In February 2018, the European Commission issued a roadmap for a comprehensive “fitness check” [to] evaluate whether the:
- Public financial and non-financial reports of EU companies are meeting their desired objectives of effectiveness, relevance and EU added value,
- Different adaptations to the EC public reporting framework are consistent with one another (i.e., coherence of current legislation taken as a whole), and
- The cost and burden associated with the various legal reporting obligations are “reasonable and proportionate.”
The fitness check, which will begin in the first quarter of 2018, will assess whether the broad EC reporting model is suitable for purpose. In the conduct of their activities, the EC will consider:
- Whether corporate reporting is suitable for cross border businesses in the frame of a more integrated Single Market and well-functioning capital markets;
- How to deal with the emergence of new business models combined with the increasing importance of intangibles in the digital economy;
- Whether the reporting simplifications adapted for small undertakings are operating properly, including the accounting regime developed for micro-companies and the EC’s legal obligation to review that accounting regime;
- The role of International Financial Reporting Standards and its interaction with the broader EU accounting framework, such as reporting non-financial information on corporate environmental, social, and governance (“ESG”) activities and the related ESG risks; and the
- Specific corporate disclosures for listed companies.
As part of this comprehensive assessment, the EC will evaluate efforts for promoting the interaction and integration of various financial and non-financial reporting models with the goal of identifying a more effective and efficient reporting framework.
Additionally, the EC will examine the opportunities and challenges provided by technological improvements in corporate reporting such as reducing “the administrative burden for companies.”
In the conduct of it’s fitness check, the EC will consult with a broad range of corporate reporting constituents via an “open public consultation,” involving public hearings, panel discussions at a formal conference (currently scheduled for the 2nd quarter of 2018) and completion of various ongoing EC activities for assessing the effectiveness of existing EC directives.
The EC accepted comments on the fitness check proposal through March 8, 2018. Comments received can be viewed on their website.