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EFRAG report regarding costs of implementing country-by-country reporting

03 Aug 2011

In October 2010, the European Commission started a public consultation in order to gather stakeholders' views on country-by-country reporting by multinational companies. Country-by-country reporting is a concept that would require multinational companies to disclose financial information on their operations in third countries in their annual financial statements.The consultation mainly focused on companies active in an extractive industry in third countries.

As part of the follow-up analysis of the comments received, the DG Internal Market and Services of the European Commission asked the European Financial Reporting Advisory Group (EFRAG) to provide assistance in collecting evidence useful for assessing the administrative costs associated with implementing the two options suggested:

  • general country-by-country reporting by multinational companies with a full set of accounts including intra-group transactions, which are eliminated on consolidation, or
  • specific country-by-country reporting by companies, which are active in an extractive industry in third countries, including payments made by the extractive industry to governments in third countries and other extractive industry-specific information.

The report includes the following overall findings:

General country-by-country reporting

"(14) Feedback received from different companies regarding estimated costs to implement the proposals in respect of general country-by-country disclosure requirements (i.e., one-off costs), and estimated costs to comply with them (i.e., ongoing costs), varied significantly.

(15) Four out of seven multinational companies that participated in the cost assessment task provided a quantitative estimate of costs required for implementing and complying with the general country-by-country disclosure requirements. These quantitative estimates ranged from EUR 0.4 million to EUR 46.6 million for both one-off and ongoing costs. [...] Three other multinational companies provided only a qualitative estimate, as they did not consider the proposals to be specified sufficiently to arrive at a quantitative estimate.

(16) Feedback received emphasised the need to specify the proposed disclosure requirements more clearly, and drew attention to a number of constraints."

Specific country-by-country reporting

"(42) The overall feedback included in the section related to the general country-by-country reporting by multinational companies (see paragraphs 14 - 16) applies equally to the specific country-by-country reporting by companies, which are active in an extractive industry in third countries. [...] It is also noted that three out of four extractive companies that participated in the cost assessment task already participate in the EITI [Extractive Industries Transparency Initiative] in some countries. The other extractive company discloses some of the information voluntarily in the CSR reporting."

The full report can be accessed via the EFRAG press release (link to EFRAG website).

Click for our October 2010 article on the European Commission public consultation on country-by-country reporting