IFRS Project Part 1

Royal Dutch Shell Company

Student’s Name

Professor’s Name

Course Title

Date of Submission

Royal Dutch Shell Company

Introduction

Royal Dutch Shell is a multinational oil and gas company which is commonly known as shell all over the world. The company was created by a merger between UK-based shell transport and Royal Dutch Petroleum. Shell was founded in February 1907 and its headquarters are located in Hague, Netherlands. Royal Dutch Shell is the most valuable companies in the world and is among the seventh largest companies with highest revenues in the world. Shell is very much integrated in areas of gas and oil industry because is active in terms of oil refining, marketing, production, distribution, and exploration as well as trading and power generation (Van Zanden, Jonker, Howarth, & Sluyterman, 2007). More so, in 2013, the Shell revenue was 84% of that of Netherland’s GDP ($555.8 billion).

Netherland is the member of the European Union and most of the financial and accounting procedures are normally dictated by the rules and regulations of IAS which was adapted in 2002. The adaption of IAS required companies, banks, and insurance companies in the member states to prepare consolidated financial or accounting reports as started by IFRs and IAS regulations. Therefore, Royal Dutch Shell management is also supposed to adhere to the regulations of the European Union and IAS rules (Chen, Tang, Jiang, & Lin, 2010).

However, the Dutch civil code regulate the companies in her territory by requiring the management of these companies to prepare list of shareholders, cash flow statements, profit and loss account, balance sheet and many other accounting documents. The state government demands the organizations to prepare annual financial statements, annual reports, and other supplementary information according to the Dutch accounting principles. Furthermore, Dutch civil code part 9-book 2, includes the guidelines on how the companies are supposed to prepare their annual reports which under the council of Annual Reporting. This Dutch code helps to regulate and supervise business organizations in terms of accounting and financial reporting.

On the other hand, business companies are also allowed by Dutch government to use or apply other principles. Companies therefore, apply for International Financial Reporting Standards (IFRS) which is much accepted by European Commission (Chen, Tang, Jiang, & Lin, 2010). The companies which are accepted by IFRS are usually obligated or expected to prepare annual financial reports according to rules and regulations of IFRs. Furthermore, every company is also required to publish its financial or annual reports within eight days from the date of adoption depending on the size of the organization. Then, auditing must be done to both medium and large business organizations by a qualified, independent, and registered auditor in the Dutch laws.

Accounting profession in Netherlands usually starts immediately a person has graduated from high school, or tertiary institution such as college or university. Then, the program continues and the person is required to have BSc and MSc in accounting. The training then goes ahead and the individual acquires RA certificate. The newly trained accountant or auditor usually serves only to the listed clients under Dutch law and NIVRA professional organization. However, since Netherlands is one of the members of European Union, the accounting profession is also subjected to EU laws which are used to regulate accounting professionals alongside other Dutch laws (Carmona & Trombetta, 2008). Therefore, the accountancy profession is regulated by two Dutch laws which are The Auditors Profession Act and The Audit Firms Supervision Act which are responsible for overseeing the auditing profession.

Finally, accounting profession and public in Netherlands has created a gap because of lack of trustworthy especially those who are working public institutions. Only about 55% of auditors in Dutch can be considered by public as trustworthy and therefore, making accounting profession to be lowly valued by the public due to corruption and other cases.

References

Carmona, S., & Trombetta, M. (2008). On the global acceptance of IAS/IFRS accounting standards: The logic and implications of the principles-based system. Journal of Accounting and Public Policy, 27, 455–461. http://doi.org/10.1016/j.jaccpubpol.2008.09.003

Van Zanden, J. L., Jonker, J., Howarth, S., & Sluyterman, K. (2007). A History of Royal Dutch Shell. OUP Catalogue.

Chen, H., Tang, Q., Jiang, Y., & Lin, Z. (2010). The role of international financial reporting standards in accounting quality: Evidence from the European Union. Journal of International Financial Management & Accounting, 21(3), 220-278.