FINANCIAL REPORTING : COUNCIL ENDORSES NEW DISCLOSURE REQUIREMENTS.
As part of the EU's wider drive to raise corporate governance standards after the Parmalat, Enron and Worldcom scandals, the Council of Ministers on 22 May formally adopted changes to the EU Accounting Directives that would require the 8,000-odd listed companies in the EU to produce a corporate governance statement in their annual report, covering 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. And board members of limited companies will be collectively responsible for the financial and other key information that they publish.
Under the terms of this new Directive, all companies (listed or not) will have to disclose all off-balance sheet arrangements, including their financial impact, in notes to the annual and consolidated accounts. Disclosure requirements on transactions for listed companies, covered by International Accounting Standards (IAS), will be extended to unlisted companies, albeit applying only to "significant" transactions not carried out under normal commercial conditions (such as unusual transactions with tied parties, like spouses of board members).
This new legislation amends the 4th and 8th Company Law Directives (78/660/EEC and 86/349/EEC) on the annual accounts of companies and consolidated accounts of groups, as well as Directives 86/635/EEC and 91/674/EEC on the annual accounts of banks and insurance companies. The adoption of the Directive was a formality since an agreement was found with the European Parliament in first reading in December. It will enter into force in all the member states in two years' time.
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|Article Type:||Brief article|
|Date:||May 24, 2006|
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