The European Commission’s review of the 4th
and 7th accounting directives has called for measures such as
cutting red tape for SMEs, facilitating social entrepreneurship and
encouraging responsible business.

The EC said that simplify accounting rules for
SMEs would result in savings of up to €1.7bn ($2.36bn) per
The EC suggested the simplified preparation of financial
statements, which would make them more comparable, clearer and
easier to understand.

“It would also allow users of financial
statements such as shareholders, banks and suppliers to gain a
better understanding of a company’s performance and financial
position,” the EC said.

The EC said it is also looking to improve
transparency and promote sustainable business among

“Mining and forestry companies would have to
be more open about taxes, royalties and bonuses paid worldwide,”
the EC said.

The European body is also looking to help
emerging sectors to fulfil their potential through the social
business initiative complimented with the CSR strategy.

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“Both initiatives reinforce Commission efforts
to engage with the private sector on social and environmental
issues, especially relevant in times of public budget constraints,”
the EC said.

EC internal market commissioner Michel
Barnier said social business is a good example of an approach to
business that is both responsible and contributes to growth and

“We need to ensure all companies, not just
social businesses, take their impact on wider society seriously:
that’s why I also want big multinationals – in particular those in
the forest and mining industries – to be more open about what they
are paying to governments across the world,” he said.

The revised proposals will now be passed to
the European Parliament and the EU’s Council of Ministers for

Institute of Chartered Accountants for England
and Wales (ICAEW) head of financial reporting faculty Nigel
Sleigh-Johnson said the 4th and 7th accounting directives are
ancient pieces of legislation long in need of an overhaul.

“We have been calling for a root-and-branch
modernisation for some time on a ‘think small first basis’, with
the objective of eliminating red tape and ensuring that the
reporting requirements at EU level are flexible, up to date and
compatible with developments in accounting at international level,”
he said.

“ICAEW strongly supports efforts to improve
domestic accountability and governance in resource rich countries.
In principle we believe that much of value can be achieved through
country-by-country reporting, particularly in areas of the world
where greater transparency is required,” Sleigh-Johnson added.