The Committee of the Admission Board issued a reprimand to EGL on 16 August 2004 owing to breaches of the financial reporting regulations in the company's 2002/2003 financial statements. EGL took this ruling to the Disciplinary Commission on 15 October 2004. The Commission upheld the reprimand on 31 January 2005 and it has now become final.
Issuers must draw up their annual financial statements in accordance with recognised financial reporting standards. EGL applies the International Financial Reporting Standards (IFRS - formerly IAS). The annual financial statements for 2002/2003 that were published in December 2003 nonetheless failed to comply with IFRS requirements in several respects.
Contrary to IAS 39, the consolidated balance sheet did not report standardised forward electricity contracts, which are used to exploit price differences rather than for physical power delivery, as financial instruments at fair value. Furthermore, the valuation of EGL's minority holding in Electricité de Strasbourg SA, which should already have appeared in the balance sheet at fair value the previous year in accordance with IAS 39, was not adjusted according to IAS 8 and disclosed.
In the cash flow statement, a financial leasing transaction was stated as having an impact on liquidity, in contradiction of IAS 7. In addition, the change in long-term liabilities was reported as cash flow from operating activities rather than financing activities. Still further, the cash flow statement contained an error in which plus and minus signs were confused, resulting in a significant error in the cash flow from operating activities and financing activities.
EGL has since complied with IFRS in its financial reporting. It was nonetheless difficult to understand why EGL contested the applicability of IFRS regulations to the treatment of standardised forward electricity contracts in the present case, having at the same time complied with precisely these regulations in the semi-annual and annual report for 2003/2004.
