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27 October 2010

Commission consults on financial reporting on a country-by-country basis by multinational companies


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Country-by-country reporting is a concept that would require multinational companies to disclose financial information on their operations in third countries in their annual financial statements.


The Services of DG MARKT are conducting a public consultation in order to gather stakeholders' views on country-by-country reporting by multinational companies. At present, issuers of securities in regulated markets in the EU are required to make public an annual financial report comprising, inter alia, a management report and the audited financial statements (cf. Article 4 of Directive 2004/109/EC). When the issuer is required to prepare consolidated accounts, the audited financial statements must comprise consolidated accounts drawn up accordance with international accounting standards (cf. Regulation EC No 1606/2002). Currently, the applicable accounting standards do not require issuers to disclose financial information on a country-by-country basis in their consolidated accounts, although the Accounting Directives do require issuers to identify subsidiaries, jointly controlled entities and associates. Moreover, non-listed limited liability companies registered in the EU (including subsidiaries of listed companies), are required to file their annual accounts with the business registries, which are accessible to any interested party. Similar obligations exist in many third countries.
 
Possible ways of ensuring additional transparency

In recent years there have been calls to impose on large companies (whether listed or unlisted) operating in third countries additional transparency requirements linked to these activities in third countries. In some cases, these calls concern a particular industry sector.
 
In a more general context, the Commission, on 22 September 2010, agreed with the European Parliament in the context of the negotiations of the new supervisory package "to prepare a Communication evaluating the feasibility of requesting certain issuers of shares whose securities are admitted to trading in a regulated market and which prepare consolidated accounts, to disclose in the annual financial report, key financial information regarding their activities in third countries." 
 
Deadline for comments is 22 December 2010.


© European Commission


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