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European Parliament approves new Accounting and Transparency Directives

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13 Jun 2013

The European Parliament has voted to approve the new Accounting and Transparency Directives. The reform of these Directives was predominently aimed at reducing the administrative burden on small companies, enhancing the transparency of payments to governments by the extractive industry and loggers of primary forest, and creating a mandatory country-by-country reporting requirement.


Accounting Directive

The new Accounting Directive reduces unnecessary and disproportionate administrative costs on small companies by simplifying the preparation of financial statements and reducing the amount of information required by small companies in the notes to financial statements. Under the Directive, small companies are only required to prepare a balance sheet, a profit and loss account and notes to meet regulatory requirements.

When examining the various policy options available to replace the old Accounting Directives, the Commission examined and rejected the option to adopt the IFRS for SMEs at EU level as the Commission deemed that IFRS for SMEs did not meet the objective of reducing the administrative burden. Nevertheless, EU Member States are able to permit or require the IFRS for SMEs as their accounting standard for all or some of their unlisted companies provided that the Directive is fully implemented and the standard, which is partially in conflict with the Accounting Directive, is modified to comply with any accounting requirement of the Directive that departs from the IFRS for SMEs.


Transparency Directive

The revised Transparency Directive closes an existing gap in the notification requirements by requiring disclosure of major holdings of all financial instruments that could be used to acquire economic interest in listed companies. A second major change is the fact that the requirement to publish quarterly financial information was abolished. This aims at reducing the administrative burden and encouraging long term investment.


Country-by-Country reporting

Country-by-country reporting was introduced with the new Accounting Directive. In order to ensure a level playing field between companies, the same disclosure requirement has been incorporated in the proposal to revise the Transparency Directive.

The disclosure requirement will 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 Commission responded to international developments in this field, in particular the inclusion of a requirement to report payments to governments in the Dodd Frank Act in the United States, but the EU disclosure requirements are more comprehensive including also the logging industry and large unlisted companies.


Further Information

The EU Commissioner for Internal Market and Services, Michel Barnier, published a press release welcoming the European Parliament vote:

Financial reporting obligations have been modernised and costs reduced, in particular for SMEs. With the new rules on country by country reporting, we have created a framework where businesses and governments must disclose revenues from natural resources. This framework will also contribute to the fight against tax fraud and corruption.

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