NEW REQUIREMENTS for companies in the extractive sector to report on payments to governments on a country-by-country basis need to be clear to achieve the purpose of increasing transparency, the ICAEW has said in a letter to the Department for Business, Innovation and Skills (BIS).
Last year, the EU imposed laws that force large extractive companies to shed light on their dealings with governments on a country-by-country basis. Under the rules, which came as part of changes to the EU Accounting Directive, European companies must disclose full information on payments of more than €100,000 (£85,000) to governments in resource rich countries.
BIS recently consulted on the UK implementation of the new reporting requirements and the ICAEW has raised concerns about the lack of clarity over how group companies will be impacted.
“We are concerned that the current proposals for UK implementation is lacking in clarity in certain areas, partly due to the wording in the underlying Directive. The regulation needs to be absolutely clear if it is to achieve its purpose,” said Nigel Sleigh-Johnson, head of the ICAEW’s financial reporting faculty.
The EU Accounting Directive changes will require large companies engaged in the extraction of oil, mineral and gas and the logging of primary forests to produce an ‘extractives report’, which may be challenging to some companies.
“The collection and collation of the information required for the ‘extractives report’ may represent a significant challenge for some companies. One reason is that the information has to be provided on cash-basis, while companies’ accounting systems are accruals-based. Good guidance to the relevant companies is therefore crucial to ensuring the legislation is implemented smoothly and consistently,” Sleigh-Johnson said.
The transposition of the EU Accounting Directive into UK law is only one of several initiatives touching on country-by-country reporting. Changes to the EU Transparency Directive will, when introduced in the UK, expand the types of company in the extractives sector that have to provide such information.
The EU Capital Requirements Directive IV, which applies to credit institutions and certain investment firms also contain country-by-country reporting requirements. Additionally, the OECD is looking at country-by-country reporting as part of its Base Erosion and Profit Shifting (BEPS) initiative.
The UK has until July 2015 to implement the EU requirements in UK law.
Investors at loggerheads with company bosses over key issues such as performance incentives, PwC survey finds
Many of our largest companies seem to be struggling to get the 2016 annual report on remuneration approved. At this stage shareholders shouldn't have more powers to influence remuneration, argues Wedlake Bell's Edward Craft
Home secretary announces new clampdown on money laundering, illicit financing and terrorist financing
European legislation could cost 4% of of firms' total worldwide annual turnover for storing individuals' data