We comment on BIS consultation on country-by-country reporting in the extractive industries

  • Deloitte Comment Letter Image

18 Jun, 2014

We have published our comment letter on the Department for Business, Innovation and Skills (BIS) consultation on proposals to implement the country-by-country reporting requirements for large extractive companies introduced by the European Union (EU) Accounting Directive.

Chapter 10 of the EU Accounting Directive (Directive 2013/34EU (link to European Commission website)) (“the Directive”) and changes made by Directive 2013/50/EU (link to the European Commission website) to the Transparency Directive (2004/109/EC)) require listed and large non-listed companies with activities in the extractive industry and the logging of primary forests to report any payments made to governments on a country-by-country basis in an effort to improve the transparency.  The Directive was published in the Official Journal of the European Union on 29 June 2013 and EU Member States have until 20 July 2015 to incorporate the rules into their national law.  The BIS proposals were published in March 2014.

Our main points are:

  • In relation to the proposals that the first reports should relate to financial years commencing on or after 1 January 2015 we identify two key issues.  We question whether companies will have sufficient time to introduce the necessary changes to their reporting systems, and subject them to adequate testing, to allow for compliance.  We highlight that “systems changes take many months to design, implement and test”.  Secondly we question whether there are significant benefits of early adoption especially when there is “little consensus within the EU as to the most appropriate implementation deadline”.  In this respect we comment that “much of the benefits for the public in reporting 2015 figures will be lost” with an earlier adoption date in the UK and hence see “some merit to delaying the operative date of introduction, to bring the UK into line with the majority of EU member states”.
  • Due to the differing implementation dates across the EU, we comment that “it will be inevitable that UK-registered subsidiaries will be obliged to report as solo entities in respect of 2015, and then be exempted from reporting for subsequent years, once their EU parent prepares consolidated extractives reporting”.
  • We highlight that the draft regulations need to be amended in a number of “key areas” including Regulation 7(2) which, as drafted, “appears to exclude overseas subsidiaries from their UK parent’s extractives reporting”.  We provide a number of recommendations for BIS to consider.

Further comments and a full response to all questions raised in the invitation to comment are contained within the full comment letter.

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