Brussels, 28/10/2004 (Agence Europe) - Following the recent financial scandals (Enron, Parmalat, etc.), the Commission has proposed four key revisions of the EU's Accounting Directives with an aim to enhance confidence in financial reporting by companies.
The proposal adopted on Thursday confirms that board members of limited companies are collectively responsible to the company for the financial and other key information that they publish and that Member States should have appropriate sanctions and liability rules where board members do not comply with accounting rules. This is in line with what currently exists in all Member States. In some States, there is debate on going further, so the Commission considers this proposal may be a first step at EU-level.
For listed companies, disclosure requirements on transactions with all related parties such as family members and company managers already exist under International Accounting Standards (IAS). The proposed amendments would extend these to unlisted companies though the amendments would apply only to significant transactions with related parties not carried out under normal commercial conditions. Member States would be able to exempt small unlisted companies.
Certain financial instruments can involve Special Purpose Entities located offshore that are not captured in the balance sheet. The Commission proposes that all companies - listed or not - should disclose all off-balance sheet arrangements, including their financial impact, in notes to the annual and consolidated accounts.
Investors need transparency on corporate governance to make informed investment decisions. The Commission is proposing that all listed EU companies should provide a corporate governance statement in their annual report. That statement would cover key issues such as whether the company complies with a corporate governance code, information about shareholders' meetings and the composition and operation of the board and its committees.