Public consultation on country-by-country reporting

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27 Oct 2010

The European Commission is conducting 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.

At present, issuers of securities in regulated markets in the EU are required to make public an annual financial report comprising, inter alia, a management report and the audited financial statements. When the issuer is required to prepare consolidated accounts, the audited financial statements must comprise consolidated accounts drawn up accordance with international accounting standards (IFRS). Currently, the applicable accounting standards do not require issuers to disclose financial information on a country-by-country basis in their consolidated accounts, although the Accounting Directives do require issuers to identify subsidiaries, jointly controlled entities and associates.

The IASB is currently working on a possible country-by-country reporting requirement which could be incorporated within a replacement Standard for IFRS 6 Exploration for and Evaluation of Mineral Assets. Once finalized, this standard is likely to become mandatory in the EU through the usual endorsement process under the IFRS Regulation.

The questionnaire for the consultation includes the following questions:

  • Would it be useful to have common EU rules on the disclosure of financial information on a country-by-country basis?
  • Would the disclosure of financial information on a country-by-country basis by multinational companies be meaningful to investors of the company concerned?
  • [...]
  • Would the disclosure of financial information on a country-by-country basis by multinational companies active in the extractive sector (e.g. minerals, oil, natural gas, etc.) be useful in order to improve domestic accountability and governance in natural resource-rich third countries?
  • [...]
  • If country-by-country reporting were to be considered useful, what kind of multinational companies would usefully be targeted?
  • Please provide information on the cost that you estimate that the introduction of country-by-country disclosure requirements could entail.

The questionnaire of the European Commission can be accessed here (link to EC website). Responses must be received by 22 December 2010.

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