Off-balance-sheet airing sought by EU.

Corporate governance reforms rushed through the European Parliament's final voting session of 2005 were expected to be voted into law by early March. The legislation, framed in response to governance issues raised by the Enron scandal and the collapse of the Italian dairy group Parmalat SpA, would require EU-listed companies to disclose off-balance-sheet arrangements. Both Enron and Parmalat used such arrangements and special purpose entities (SPEs) to conceal the true state of their finances.

Amendments spell out off-balance-sheet arrangements, possibly associated with creation of SPEs, that qualify for disclosure, BNA reported. These including risk- and benefit-sharing arrangements; obligations arising from a contract such as debt factoring; combined sale and repurchase agreements; consignment stock arrangements; "take or pay" arrangements; securitization arranged through separate firms; pledged assets; operating leasing arrangements; and outsourcing.

Based on reporting in Europe from BNA, other important changes to current EU directives on accounts would:

* establish collective responsibility of board members for annual reports and accounts;

* require greater transparency regarding company transactions not carried out under "normal commercial conditions" and involving "related parties" such as managers, spouses or the manager's family; and

* demand inclusion of a "corporate governance statement" in annual reports.

Added clauses establish that the rules on corporate governance statements will apply equally to banks, insurers and reinsurers and EU-registered bond issuers, all of which are covered by separate, sector-specific EU accounting legislation.

Once signed, the directive will enter into force 20 days after publication. States must then transpose the directive into national law within 24 months, according to an amendment agreed between legislators and ministers.