New rules mean firms must disclose non-financial information

17th April 2014

MGI World Mr Barnier believes all parties will benefit from the increased transparency.

European lawmakers have voted in favour of new accounting rules that would see large enterprises operating within the European Union (EU) being required to divulge a plethora of non-financial information in their yearly reports.

The revisions were passed by 599 votes to 55 in a parliamentary session in Strasbourg. The changes mean that firms employing more than 500 people will need to disclose information regarding environmental, social and staff-related matters.

Large companies will also be compelled to divulge data on human rights issues, bribery and anti-corruption concerns, as well as boardroom diversity.

Michel Barnier, Internal Market and Services commissioner at the European Commission (EC), said: "Companies, investors and society at large will benefit from this increased transparency.”

The directive allows companies the flexibility to communicate relevant information in any way they feel would be useful, including producing a separate report for these matters. International, European or national guidelines can be used, with the business being able to select which is the most appropriate.

According to the EC, around 6,000 enterprises will be affected by the revised law. However, this is a significant reduction from the 18,000 that would have been impacted if the EC’s original proposals had been agreed. The finalised directive now excludes small to medium-sized businesses.

The Financial Reporting Council (FRC) - the UK’s reporting watchdog - has welcomed the changes. Stephen Haddrill, chief executive of the organisation, said: "The  FRC worked closely with European Union institutions and the UK government to ensure that the risk of proliferation of ‘boilerplate' was removed. This will ensure that investors receive only relevant and proportionate information.”

According to Mr Haddrill, the flexibility surrounding the location of the disclosures will enable businesses to disclose information in a manner that communicates the information effectively. 

The directive still has to be adopted jointly by the European Parliament and EU member states in the Council before it can become law. Many expect that the Council will formally adopt the proposals at some point in the next few weeks.

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