The European Parliament yesterday voted through comprehensive changes to the EU’s accounting framework, abolishing quarterly reporting, introducing country-by-country reporting for extractive and logging companies and reducing reporting requirements on small and micro businesses.
The Strasbourg vote is almost the final hurdle in the legislative process to replace and modernise the 4th and 7th Accounting Directives with a new Directive, a project begun by the European Commission in 2007. The Parliament also voted on changes to the Transparency Directive.
Institute of Chartered Accountants in England and Wales (ICAEW) head financial reporting faculty Nigel Sleigh-Johnson said: "The introduction of country-by-country reporting requirements on major companies in the extractive and logging sectors has, understandably, received much of the attention of MEPs and commentators. However, there are other changes that will have a wide reach, such as the end of mandatory quarterly reporting for listed companies and restrictions on the disclosures that member states can mandate for small companies".
"ICAEW has been calling for a root-and-branch modernisation of the Accounting Directives for many years. After numerous consultations and debates, we can now finally see the finishing line. However, there are substantial issues to be addressed as the legislation is enacted in the UK. For example, a review of the disclosure requirements of the Financial Reporting Standard for Smaller Entities will be necessary," he said.
The new Accounting Directive incorporates the decision to give each member state the ability to introduce significantly simplified reporting requirements for micro businesses, as adopted into EU legislation last year.
Sleigh-Johnson added: "We have grave doubts about the value of some of these optional exemptions. We have been in discussion with the Department for Business, Innovation and Skills to try to ensure that the new regime does not undermine the usefulness of financial information produced by companies, particularly where they are seeking access to new sources of finance."