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EC publishes evaluation roadmap for fitness check on public reporting by companies

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12 Feb 2018

The European Commission (EC) has published an evaluation roadmap 'Fitness check on public reporting by companies (Accounting Directive, Transparency Directive, Non-financial reporting Directive, Bank Accounts Directive et Insurance Accounts Directive and IAS Regulation)'.

The purpose of the fitness check exercise will be to assess whether the public reporting obligations including financial and non-financial reporting requirements for EU companies are meeting their objectives (effectiveness, relevance and EU added value). It will cover various reporting requirements including the Accounting Directive including the Non-Financial Reporting Directive, the Regulation on International Accounting Standards (IAS Regulation), the Transparency Directive (TD), the Banks Accounts Directive, and the Insurance Accounts Directive.

The Commission aims to assess whether the EU financial reporting framework is still fit for purpose. Aspects in this context are cross border businesses in a more integrated Single Market and well-functioning capital markets, the emergence of new business models, the increasing importance of intangibles in the digital economy, and the role of IFRSs and their interaction with the broader EU accounting framework. The Commission also notes the increased demand for public reporting on a broader range of topics as for example reporting on sustainability issues and long term value creation. Interaction and integration of the different sets of public reporting by companies (financial, non-financial and other reports) will also be looked at. And finally, the Commission will look at digitalisation and its long-term challenges and opportunities.

The first step in this fitness check will be an open public consultation that is expected to be launched in 1st quarter of 2018 and will last for a period of at least 12 weeks. In particular, participants will be asked for their views on the following:

  1. Whether the current financial reporting framework meets its objectives and will continue to do so in the digital economy, whether the level of harmonisation and simplification meets the needs of respectively the large cross border groups and the SMEs, the role of IFRS for non-listed and listed companies including governance aspects to ensure these are not detrimental to long term and sustainable investments, and the coherence of sectoral accounting legislation for banks and insurance companies with other EU reporting and prudential legislations;
  2. Whether the financial and non-financial disclosures in the area of Environmental, Social and Governance (ESG) reporting by companies are fit for purpose, including as regards sustainability disclosures;
  3. Whether to encourage experimentation with integrated reporting as a way to make the EU reporting framework more effective and efficient and if yes how;
  4. Whether public corporate reporting does take enough consideration of – and at least is not a hindrance to – technological progress and how to make the best use of these new tools to do more with less.

Please click to access the full fitness check roadmap on the EC website. Note that roadmaps can also be commented on - feedback on this roadmap is requested by 8 March 2018.

The High-Level Expert Group (HLEG) on Sustainable Finance, established by the EC, has also suggested in its final report setting out strategic recommendations for a financial system that supports sustainable investments that changes to the IAS Regulation might be warranted.

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