The Department of Jobs, Enterprise and Innovation (the DJEI) has launched a consultation in which it seeks feedback on various implementation options open to Member States under the new accounting Directive, Directive 2013/34/EU (the Directive) on annual financial statements, consolidated financial statements and related reports. The Directive is due to be implemented into Irish law in 2015.
The approach of the Directive is described as "think small first". This approach imposes basic requirements on small companies or groups and gradually imposes additional requirements on medium-sized companies and groups, with the most onerous requirements being imposed on large companies and groups, as well as "public interest entities". This approach differs from old accounting Directives where the largest company types were the norm, with various derogations and exemptions for small and medium sized companies. As a result of the new approach, Member State options and derogations are significantly reduced.
The consultation outlines all of the options and derogations, and seeks specific comments through 104 separate questions. Some of the options available under the Directive, on which the DJEI is seeking comments, are:
- Thresholds - there is a limited scope in the Directive to set thresholds for small companies. Under Article 3, thresholds may be set at a balance sheet total level between €4,000,000 and €6,000,000 and net turnover between €8,000,000 and €12,000,000 but Member States may not set it below or above those limits. The consultation seeks feedback on whether the thresholds should be set at the upper or lower limit.
- "Public interest entities" (or PIEs) – PIEs are listed companies whose securities are admitted to trading on a "regulated market" (in Ireland this is the Main Securities Market), along with banks and insurance entities, whether listed or not. Under Article 2, there is an option for Member States to designate other company types as PIEs. The consultation seeks comments on whether the scope should be expanded. The current Audit Directive contains a similar option which Ireland did not exercise;
- Additional financial information/statements – under Article 4, with the exception of small companies, the law can require the inclusion of additional financial information or statements other than those required by the Directive – the consultation seeks views on whether this should be introduced or not;
- Corporate Governance Statement – Article 20 of the Directive allows Member States to permit "regulated market" companies to produce a corporate governance statement separate from the directors' report, provided it is filed in the CRO together with the directors' report, or posted on the company's website. The consultation seeks views on this and also whether companies with securities other than shares admitted to trading on a regulated market or on any market, should be exempt from making disclosures relating to the corporate governance code, the operation of shareholder meetings and the functioning of the board;
- Consolidation – there are a number of options around consolidation of accounts in the case of group companies;
- General publication requirement – unlimited companies fall within the scope of the Directive where all the unlimited shareholders are themselves, limited companies. Under Article 30 of the Directive, Member States may exempt such unlimited companies from the obligation to file their financial statements and management report with the CRO provided they are available to the public from the head office of the undertaking concerned. The DJEI states in the consultation paper that broadly, these are cases where all the unlimited shareholders are limited companies of another Member State or of a third country. The consultation seeks views on whether or not they should be exempted as outlined;
- Unlimited companies – as mentioned above, as a general rule, unlimited companies fall within the scope of the Directive where all the shareholders are themselves limited companies. However, under Article 38(1) of the Directive, Member States have an option to require limited companies which are shareholders of unlimited companies to have the financial statements of the unlimited company prepared and audited in accordance with the requirements of the Directive and file them with their own financial statements in the CRO. In addition, where the financial statements of the unlimited company are filed in the companies registry of another EEA Member State (in accordance with Article 38 (1) set out above), there is an option for that company to be exempt from drawing up financial statements for filing in the CRO. Member States may also exempt unlimited liability undertakings from the requirements of the Directive where they are included in the consolidated financial statements of an EEA group. The consultation seeks feedback on all of these options.
The consultation is open until Monday 31 March 2014.