The Committee on Legal Affairs (JURI) of the European Parliament (EP) has unanimously backed non-financial reporting and diversity rules, paving the way for a formal vote by the whole EP on the issue, due in the April plenary session.
The legislation is the result of an informal agreement between the EP and the Council of the European Union, and if passed by both institutions will amend the Accounting Directive to introduce non-financial and diversity reporting requirements.
The new rules will require all public interest entities with more than 500 employees to provide non-financial statements on the impact of their activities relating to environmental, social and employee matters.
In order to lessen the administrative burden, companies will only have to disclose information relevant to understanding the development, performance, position and impact of their undertakings.
The legislation will also require large listed companies to publish information on their diversity policy for administrative, management and supervisory boards, including information on the age, gender and educational and professional backgrounds of their members.
Companies that do not disclose these issues are required to explain the reason for this, and member states are to ensure there are effective means to guarantee disclosure of non financial information in compliance with the provisions of this directive.
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Speaking to The Accountant, Association of Chartered Accountants (ACCA) head of corporate reporting Richard Martin described the regulation as a "good base for integrated reporting that marks out a clear direction and encourages companies to think about more transparent reporting."
Martin did say changes could have been more specific about the supply and value chain for companies to consider, but said "it contained a number of useful additions and will be helpful to shareholders and other stakeholders."
Commenting on the vote, ACCA chief executive Helen Brand described it as an important moment, but warned "it needs to be ensured that the administrative burdens are kept to a minimum for public interest entities that would fall under the scope of the directive."
Given the overwhelming support the legislation received at JURI, sources in the EP told The Accountant that it is expected to be passed in the European Parliament.