EU country-by-country reporting drive "not co-ordinated", says ICAEW
Despite its "laudable" aims, country-by-country reporting proposals need refining, say consultation respondents
COUNTRY-BY-COUNTRY REPORTING needs greater co-ordination and refining if it is to function, according to responses to a government consultation.
The move stems from two European directives; the Capital Requirements Directive (CRD IV) requires extensive reporting by European banks, while a further set of requirements applicable to large companies in the extractive and forestry sectors was introduced by the revised Accounting Directive, which became law in June 2013.
As a result, financial institutions and companies will be required to publish their name, the nature of their activities and geographic location, number of employees, and their turnover on a country-by-country (CBCR) basis on 1 July 2014.
However, there is concern from the ICAEW that while the objectives are laudable, there is a lack of co-ordination on the EU’s part in its drive for country-by-country reporting. There is a danger, the institute said that “the objectives of campaigners in this area will be frustrated… and lead to confusion rather than clarity” as a result.
There are worries, too, that businesses could suffer from a number of compliance costs if the requirements are passed in their current form.
In its submission, the institute said: “We think the current approach to extending country by country reporting in Europe is fraught with risks. The objectives are laudable, but whether an effective and proportionate regime is the outcome is far from certain. We therefore suggest that the European Commission undertakes a rigorous, inclusive consultation exercise and a thorough impact assessment on country by country reporting before any further legislative requirements are proposed.”
The government said in its consultation: “The government believes that the CBCR requirements have a natural element of proportionality due to the fact that larger multinational institutions will have more data to gather and this would also lead to a relatively larger reporting burden. Smaller institutions that operate purely domestically will already have most of the relevant data in their annual reports. Therefore, the government does not believe that the burden on smaller institutions will be significant and disproportionate.”