accounting treatment. of exchange differences produced in the currencies of participating States, the contracts or exchange rate transactions of participating States and the differences in the conversion of consolidated annual accounts where they are included companies from participating States.

The treatment of expenditure arising from the introduction of the euro is also subject to regulation of the rounding that is generated when the pesetas are converted into euro and the reverse, as well as the casuistics produced in companies whose Economic exercise closure does not coincide with the calendar year. Finally, the information to be included in the memory of the annual accounts in relation to the effects produced by the introduction of the single currency is collected.

This Royal Decree contains two articles, one additional provision and three final provisions; in Article 1 the rules on accounting aspects arising from the introduction of the euro are adopted, establishing the Article 2 the enforcement of these rules by all undertakings, as well as by non-profit-making entities and groups which are obliged to make annual accounts, without prejudice to the need to be applied in the case of a formulation. voluntary of annual accounts; additionally, the possibility that they may exist specific rules for financial institutions.

An additional provision is also incorporated, which seeks to homogenise the use of monetary expression in the annual accounts and in the budgetary documents to be drawn up by certain non-profit entities, of In accordance with the provisions of Royal Decree 776/1998 of 30 April 1998 approving the rules for the adaptation of the General Accounting Plan to non-profit entities and the rules on the budgetary information of these entities.

Finally, in the final provisions the concept of a foreign currency is required for the entry into force of the euro; it is also collected for the adaptation of these rules and the date of entry into force.

In its virtue, prior to the report of the Inter-Ministerial Commission for the Coordination of Activities for the Introduction of the Euro in Public Administrations, on the proposal of the Second Vice President of the Government and Minister of Economy and Finance, in agreement with the Council of State and after deliberation by the Council of Ministers at its meeting on 23 December 1998,

DISPONGO:

Article 1. Adoption of the rules on accounting aspects of the introduction of the euro.

The rules on accounting aspects of the introduction of the euro, the text of which is inserted below, are approved.

Article 2. Application.

1. The rules on accounting aspects of the introduction of the euro will be mandatory for:

a) All companies, whatever their legal, individual or corporate form.

(b) Non-profit entities required to make annual accounts.

c) The subjects required to formulate consolidated annual accounts.

2. However, the provisions of this Royal Decree shall not apply to financial institutions for which there are specific provisions applicable to them in this field.

Single additional disposition. Budget information in non-profit entities.

If, in accordance with the content of the rules on accounting aspects of the introduction of the euro, an entity to which Royal Decree 776/1998 applies, of 30 April, approving the rules for the adaptation of the plan General Accounting for non-profit entities and the rules on budgetary information to these entities, it formulates its annual accounts in euro, it shall draw up the budgets to be drawn up from that moment on monetary expression, in the same terms as for the annual accounts in Article 1 of the rules on accounting aspects of the introduction of the euro.

Final disposition first. Currency other than the euro.

From the entry into force of the euro, the references to "foreign currency" contained in the General Accounting Plan, approved by Royal Decree 1643/1990 of 20 December, its sectoral adaptations and other rules Complementary and development, they shall be read as "currency other than the euro".

Final disposition second. Regulatory enablement.

1. The Minister for Economic Affairs and Finance, on a proposal from the Institute for Accounting and Audit of Accounts and through Ministerial Order, may adapt the rules on the accounting aspects of the introduction of the euro to the specific conditions of the subject accounting.

2. The Minister for Economic Affairs and Finance, on a proposal from the Institute for Accounting and Audit of Accounts and through Ministerial Order, may adapt the provisions of Article 6 of the rules on accounting aspects of the introduction of the euro to the criteria to be set out in the rules of the European Union.

Final disposition third. Entry into force.

This Royal Decree will enter into force on 1 January 1999.

Given in Madrid at December 23, 1998.

JOHN CARLOS R.

The Second Vice President of the Government and Minister of Economy and Finance,

RODRIGO DE RATO Y FIGAREDO

Rules on the accounting aspects of the introduction of the euro

1. Economic and Monetary Union is a major step in the process of European economic integration, which is characterised primarily by two objectives: the establishment of a common monetary policy for the participating countries and the fixing of irrevocable exchange rates between the currencies of those States by introducing the single currency denominated euro.

For this purpose, an appropriate legal framework is required to allow an orderly transition to the euro. At the European Council meeting in Madrid on 15 and 16 December 1995, a number of agreements were reached on the establishment of Economic and Monetary Union and the introduction of the euro. The following timetable was adopted:

Phase A (implementation of Economic and Monetary Union): It starts in 1998 with the knowledge of the countries that will participate in the Economic and Monetary Union and the constitution of the European Central Bank.

At this stage, the conditions of monetary and exchange rate policy are set and the manufacture of euro-denominated notes and coins begins.

Phase B (transitional period): It starts on 1 January 1999 with the determination of the fixed and irrevocable conversion rate between the euro and the participating national currencies and ends on 31 December 2001.

At this stage, the euro will become a currency in its own right and economic operators will be able to start their operations in euros.

Phase C (definitive period): On 1 January 2002, new euro banknotes and coins will be put into circulation by replacing the old national currency units. This operation shall be completed by 1 July 2002 at the latest.

Three basic principles were also articulated in this Council:

(a) Legal equivalence between the euro and the national currency units during the transitional period, which means that the latter are ultimately non-decimal fractions of the euro;

b) Principle of "non-obligation-non-prohibition", applicable, during the transitional period, to the use of the euro;

c) Continuity in contracts, i.e. the replacement of national currencies by the euro, does not alter the interest rates of securities and credits unless it is stipulated by the contract concluded between the parties.

These principles have been set out in the following legal framework, which regulates the introduction of the euro:

Regulation (EC) No 1103/97 of the Council of 17 June on certain provisions relating to the introduction of the euro, allowing the changeover to the euro, regulating aspects such as the equivalence of one to one between the ecu and the euro, the continuity of the validity of the legal instruments and the rules for conversion and rounding.

Regulation (EC) No 974/98 of 3 May on the introduction of the euro, based on Article 109.L (4) of the EC Treaty, which constitutes the legal basis under which the Council may adopt measures aimed at the rapid introduction of the euro and sets out the provisions of monetary legislation to be applied by the participating Member States.

Within this legal framework, as far as accounting is concerned, it should be noted that the introduction of the euro does not require the drafting of new Community legislation or the amendment of the Directives. in force, nor even greater harmonisation of the rules, so that Member States can maintain current accounting practices authorised under the Accounting Directives.

2. On 19 December 1997, the "National Plan for the Introduction of the Euro in Spain" was approved, the result of the work carried out by the Inter-Ministerial Commission for the Coordination of Activities for the Introduction of the Euro in Spain. General Government, set up by Royal Decree 363/1997 of 14 March, which provided a guide for the changeover to the euro, the conclusions of which served as a basis for the drafting of a legislative project which culminated in the adoption of the of Law 46/1998 of 17 December 1998 on the introduction of the euro and the Organic Law 10/1998 of 17 December, supplementary to the Law on the introduction of the euro.

3. As far as the content of the present rules on the accounting aspects of the introduction of the euro is concerned, the work carried out by the European Commission's Directorate-General XV, Internal Market and Financial Services, which was drawn up, should be highlighted. a document containing a set of accounting recommendations for the Member States in order to facilitate solutions to the accounting problems arising from the transition to the single currency.

Under Law 46/1998 of 17 December on the introduction of the euro, the Commission document indicated above and the principles invoked in the "National Plan for the Introduction of the Euro", these rules collect the accounting implications arising from the introduction of the euro, taking into account the reality of the Spanish entities and the accounting rules in force in our country.

For these purposes, the rules have been structured into three chapters dealing with the following aspects:

a) Currency in which annual accounts are expressed.

Fundamentally the problem of the transitional period of introduction of the euro.

b) Accounting books. The currency in which the transactions carried out by the institutions are to be recorded during the transitional period and, consequently, in the definitive period is regulated.

c) Valuation of certain heritage elements as a result of the introduction of the euro, which in turn contains a number of rules analysing specific aspects.

4. Article 1 of Chapter I deals with the issue of the currency in which annual accounts are to be expressed.

On this point, there is no doubt that the annual accounts corresponding to the financial years for which the closing date will be carried out from 1 January 2002, will be formulated by expressing their values in euros. as a result of the transitional period, i.e. from 1 January 1999 to 31 December 2001; for this purpose, the closing date is set as a necessary element to regulate the expression of the annual accounts in euro or pesetas, in such a way that all entities whose accounts relate to exercises which are closed during the transitional period may express their annual accounts in pesetas or in euros.

However, it seems that the recommendation that the annual accounts to be formulated as of 1 January 2002 should be expressed in euro should be expressed in general, despite the fact that they may correspond to exercises closed during the said transitional period. Finally, the accounting officer is empowered to express the values in thousands of euros when the amount of the magnitudes so advises and always with the objective of obtaining the faithful image of the patrimony, the results and the situation financial.

In accordance with the content of Article 27 of Law 46/1998 of 17 December 1998 on the introduction of the euro, the accounting subjects may freely choose to express the annual accounts in pesetas or in euro, if the Euro option shall not be used for the use of the peseta except in exceptional cases, such as merger or division operations where entities that have not yet chosen the euro option are involved.

Article 1 of these rules also deals with the issue of the currency in which the consolidated annual accounts are to be expressed, in such a way that the same criterion as that indicated for the individual annual accounts is followed; However, in order to achieve the proper understanding of those accounts, it is recommended that the consolidated annual accounts of a group should be expressed in the same currency in which the individual accounts of the parent entity are expressed.

In any event, for the use of the euro expression in the individual and consolidated annual accounts, the conversion rate referred to in Article 2 (2) of that Law on introduction shall apply. of the euro taking into account rounding.

5. Article 2, which is included in Chapter I, addresses the issue of comparability in the time of the information provided by the annual accounts.

In this respect, it should be noted that Article 35 (4) of the Trade Code sets out this need for the temporary comparability of the accounting information, by providing that in each of the balance sheet items, the accounting information In addition to the figures for the financial year which is closed, the profit and loss and the financing table shall be shown in the immediately preceding financial year, indicating that when these figures are not comparable, they must be explained the amount of the preceding financial years. In addition, certain information relating to the financial year or years preceding the year referred to in the annual accounts and the corresponding rounding must be presented in the memory.

This article deals with the comparability of annual accounts following the introduction of the single currency.

On this point, and as stated in the above European Commission document, "Contable Aspects of the Introduction of the Euro", it has been considered that the accounting subjects who agree with the (a) the euro for the formulation of the annual accounts must include the figures for the financial year or, as the case may be, the preceding financial years, using the conversion rate and the corresponding rounding.

In this way, the figures for the preceding financial year are to be included in the balance sheet and in the profit and loss account; information on the use of this currency and the adaptation of the euro will be collected in the memory. amounts of the financial year. If the institution makes normal memory and balance sheet, the figures for the preceding financial year, as well as in the analytical profit and loss account, shall also be incorporated in the financing table if the institution is established.

6. Chapter II contains a single article, the 3, concerning the currency in which the transactions carried out by the entities are expressed in the books of accounts.

The problem is how you will need to make your accounting records during this transitional period; this is how it is regulated that, during this period, the bookkeeping books can be carried freely in pesetas or in euro, with a view to that entities adopt their accounting management teams at the time that best suits their needs.

In any case, it is logical that if during an exercise the change to which has been made is produced, the date on which the change and its effects is produced must be indicated in the aforementioned books. To this end, this change must be matched with the beginning of an economic exercise, resulting in a different case from the drawing up of a balance of sums and balances allowing for the appropriate reflection of the balance.

It is finally noted that the exercise of this option is set on the same terms as those regulated for the annual accounts, in such a way that the euro option is retained, with the exception of exceptional cases such as the already previously indicated for the annual accounts.

7. Chapter III "Valuation of certain heritage elements as a result of the introduction to the euro" addresses a number of topics.

First of all, Article 4 deals with the differences in exchange that will occur with respect to the currencies of participating States.

Currently, the General Accounting Plan, approved by Royal Decree 1643/1990 of 20 December, establishes in the standard of valuation fourteenth the accounting treatment to be given to differences in currency exchange foreign. Finally, it is a question of regulating the treatment of exchange differences that can be made manifest in the treasury, fixed income, credits and debits, since other heritage elements will not produce any difference; although it does may include such differences in the purchase price or cost of production in the case of fixed assets or stocks of immovable property in real estate companies which are in the construction phase financed by the liabilities required to generate those.

Based on the principle of prudence, the General Accounting Plan states that negative differences of change should be attributed to the result of the exercise in which they are shown, while for positive differences, Except for cash, its imputation shall be deferred to the result, in general, until the expiry of the operation which produces them, since these amounts may be subject to variation up to that date and are therefore not collected. as income until they are made.

However, the irrevocable fixing of the exchange rate between the national currencies of the participating States will result in differences in positive or negative changes arising from fluctuations in these currencies. In future, they will be final and therefore should be understood to be carried out, taking into account the profit and loss account of the year in which the conversion rate is known, as it yields the argument of prudence. set out in the Plan of the Plan referred to above, as it is not subject to change in the future.

In order to concretize, it should be noted that the determination of these exchange differences should be made on the basis of the values in pesetas derived from the conversion of the different asset items and liabilities, in accordance with the provisions of the 14th quoted rule.

However, all the above, the treatment of the differences of change produced in connection with the introduction of the euro, was the subject of a thorough analysis in the working group created for this purpose within the Institute of Accounting and Audit of Accounts, valuing the different alternatives that were proposed and that respond in synthesis to two alternative treatments:

On the one hand, the possibility of slowing down the imputation to results of the positive differences arising from the introduction of the euro, and on the other hand, to record these differences in a way different from that indicated above.

In particular you can synthesize the content of these postures as follows:

To deal with the positive differences in the introduction of the euro as a revenue to be distributed in various financial years, which will be attributed to results as they were cancelled originated.

This positioning, which responds to an approach that seeks to prevent these results from being applied at the time they are produced, in order to mitigate their impact on the profit and loss account, is not covered by the accounting rules in force in this respect since in pure orthodoxy these differences have been made and therefore they must be imputed in the account of results, so it has not been collected in the present rules.

On the other hand, the situation of non-cash assets acquired and listed in the same currency in which they are unequivocally financed with specific debts and which cause differences of exchange, was studied. the possibility that, if this were the case, they will be charged as a correction of the value of those assets.

In this case, it should also be noted that there is also no regulation in our general accounting regulations that allows this to proceed, except for the case of the assets under construction. In this respect, it should be noted that this approach is not shown on the basis of the euro's entry, but rather responds to a possible general accounting treatment of differences in exchange with other currencies, perhaps in future developments in the euro area. the accounting rules could be taken into account.

Other aspects that have been addressed in this article are as follows:

Since the conversion rate will be known in January 1999, it has been considered in the document prepared by the European Commission's Directorate-General XV, and thus has been included in these rules, that the effect will be recognized in the the annual accounts to be closed at 31 December 1998, a circumstance which has been taken into account in Law 46/1998 of 17 December 1998 on the introduction of the euro, where Article 27 (5) requires its regulatory development it takes into account the effects to be incorporated into the 1998 annual accounts.

Another issue that has been raised is the possibility that before 31 December 1998, within a homogeneous group defined in the rule number 14. a of the General Accounting Plan, negative differences of exchange of participating currencies would have been offset with positive differences of non-participating currencies. This will lead to the need to adjust the amount of these positive differences which were attributed to results in previous years, which will mean an expenditure for the financial year at 31 December 1998.

From this moment on, it is also necessary to define which currencies are convertible into the euro and which are understood by homogeneous group.

In turn, the last paragraph of the valuation rule 14. It opens the possibility of applying special rules to specific industries or sectors with large long-term debt in foreign currency. On the basis of this, the orders of the Ministry of Economy and Finance of 12 March 1993 and 18 March 1994 have been published for regulated companies, allowing for the differentiation of possible negative differences, as well as the Order of Ministry of Economic Affairs and Finance of 23 March 1994 to adapt this assessment rule to the specific conditions of certain air transport undertakings. In this respect, it is clarified in this paragraph that the content of these orders will not be affected by the introduction of the euro.

8. Finally, the working group referred to has been referred to the analysis of the possible economic effects arising from the exchange of the peseta for the euro, mainly the valuation of certain non-cash assets acquired in the euro. currency of a participating State to the euro. In this respect, it should be noted that the possible alternatives were analysed in order to take into account the effect that has been referred to, in such a way that the possibility of converting the amounts of the assets taken into account was treated. consideration of the conversion to the euro of the monetary unit in which the various assets were acquired.

It was concluded that while this position would have been more economically appropriate, as long as those immobilized would not be affected by the evolution of both currencies (the peseta and the currency of a participating State). from the moment of the acquisition to the fixing of the irrevocable conversion rate, the associated problems that this alternative would imply, in the sense that it would break the scheme arbitrated in the cited norm of valuation and therefore of the model accounting followed by the acquisition price, cause the conversion mechanism to be established In the past, however, in the reading of the annual accounts, to interpret them properly, this effect must be taken into account and the solution adopted. In short, the accounting model to which reference has been made is not prepared for such a modification, so the present rules try to incorporate the introduction of the euro in line with the existing rules.

the other hand, as in other subjects, the European Commission's criterion has been very much in mind, a circumstance which has prevailed over any other in the discussions of the working group and which have led, as regards to these aspects, that the conversion be performed in total in tune with that established.

9. Article 5 sets out the differences resulting from contracts or exchange rate transactions.

At this point, it is important to highlight the continued emergence of financial market instruments (futures, options, swaps, etc.).

At present, the accounting treatment of this type of operations, whether of risk coverage or when it comes to operations, is submitted to the Accounting and Audit Institute of Accounts. the profitability referred to in these rules as speculative, without prejudice to the fact that the specific rules applicable to financial institutions have already laid down rules for that purpose.

The present rules, taking into account the conclusions as to what has been reached so far, incorporate general criteria in order to provide an accounting solution to the possible aspects of the introduction of the euro in this type of operation. It is thus regulated that the differences arising from transactions intended to cover the risk of the exchange rate of assets or liabilities or transactions to be carried out in the future will be temporarily imputed to the profit and loss account. earnings with equal criteria to the income or expenses arising from the operation they cover. On the other hand, the differences arising from speculative transactions will continue to be treated as general treatment provided for in Article 4. In this case, the financial update of its nominal values should be taken into account in the light of the time period to the materialisation, due to maturity, of the exchange differences.

10. Article 6 deals with the accounting problems arising from possible differences in conversion in foreign currency into consolidated annual accounts.

In national legislation, Royal Decree 1815/1991 of 20 December 1991 approves the rules for the formulation of consolidated annual accounts, as laid down in Articles 54, 55 and 56 of the various methods applicable to the conversion of annual accounts into foreign currency.

With the introduction of the euro it is necessary to determine the accounting treatment to be given to the conversion differences arising from the consolidation of foreign entities.

In the working group mentioned above, the possibility was raised that it would not be appropriate to distinguish according to the method that was used for each entity (exchange rate or monetary-non-monetary exchange rate), because this It would mean perpetuating a situation arising from the conversion of annual accounts into foreign currency, a circumstance which, once the euro appears, no longer occurs in respect of the annual accounts expressed in that currency. In this respect, and taking into account the exceptional nature of a process such as the introduction of the euro, this position advocated that these conversion differences should be recorded in a different manner to that followed up to that point. irrespective of the conversion method to be applied, establishing that such conversion differences are treated in a single and in any case as consolidated company reserves.

However, the simplicity of this position, the majority of the working group finally decided to give a differentiated treatment for each of the methods of conversion of annual accounts, in order not to establish criteria other than the one adopted by the European Commission in this respect.

11. Article 7 develops the problem of costs linked to the transition to the single currency.

As a general rule, these costs shall be charged to the profit and loss account of the year in which they are incurred.

It is possible to provide, in certain circumstances, a provision for risks and expenses. This point was discussed by the components of the aforementioned working group, and three different positions were found in this regard:

(a) A first thought that the provision of the said provision would not be appropriate because there would have been no current of goods or services, that is, the provision would be made to cover future expenses.

b) Another opinion agreed to constitute the envelope with certain limitations, i.e. by establishing restrictions.

c) And finally, a third opinion, party to the provision of the provision in accordance with the accounting rules, which in short is to accommodate its content to the provisions of the Trade Code and the Plan General Accounting, thus avoiding the understanding that something different is being regulated than there is, a circumstance that obviously could not be given.

Finally, the different alternatives indicated are incorporated into the present rules the last of them, so that it is established that these expenses must be imputed to the profit and loss account at the time when know, irrespective of the actual financial year in which they are actually carried out, in accordance with the assessment of the losses which may be apparent in certain assets as a result of their value not being recovered by future income. In any event, their determination shall meet objective criteria and be clearly and accurately justified in the memory of the annual accounts.

This article also provides for the possibility of any of the situations referred to in the third, fifth and twentieth valuation rules of the General Accounting Plan and in the Resolutions that develop, in which case the provisions set out in those rules shall apply.

12. Article 8 of the rules deals with the subject of exercises which do not coincide with the calendar year, dealing with the case of those entities which close the financial year before 31 December 1998, but make their annual accounts with after this date, so that for these cases information is requested in the memory of the annual accounts.

13. Article 11 of Law 46/1998 of 17 December on the introduction of the euro regulates the rounding rules for the euro-peseta conversion of monetary amounts. The differences generated by this rounding are dealt with in Article 9 of these rules, so that they must be taken into account in general.

A question raised in relation to rounding is whether, for the purposes of the annual accounts, the euro must be converted into one of all the transactions carried out by the accounting officer or the conversion of the euro is sufficient. items of the annual accounts. In the rules it is regulated that in order to facilitate the adaptation to the euro, if an accounting subject during the transitional period keeps the notes in the books of accounts in pesetas, but wishes to express the annual accounts in euros, allows the conversion to be carried out by the overall amounts of each item of the annual accounts.

14. Article 10 provides for the information to be included in the annual accounts, both individual and consolidated, in relation to all the significant aspects arising from the introduction of the euro.

15. In order to facilitate the accounting record of the transactions referred to, Article 11 includes a set of accounts to be used for the purposes of the accounting system, although each institution may create and use the accounts which are best suited to its own accounting management.

16. Finally, it should be noted that, in general, the references contained in the accounting rules to the foreign currency should be understood, with the corresponding conversion, to the euro-currency other than the euro. respectively.

CHAPTER I

Currency in which annual accounts are expressed

Article 1. Currency in which the annual accounts are expressed.

1. The annual accounts, individual and consolidated, corresponding to the financial years for which the closing date occurs during the transitional period of the introduction of the euro, covering from 1 January 1999 to 31 December 2001, both may be expressed in pesetas or in euro. This will apply the conversion rate and its corresponding rounding.

Taken the option of expressing the annual, individual and consolidated accounts in euro shall be maintained throughout the transitional period, with the exception of exceptional cases duly justified in the light of the memory of the annual accounts.

2. The annual accounts, individual and consolidated, corresponding to financial years for which the closing date occurs after 31 December 2001, shall express their values exclusively in euro, for which the rate shall apply. of conversion and its corresponding rounding.

3. The annual accounts, individual and consolidated, expressed in euro, may incorporate their securities in the thousands where the size of the figures so advises, indicating this in the annual accounts; in any case, they shall be drawn up with clarity and show the true image of the assets, the financial situation and the results of the accounting officer.

Article 2. Comparability of the information contained in the annual accounts.

1. The annual accounts, individual and consolidated, which are expressed in euro, in accordance with the provisions of the preceding article, shall in any case be included in the balance sheet, in the profit and loss account and in the accounts, the financial year Euro precedents.

2. In order to express the values in euro corresponding to previous years referred to in this Article, the conversion rate and its corresponding rounding shall be used in any case.

3. For the purposes of comparability, in the first financial year in which the accounting officer expresses the annual accounts in euro, he shall include in the report a statement on the "Bases for the annual accounts" of the accounts. adaptation of the amounts of the preceding financial years, as well as the introduction of the euro.

CHAPTER II

Currency in which accounting books are expressed

Article 3. Currency in which the annotations are expressed in the accounting books.

1. During the transitional period of the introduction of the euro, the accounting officers in the accounting records of the transactions carried out may do so by expressing the values in pesetas or in euro, irrespective of their annual accounts, individual and consolidated, are expressed in accordance with the provisions of Article 1.

Taken the option of scoring the transactions in euro, which will be clearly indicated, will apply to the set of accounting books and will be maintained throughout the transitional period, not being able to change the criterion, except in exceptional cases duly justified in those books.

2. If, in accordance with Article 1, the annual accounts are expressed in euro and the accounts are kept in pesetas, the annual accounts and inventories shall be incorporated in the inventory and annual accounts. pesetas, indicating in due diligence that the values in euro have been expressed in their formulation, as well as the information required in Article 2 (3).

3. From 1 January 2002, the accounting officers, when recording the transactions carried out in the books of accounts, shall express their values exclusively in euro.

CHAPTER III

Assessment of certain heritage elements as a result of the introduction of the euro

Article 4. Currency exchange differences of participating States.

1. In accordance with the fourteenth valuation rule contained in the fifth part of the General Accounting Plan, approved by Royal Decree 1643/1990 of 20 December 1990, the differences in exchange from transactions in currency Participating States shall be deemed to have been made on 31 December 1998, when any fluctuation with these currencies is eliminated, in recognition of the profit and loss account at that time.

2. By way of derogation from the above paragraph, where the differences in exchange occur in debts in the currencies of participating States, which are clearly intended for the specific financing of fixed assets under construction, and provided that comply with the provisions of the 14th paragraph of the fifth part of the General Accounting Plan, which may be treated as one more element of the cost of such fixed assets.

The same will apply to the stock of buildings under construction, in accordance with the rules of adaptation of the General Plan of Accounting to the real estate companies, approved by Order of the Ministry of Economics and Finance of 28 December 1994.

3. If, before 31 December 1998, within a homogeneous group of currencies, as referred to in the 14th valuation rule, no positive differences in the currency of the currencies of the Member States have been achieved. Non-participants who were part of the said group, having been charged with negative differences in the currencies of participating States, shall adjust their amount, considering an expenditure for the financial year, for which account 668 may be used, 'Negative differences of change', contained in the second part of the General Plan of Accounting; the counterpart of that expenditure shall be recorded as a "positive foreign currency difference" which forms part of the balance sheet liability B pool "Income to be distributed in various financial years".

4. After 31 December 1998, the date on which the effects produced by the introduction of the euro will be collected, for the purposes of determining the homogeneous groups referred to in the fourteenth valuation rule contained in the fifth Part of the General Accounting Plan shall be grouped together with the currencies which are the official currency of the euro.

5. Regulated undertakings holding transactions in the currencies of participating States, to which the orders of the Ministry of Economy and Finance of 12 March 1993 and 18 March 1994 are applicable, and the air transport undertakings to the As the Order of the Ministry of Economy and Finance of 23 March 1994 is applicable, the differences of exchange which are shown on 31 December 1998 with the same criterion as that applied up to that date shall be imputed to results. time.

Article 5. Contracts or currency exchange rate transactions of participating States.

1. Differences arising from contracts or exchange rate transactions of participating States (futures, options, financial swaps, fixed-term contracts, exchange insurance, etc.) recognised and registered up to 31 December 1998, whose counterpart, in accordance with the terms of the respective contracts, represents a charge, a payment obligation or has produced a cash flow movement, shall have the following treatment:

(a) Operations that are unequivocally intended to cover the exchange rate risk of assets or liabilities held by the company in that date, or of transactions and commitments to be made in the future: their differences must be linked to the respective assets (present or future) covered, and the profit and loss account must be imputed to the same temporary criterion as the revenue or expenditure arising from the operation principal cover; until such time, transitional accounts shall be used.

(b) Speculative Transactions: their differences shall be attributed to the profit and loss account, in accordance with the general allocation criteria set out in Article 4.

In any event, the value adjustments that are necessary shall be made on the basis of the possible insolvency of the debtor.

2. If the differences to which reference has been made come from long-term maturity transactions, they shall be updated financially; the remainder shall be shown in a balance sheet item of expenditure or revenue to be distributed in several financial years, as appropriate, imputed to results in accordance with the financial criterion used for its updating. A market interest rate applicable to transactions of similar characteristics to which they generate the difference shall be used to effect such financial update.

Article 6. Conversion into consolidated annual accounts.

1. For the purposes of drawing up consolidated annual accounts, the annual accounts of foreign companies expressed in currencies of participating States shall be converted into account of the conversion rate to the euro if the consolidated annual accounts include 31 December 1998.

2. For the consolidation of the annual accounts of foreign companies referred to in the preceding paragraph, the method of conversion of foreign companies which corresponds in accordance with Articles 54 to 59 of the rules for the formulation of consolidated annual accounts, approved by Royal Decree 1815/1991 of 20 December 1991, taking into account the following:

(a) If the exchange rate method of closing is applied, the differences in the conversion of annual accounts denominated in one of the participating currencies up to 31 December 1998 shall be recorded as part of the own funds of the consolidated balance sheet until the disposal of the shares of the foreign company that originated them. These differences shall be set out under the heading (A). VII.

Conversion differences " of the consolidated balance sheet model included in the Annex to the rules for the formation of consolidated annual accounts.

(b) If the monetary-non-monetary method is applied, in accordance with the above rules for this method, the differences that may be evident in the conversion of annual accounts denominated in one of the participating currencies up to 31 December 1998 shall be charged to the consolidated profit and loss account for the financial year as positive or negative conversion results, as provided for in Article 56 (e) of the Financial Regulation. Standards indicated. These differences shall be respectively, depending on their nature, in items 11. "Negative conversion results" of the must or 9. 'Positive conversion results' of the consolidated profit and loss account model included in the Annex to the rules for the formulation of consolidated annual accounts.

However, it should be borne in mind that when applying the conversion rate to the euro on the annual accounts of the foreign company, changes in the exchange rate of the said currency are incorporated with respect to the exchange rate. The Commission shall, in accordance with Article 56 of the rules for the formulation of consolidated annual accounts, amend the historical values to be maintained, which shall be binding in accordance with Article 56 of the rules for the formulation of consolidated annual accounts. the assessments of the different assets of that company.

Article 7. Investments and expenditure arising from the introduction of the euro.

1. Expenditure incurred by institutions as a result of the introduction of the euro shall be charged to the profit and loss account for the financial year in which they are incurred, without prejudice to the principle of prudence that the corresponding provisions for risks and expenses, where such expenditure is clearly specified in terms of its nature at the date of the close of the financial year, but not determined as to its exact amount or date of production.

2. Operations which are identified with an extension, improvement or renewal of a fixed asset in accordance with the third and fifth valuation rules of the General Accounting Plan, as well as the development carried out by the Institute's Resolutions Accounting and Audit of Accounts, they must be counted as the highest value of the fixed assets.

3. In cases where the life of a good is affected by the introduction of the euro, as an estimated parameter, the 21st valuation rule of the General Accounting Plan should be applied, adjusting the the depreciation of the year and of the future or, where appropriate, the loss of the said good.

4. The amounts of investments and expenditure arising from the introduction of the euro shall be treated in accordance with their nature. However, if such expenses or losses are significant from a quantitative point of view, they shall be treated as extraordinary expenses in the profit and loss account.

Article 8. Exercises that do not match the calendar year.

1. Institutions whose economic performance does not coincide with the calendar year shall reflect the effects of the introduction of the euro, in particular the exchange rate differences from participating States, as well as any other currency. (a) in the annual accounts for the financial year which it includes on 31 December 1998.

2. If the annual accounts for financial years ending before 31 December 1998 are made after that date, it shall be included in the annual accounts in the section corresponding to the annual accounts. 'post-closure events' means information on the conversion rate and the consequences which it may have on the valuation of the various assets and, in particular, on the possible differences of change.

Article 9. Rules on rounding.

1. The differences that are generated by the rounding off of the conversion, as laid down in Article 11 of Law 46/1998 of 17 December 1998 on the introduction of the euro, shall be collected, where appropriate, in the profit and loss account of the financial year in which the euro is originate, forming part of the financial income or expense.

2. If, in accordance with the provisions of Article 28 of Law 46/1998 of 17 December 1998 on the introduction of the euro, a reduction of capital is made, the amount of the capital shall be charged to an account of essential reserves, with the result that a specific item under item A. IV of the liability of the balance sheet model contained in the fourth part of the General Accounting Plan, the name of which shall be 'Differences in adjustment of capital to euro'.

3. During the transitional period, if in accordance with the provisions of Articles 2 and 3 above, the annual accounts are expressed in euro while the accounting books continue to collect the transactions, expressing their values in pesetas, may convert the items of the annual accounts into a global form, without prejudice, where appropriate, to the rules on redenomination contained in the Act on the introduction of the euro.

Article 10. Information to include in memory.

1. In the memory of the annual accounts for the financial year in which, in accordance with the above Articles, the effects produced by the introduction of the euro are collected, the following information shall be included in the corresponding:

(a) The plans drawn up for the introduction of the euro shall be indicated by estimating their amounts and the time-limits for carrying them out; in particular, the future commitments to be made by the institution, relating to investments to be made as consequence of the introduction of the euro.

(b) The quantification of the exchange differences arising from the introduction of the euro, the most significant transactions from which they come, as well as the adjustments referred to in Article 4 (3) above. The time limits shall be included as well as the amounts of the most significant transactions.

(c) If the institution has exchange rate transactions or contracts with respect to the currencies of participating States, the most significant transactions and the accounting treatment followed shall be reported. The time limits shall be included as well as the amounts of the most significant differences and transactions, distinguishing the items receivable and payable respectively.

(d) The amount of expenditure and losses arising from the introduction of the euro, in particular the provisions which may be incurred, indicating the criteria used for their allocation and their justification, as well as the assets whose life useful is affected, pointing out the effects on the amortization of the same.

(e) If differences of a significant nature result from rounding, the amount and the operations that produce it shall be reported.

In particular, the capital figure and the effects produced in its conversion to euro shall be reported.

2. In the memory of the consolidated annual accounts, in addition to the information collected in the preceding points, the following shall be included:

(a) The amount of the conversion differences for the dependent companies in participating States to which the closing exchange rate method applies to them.

(b) If the monetary-non-monetary method is applied to foreign companies whose accounts are denominated in one of the currencies of participating States, information on the results of the conversion shall be included indicating the criterion used for their imputation to results and, in particular, on the differences in valuation in relation to the historical value produced in foreign companies expressed in the currencies of participating States.

Article 11. Accounts to be used to record the effects of the introduction of the euro.

To carry out the accounting records of the operations referred to in the preceding paragraphs, the following accounts may be used:

1. The account 668. "Negative differences of change" provided for in the second part of the General Accounting Plan is developed in the following four-digit accounts:

6680. "Negative differences in exchange for the introduction of the euro".

6681. "Negative differences of change".

The movement of account 6680 is as follows:

a) It will be loaded:

a.1) For the amount of the negative exchange differences arising from the transactions in currencies of the participating States as at 31 December 1998, with credit to groups 1, 2.4o5.

a.2) For the amount of positive exchange differences brought to results from previous exercises of non-participating States currencies that were part of the same homogeneous group, with credit to account 136.

a.3) For the amount of the negative exchange differences arising from contracts or speculative exchange rate transactions, with credit, in general, to group 5 accounts.

b) The account shall be credited to the account 129.

The movement of account 6681 matches the one provided in the General Accounting Plan for account 668.

2. The account 768, "positive exchange differences" provided for in the second part of the General Accounting Plan, is developed in the following four-figure accounts:

7680. "Positive differences in exchange for the introduction of the euro".

7681. "Positive differences of change".

The movement of account 7680 is as follows:

a) It will be paid:

a.1) For the amount of positive exchange differences arising from transactions in currencies of the participating States as at 31 December 1998, from group 1 accounts, 2.4o5.

a.2) Due to the cumulative positive exchange differences of previous financial years of participating States with the count 136.

a.3) For the amount of positive exchange differences arising from contracts or speculative exchange rate transactions, with a charge, in general, to group 5 accounts.

b) The account is loaded with credit 129.

The movement of account 7681 matches the one provided in the General Accounting Plan for account 768.

3. The account 669 "Other financial expenses" provided for in the second part of the General Accounting Plan, is developed in the following four-figure accounts:

6690. "Expenditure on differences arising from euro rounding".

6691. "Other financial expenses".

The movement of account 6690 is as follows:

(a) It shall be charged for the amount of the differences arising from the rounding which may be shown by the conversion, with the payment to the accounts of the various groups.

b) The account shall be credited to the account 129.

The movement of account 6691 matches the one provided in the General Accounting Plan for account 669.

4. The account 769 "Other financial income", as provided for in the second part of the General Accounting Plan, is developed in the following four-figure accounts:

7690. "Income from differences arising from euro rounding".

7691. "Other financial income."

The movement of account 7690 is as follows:

(a) It shall be paid for the amount of the differences arising from the rounding that may be shown by the conversion, from the accounts of the various groups.

b) The account is loaded with credit 129.

The movement of account 7691 matches the one provided in the General Accounting Plan for account 769.

5. The account 678 "Extraordinary expenses", provided for in the second part of the General Accounting Plan, is developed in the following four-digit accounts:

6780. "Expenditure produced by the introduction of the euro".

6781. "Other extraordinary expenses".

The movement of account 6780 is as follows:

(a) It shall be charged in general for the amount of the significant expenditure arising from the introduction of the euro, with credit, in general, to group 5 accounts or, as the case may be, sub-group 14.

b) The account shall be credited to the account 129.

6. Account 119 'Differences in adjustment of capital to euro' shall be created, which shall appear on the liabilities side of the balance sheet and shall contain any differences arising as a result of the conversion to euro of the capital figure in accordance with the content of the Act 46/1998 of 17 December 1998 on the introduction of the euro.