EU moves to improve transparency of company accounts

Improvements in clarity and openness of annual and consolidated accounts for
European Union (EU) businesses have been approved by the EU Council of
Ministers, the latest of a series of transparency-seeking reforms to European
company law directives.

The change amends the fourth and seventh ‘accounting’ company law directives,
and accounting directives for banks and insurers. It is designed, said a council
statement, to ‘enhance confidence in the financial statements and annual reports
published by EU companies’.

Notably, the reforms establish a collective responsibility for board members
to reliably and honestly draft and publish these documents; they also demand
more information be published on large and unusual transactions with related
parties – such as family members and company managers – for all bar smaller
unlisted companies.

The changes, however, do not include some proposals that were deemed
over-bureaucratic by the European Parliament, whose amendments have been
accepted by ministers.

For instance, with regard to the compulsory filing of separate statements on
off-balance sheet arrangements, ministers agreed that such concerns are already
covered by International Accounting Standards.

They also accepted parliamentary amendments increasing the number of small
and medium-sized businesses allowed to file simplified returns under the fourth
company law directive. This threshold, regarding smaller companies’ balance
sheet total and net turnover, has been raised by 20%.

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