REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE on the review clauses in Directives 2013/34/EU, 2014/95/EU, and 2013/50/EU
Date: 2021-04-21
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU Member State, accounting, activity report, closing of accounts, disclosure of information, euro area, inflation, publication of accounts, securities, size of business

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 21.4.2021  COM(2021) 199 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE on the review clauses in Directives 2013/34/EU, 2014/95/EU, and 2013/50/EU {SWD(2021) 81 final}  
 
 
Foreword 
This report examines the review clauses contained in different pieces of EU legislation on the 
mandatory disclosure of companies’ financial or non-financial information to the public. 

In particular, it examines the following review clauses:  

  Directive 2013/34/EU (1) (the Accounting Directive): 

o  Article 36(9) – Financial reporting regime for micro-companies; 
o  Article 3(13) – Effect of inflation on SME size criteria; 
o  Article  48  –  Report  on  payments  to  governments  by  extractive  or  logging 

industries; 

  Directive  2014/95/EU  (2)  (the  Non-Financial  Reporting  Directive,  amending  the 

Accounting Directive): 

o  Article 3 – Non-financial reporting by certain public-interest entities; 

 

 Directive 2013/50/EU (3) (amending the Transparency Directive): 

o  Article  5  –  Disclosure  requirements  for  issuers  with  securities  listed  on  EU 

regulated markets. 

Where  appropriate,  findings  of  the  Commission’s  fitness  check  (evaluation)  of  legislation 
regulating  companies’  periodic  public  reporting  on  financial  and  non-financial  information 
were considered. The staff working document resulting from this fitness check accompanies 
this report (4).   

1   Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial 
statements, consolidated financial statements and related reports of certain types of undertakings, amending 
Directive  2006/43/EC  of  the  European  Parliament  and  of  the  Council  and  repealing  Council  Directives 
78/660/EEC and 83/349/EEC, OJ L 182, 29.6.2013, p. 19. 

2   Directive  2014/95/EU  of  the  European  Parliament  and  of  the  Council  of  22  October  2014  amending 
Directive  2013/34/EU  as  regards  disclosure  of  non-financial  and  diversity  information  by  certain  large 
undertakings and groups, OJ L 330, 15.11.2014, p. 1. 

3   Directive  2013/50/EU  of  the  European  Parliament  and  of  the  Council  of  22  October  2013  amending 
Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency 
requirements in relation to information about issuers whose securities are admitted to trading on a regulated 
market,  Directive  2003/71/EC  of  the  European  Parliament  and  of  the  Council  on  the  prospectus  to  be 
published  when  securities  are  offered  to  the  public  or  admitted  to  trading  and  Commission  Directive 
2007/14/EC  laying  down  detailed  rules  for  the  implementation  of  certain  provisions  of  Directive 
2004/109/EC, OJ L 294, 6.11.2013, p. 13.  

4   This report is not a summary of the staff working document on the fitness check. 

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Reporting regime for micro-companies 
Review clause: Directive 2013/34/EU (the Accounting Directive) – Article 36(9) 

Introduced  in  2012,  the  specific  reporting  regime  for  micro-companies  permits  significant 
simplification of reporting, on the basis of an EU definition of micro-companies and several 
options  offered  to  the  Member  States.  The  implementing  Member  States  generally  took 
advantage of the subsequent  revision of the Accounting Directive in  2013 to  implement  the 
simplification from financial year 2016 onwards.  

Number of micro-companies 

In 2016, there were 13.5 million companies with limited liability falling within the scope of 
the  Accounting  Directive  in  the  EU-27.  Among  these,  11.1  million  (82%)  were  micro-
companies,  based  on  the  Directive’s  size  criteria.  Figure  1  shows  the  number  of  micro-
companies per Member State. 

Figure 1 – Number of micro-companies in the EU in 2016 (‘000) 

455 

241 

918 

252 

211 

295 

317 

93 
69 

134 

913 

231 

113 

154 

87 

863 

525 

69 

151 

339 

82 

1768 

1431 

408 

National size criteria (% of EU Directive) 

36 

173 

Source: CEPS based on Orbis Europe - 2016 

Note: The map shows the number of micro-companies in each Member State, based on the application of the size 
criteria within the Accounting Directive. The colour code indicates where national size criteria diverge from EU 
law, as a proportion of the Accounting Directive size criteria. Light grey means there is no effect. 

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Six Member States (Cyprus, Spain, Croatia, Luxemburg, Malta and Sweden) do not recognise 
micro-companies  specifically  for  corporate  reporting.  Of  the  21  Member  States  recognising 
micro-companies for a super-simplified micro-regime, 20 faithfully apply the Directive’s size 
criteria. Two Member States (Estonia and Italy) use lower size criteria than the Directive. As 
a result, 8.6 million companies are recognised as micro-companies in the EU, i.e. 78% of the 
total number of micro-companies recognised by the Directive. 

Simplification and reduction of administrative costs  

Micro-companies have seen their respective reporting regimes simplified to a varying degree, 
depending on the law in each Member State. In the worst case scenarios (no categorisation of 
micro-companies,  little  simplification),  a  micro-company  must  comply  with  the  reporting 
regime applicable to small companies (5). 

EU law allows Member States to simplify the regime for small companies, tailoring it to the 
companies’ needs in a number of ways. If so, micro-companies may choose one or more of 
the following options: 

 
 
 
 
 
 

to draw up a super-abridged balance sheet and profit and loss accounts;  
to reduce information in the notes to virtually nothing;  
to have no management report;  
to have no audit;  
to have a specific publication regime (one-stop shop system, balance sheet only);  
to not calculate and recognise year-end accruals. 

The  22  Member  States  recognising  micro-companies  have  used  these  options  to  a  varying 
degree.  The  Centre  for  European  Policy  Studies  (CEPS)  estimates  that  13  Member  States 
have implemented a fairly simple regime (62% of eligible companies) and 9 Member States 
offer only limited simplification (38%) (6). 

The most popular features of a micro-regime are fewer notes and the simplified layouts for the 
balance sheet and profit and loss accounts. Five Member States offer one-stop shop solutions 
(e.g.  filing  tax  returns  only  once).  Only  2  Member  States  exempt  micro-companies  from 
recognising year-end accruals. 

Most micro-companies seem not to be aware of the existence of the super simplified regime, 
or if aware, do not put it into practice out of inertia. Accountants(7) may not have played their 
role in  raising  awareness and/or putting  simplification in  motion  and this resulted in  micro-

5   The ‘small regime’ is less onerous than the reporting regime applicable to larger companies or public-interest 
entities.  This  is  because  it  limits  the  information  to  be  provided  in  the  notes  to  the  required  financial 
statements, and waives the management report and audit requirements. 

6   See  the  ‘burden  relief  index’  for  each  Member  State,  Study  on  the  accounting  regime  of  limited  micro 

companies – CEPS – May 2019, p. 38. 

7   Of the micro-companies surveyed by CEPS, 72% use an external accountant. 

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companies’  not  reaping  the  full  benefits  of  simplification  such  as  a  significant  reduction  of 
external accountants’ fees (8).  

On  this  basis,  it  is  estimated  that,  for  the  8.6  million  micro-companies  affected,  the  current 
recurring cost savings amount to EUR 79 million a year (9) after one-off initial costs of EUR 
20 million (10). 

If all the Member States fully simplified reporting, and all companies were fully aware of this, 
the estimated cost savings for 11.1 million micro-companies could reach EUR 1 020 million 
annually (11) after EUR 255 million initial one-off costs (12). 

Conclusion 

Since 2013, the Accounting Directive has, to a great extent, been protecting micro-companies 
from being overburdened. This is because they cannot be required to report more than small 
companies.  Nowadays,  78%  of  micro-companies  are  recognised  as  such  in  the  EU.  This 
means that they benefit from an even more simplified reporting regime. This has been made 
possible  by  a  majority  of  Member  States’  availing  of  the  simplification  opportunities  the 
Directive  offers.  The  degree  of  simplification  can  vary  greatly  depending  on  each  Member 
State.  This  partly  explains  why  cost  savings  have  reached  only  a  fraction  of  their  full 
potential. For the rest, it appears that companies themselves are not aware of or resist changes. 
This  weakens  the  impact  of  simplification.  The  Commission  urges  Member  State  that  have 
not  done  so  already  to  fully  recognise  all  EU  micro-companies  as  such,  to  simplify  their 
reporting regime as much as possible and to raise awareness of the opportunities for doing so. 

8   Source: CEPS. 
9   Current  ongoing  burden  reduction  per  year:  8.6  million  micro-companies  (national  size  criteria  and 
implemented  regime)  *  20%  self-reporting  and  aware  of  super-simplified  regime  *  50%  apply  super- 
simplified regime * 6.0 hours saved * EUR 15.28 average hourly earnings = EUR 79 million. Commission 
services calculations derived from CEPS data. 

10   Current one-off costs: 8.6 million micro-companies (national size criteria and implemented regime) * 20 % 
self-reporting and aware of super-simplified regime * 50% apply super-simplified regime * 1.5 hours saved * 
EUR 15.28 average hourly earnings = EUR 20 million. Commission calculations derived from CEPS data. 
11   Potential  ongoing  burden  reduction  per  year:  11.1  million  micro-companies  (Accounting  Directive  size 

criteria) * 6.0 hours saved * EUR 15.28 average hourly earnings = EUR 1 020 million. 

12   Potential one-off costs: 11.1 million-micro companies (Accounting Directive size criteria) * 1.5 hours saved 

* EUR 15.28 average hourly earnings = EUR 255 million. 

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Adjusting SME size criteria for inflation  
Review clause: Directive 2013/34/EU (the Accounting Directive) – Article 3(13) 

Size criteria in the Accounting Directive have been revised regularly since the Directive was 
first  adopted  in  1978.  The  revisions  have  reflected  inflation  over  the  years,  and  sometimes 
gone beyond that. The figure below summarises how the situation has developed: 

Figure 2 – Evolution of SME monetary size-criteria in the Accounting Directive 

3,00

2,50

2,00

1,50

1,00

0,50

0,00

%
0
0
1
=
4
9
9
1
e
s
a
e
r
c
n

i

d
e
t
a
g
e
r
g
g
A

Thresholds

Inflation

8
7
9
1

0
8
9
1

2
8
9
1

4
8
9
1

6
8
9
1

8
8
9
1

0
9
9
1

2
9
9
1

4
9
9
1

6
9
9
1

8
9
9
1

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

Year 

  Source: European Commission – point of reference: small size criteria (turnover / total balance sheet) - base 1,00 in 1994 

In 2013, an obligation was introduced in the Accounting Directive (13) for the Commission to 
review and, where appropriate, amend the size criteria, by defining categories of companies 
(micro-,  small,  medium-sized,  large)  at  least  every  5  years  to  account  for  the  effects  of 
inflation (in delegated acts). In doing so, EU legislation aims to maintain the status quo, i.e. to 
avoid  a  situation  in  which,  due  to  inflation,  micro-  and  small  companies  in  particular  are 
unwittingly  made  subject  to  the  more  demanding  accounting  regimes  applicable  to  larger 
companies.  

Geographical area 

The  Directive  denominates  the  company  size  criteria  in  euro.  The  euro  area  (Austria, 
Belgium,  Cyprus,  Estonia,  Finland,  France,  Germany,  Greece,  Ireland,  Italy,  Latvia, 
Lithuania,  Luxembourg,  Malta,  the  Netherlands,  Portugal,  Slovakia,  Slovenia  and  Spain) 
accounts for 74% of EU companies (14). 

As  regards  Member  States  outside  the  euro  area  (Bulgaria,  Croatia,  Czechia,  Denmark, 
Hungary, Poland, Romania and Sweden), these  would have to  adjust national  company size 

13   Article 3(13).  
14   Source:  CEPS/Commission.  Latvia  joined  the  euro  area  in  2014  and  Lithuania  in  2015.  This  survey  uses 

Eurostat data on the euro area comprising these countries. No specific restatements were made. 

5 

 
 
   
                                                           
 
 
 
 
 
criteria depending on the exchange rates of their respective currencies when transposing into 
national law the Directive criteria expressed in euro.  

As  regards  countries  that  belong  to  the  European  Economic  Area  (Norway,  Iceland  and 
Liechtenstein), these would normally also have to consider adjusting their national company 
size criteria.  

Inflation  

Over  a  period  of  7  years  from  1  January  2013  to  31  December  2019,  cumulated  inflation 
reached 6.4% in the euro area and 7.5% for the EU27 (15). 

Adjusting size criteria 

Size criteria adjusted by 6.4% to account for inflation would be as follows (before rounding 
up): 

Figure 3 – SME threshold in the Accounting Directive, current and adjusted for 6.4% inflation 

Balance sheet 

Turnover 

Micro 

Small (lower end) 

Small (higher end) 

Medium / Large 

Current 
Adjusted 

Current 
Adjusted 

Current 
Adjusted 

Current 
Adjusted 

350.000 € 
372.400 € 

700.000 € 
744.800 € 

4.000.000 € 
4.256.000 € 

8.000.000 € 
8.512.000 € 

6.000.000 € 
6.384.000 € 

12.000.000 € 
12.768.000 € 

20.000.000 € 
21.280.000 € 

40.000.000 € 
42.560.000 € 

 Source: European Commission 

At  this  stage,  rounding  seems  necessary  to  ensure  workable,  simple  and  meaningful  size 
criteria  for  companies.  Rounding  should  maintain  the  multiplying  factor  of  2  introduced  by 
the legislator on turnover versus the total balance sheet. Rounding up should  be adapted for 
each  size  criterion  to  ensure  meaningful  results,  in  order  to  faithfully  reflect  inflation  with 
significant rounding up.  

It is suggested the following rules for rounding be applied: (i) micro size criteria, to the next 
25 000, (ii) small, to the next 100 000, (iii) medium/large, to the next 500 000. 

15   Source: Eurostat, all items, HICP - 2015 base 100.  

6 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
The table below shows how inflation adjustment as at December 2019 could result in rounded 
size criteria, showing absolute values and percentage increase in current size criteria:  

Figure 4 – SME threshold in the Accounting Directive, current vs adjusted for 6.4% inflation and 
rounding up 

Balance sheet 

Turnover 

Micro 

Small (lower end) 

Small (higher end) 

Medium/Large 

Current 
Adjusted rounded 
Resulting % 

350.000 € 
375.000 € 
7.1% 

700.000 € 
750.000 € 
7.1% 

Current 
Adjusted rounded 
Resulting % 

4.000.000 € 
4.300.000 € 
7.5% 

8.000.000 € 
8.600.000 € 
7.5% 

Current 
Adjusted rounded 
Resulting % 

6.000.000 € 
6.400.000 € 
6.7% 

12.000.000 € 
12.800.000 € 
6.7% 

Current 
Adjusted rounded 
Resulting % 

20.000.000 € 
21.500.000 € 
7.5% 

 Source: European Commission 

40.000.000 € 
43.000.000 € 
7.5% 

As  shown  above,  rounding  results  in  size  criteria  increased  by  6.7%  to  7.5%.  This  is 
reasonably  close  to  intended  inflation  rate  and  consistent  for  each  size  criterion.  The  above 
size criteria are therefore used as a sound basis for analysing impacts. 

Analysis of impacts in the euro area 

The  analysis  of  impacts  focuses  on  the  obligations  of  Member  States  and  their  impacts  on 
companies (stratification by size (16), costs) in the euro area. The analysis was conducted per 
Member State, applying inflation of 6.4% to the current national criteria and rounding rules in 
each Member State. It was considered that all Member States would adjust their size-criteria 
despite the leeway they would be offered (17), thus giving the higher bound of impacts. The 
lack of meaningful data meant the impact on Cyprus could not be assessed. 

16   Based on ORBIS and Study on the accounting regime of limited micro companies – CEPS – 2019. Impacts 
on population have been estimated for each Member State in the euro area, using national size criteria and 
applying reasonable rounding. 

17   Member  States  may  only  partly  be  compelled  to  revise  their  national  size  criteria.  The  Directive  offers  a 
range of options for the small size criteria. Only 9 Member States in the euro area (implementing the lower 
end of the range) would be compelled to adjust for inflation. These account for 1/3 of small companies. The 
other Member States (accounting for 2/3 of small companies) would have leeway to decide to not implement 
the  adjustment.  This  survey  assumes  that  all  euro  area  Member  States  will  adjust  their  size  criteria  for 
inflation. 

7 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
  Micro-companies 

The micro-regime is an option for Member States. It is estimated that the adjustment 
of size criteria would have no impact on the Member States in the euro area with no 
micro-size  category  or  regime  (Cyprus,  Spain,  Luxemburg  and  Malta).  As  for  other 
Member  States  in  the  euro  area,  adjustment  for  inflation  of  the  micro-company  size 
criteria  would  result  in  around  77  000  companies’  (higher  bound)  no  longer  being 
considered small companies, but micro-companies instead. Potential cost savings are  
summarised below. 

  Small companies 

An adjustment for inflation would reduce the number of small companies in the euro 
area by around 61 000, mainly as a result of 77 000 becoming micro-companies, partly 
compensated for by around 16 000 medium-sized companies’ becoming small. 

If the status of 77 000 small companies became micro, they would make overall cost 
savings of approximately EUR 7 million (18). Potential cost savings for medium-sized 
companies are summarised below. 

  Medium-sized and large companies 

As  seen  above,  the  number  of  medium-sized/large  companies  would  decrease  by 
around 16 000 due to medium-sized/large companies’ becoming small, leading to  an 
overall reduction in annual compliance costs of around EUR 63 million (19) for these 
companies. 

In this category, around 4 000 large companies would become medium-sized (20). It is 
estimated  they  would  experience  only  marginal  effects  on  their  reporting  regime: 
fewer notes perhaps; a possible exemption from the requirement to keep consolidated 
accounts;  probably  no change for companies subject  to  country-by-country  reporting 
in  the  extractive  sector,  nor  change  of  reporting  regime  applicable  to  public-interest 
entities,  including  non-financial  reporting.  Cost  savings,  deemed  insignificant,  were 
therefore not assessed. 

18   Rough  estimate  –  77  390  *  6.0  hours  saved  *  EUR15.28  average  hourly  earnings  –  derived  from  CEPS. 
Actual cost savings per company due to a change in size category will vary in practice, depending on each 
company’s size, local legislation and circumstances. 

19   Rough  estimate:  15  777  companies  x  EUR  4  000  savings  per  company,  comprising  EUR  1  000  for  the 
preparation of financial statements, plus savings in audit fees in the region of EUR 3,000 (assuming all the 
Member States involved exempt small companies). Cost savings used here were reported by the Commission 
in  the  follow-up  to  the  impact  assessment  in  the  context  of  the  REFIT  programme  -  see  Report  on  Action 
Programme for Reducing Administrative Burdens in the EU, SWD(2012) 423 final (p.7, p.15 and p.16). 
20   For Member States without the medium-sized category (Belgium, France, Italy, Slovakia, representing 42% 

of companies), the adjustment of size criteria would have no effect. 

8 

 
 
                                                           
The figure below summarises the impacts on population and costs in the euro area. 

Figure 5 – Change in population and cost savings for each size category of adjusted size criteria in the 
euro area  
Size category 

Cost savings  

Changes in 
population – euro 
area  
(higher bound) 
+77,390 
-61,613 
-15,777 
Source: European Commission 

(higher bound)  

- 
EUR 7 million 
EUR 63 million 

Micro 
Small 
Medium/Large 

Knock-on effects on Member States outside the euro area and EEA countries 

An increase in the euro-denominated size criteria would entail divergent obligations to adjust 
(or not) size criteria for the Member States outside the euro area. In addition to adjusting for 
inflation,  the  respective  national  size  criteria  denominated  in  national  currency  would  also 
have to be adjusted on the basis of respective exchange rates against the euro (21) observed on 
the  date  the  EU  amending  legal  act  enters  into  force.  These  future  rates  cannot  be  fully 
predicted and in any case, the Directive leaves leeway of 5% in order to make it possible to 
determine round size criteria in the national currencies. This prerogative of the Member States 
adds unforeseeable potential effects, especially as the leeway and inflation rate may add up or 
cancel each other out. 

A rough  analysis of the situation as at  31 July 2017  – disregarding the 5% leeway  – shows 
that  adjustments  for  inflation  in  the  respective  non-euro  area  countries  would  generally 
produce  uneven  results  from  one  country  to  another.  Adjustments  would  generally  not  be 
exactly commensurate with respective inflation rates, with only a few Member States being in 
a position to make adjustments in line with their own inflation. A few Member States could 
face an obligation to increase size criteria by several percentage points above the cumulative 
effect  of  their  own  inflation.  At  the  other  end  of  the  spectrum,  some  Member  States  could 
afford not to adjust certain size criteria (especially small size criteria).  

Conclusion 

Given the moderate inflation in  the euro  area over the last few  years,  an adjustment of size 
criteria in current circumstances would deliver potentially limited results for companies in the 
euro area and uncertain results for companies in Member States outside the euro area. 

These considerations make the case for an adjustment less pressing on the date of this report. 
Nevertheless, the Commission retains the right to propose adjustments to size criteria at any 

21   In 2013, the Accounting Directive prescribed (Article 3(9)) using the exchange rate published in the Official 
Journal of the EU on the date of the Directive’s entry into force (29 June 2013). It also prescribes using the 
exchange  rate  published  on  the  date  of  entry  into  force  of  ‘any  Directive  setting  those  amounts’.  The 
Commission interprets this as including subsequent legislative acts.  

9 

 
 
 
                                                           
point in time to adjust for inflation by means of delegated acts, as the Accounting Directive 
permits. 

10 

 
 
Reports on payments to governments by companies active in the 
logging or extractive sectors (country-by-country reporting/CBCR) 
Review clause: Directive 2013/34/EU (the Accounting Directive) – Article 48  

Chapter  10  in  the  Accounting  Directive  introduced  in  2013  requires  large  EU  companies 
operating in the extractive or logging sectors to report annually on payments to governments 
from  the  2016  financial  year  onwards.  Payments  must  be  disclosed  by  project  and  by 
government.  A  government  may  be  local,  regional  or  national  and  should  by  definition 
include any state-owned company.  

Enhancing transparency of payments to governments 

All the Member States implemented this policy in national law between 2014 and 2017. Most 
ensured  that  companies  active  in  the  logging  or  extractive  sectors  started  their  CBCR  from 
financial  year  2016  as  required  under  EU  legislation  –  or  earlier  (the  UK,  France).  In  three 
Member States the reporting started as from financial year 2017 only, with limited effects due 
to  the  number  of  companies  affected.  No  major  instance  of  non-compliance  was  identified, 
but the Commission is currently investigating a few compliance issues with certain Member 
States. 

A  compliance  study  by  VVA  consultants  found  (22)  that  in  the  extractive  sector,  a 
considerable  amount  of  reporting  is  conducted,  with  no  evidence  of  widespread  non-
compliance.  Nevertheless,  in  certain  cases  the  contractor  could  not  obtain  the  CBCR  of  a 
number of companies and attributed this mainly to the recent stage of implementation, uneven 
access to companies’ websites or business registers, or filing delays 

On the logging of primary forests, VVA found only two reporting companies in the EU – far 
less than the hundred companies expected. This is mainly because of specific sectoral features 
(size, activities of a company) and inherent issues due to the Directive’s restrictive definition 
of primary forests23. Given the lack of widespread reporting on payments to governments by 
logging  companies,  the  major  mechanisms  in  place  to  enhance  transparency  in  the  logging 
sector include the EU Timber Regulation (EUTR) (24) and the EU Forest Law Enforcement, 
Governance and Trade (FLEGT) Action Plan (25) although neither EUTR nor FLEGT require 
operators  to  report  on  their  due  diligence  effectiveness  or  suppliers  being  in  breach  with 
applicable legislation. 

22   Valdani, Vicari and Associati, Study: Review of country-by-country reporting requirements for extractive and 

logging industries, November 2018 (available on Commission website). 

23   Defined in the Accounting Directive as a "forest of native species, where there is no clearly visible indication 
of  human  activities  and  the  ecological  processes  are  not  significantly  disturbed”.  Secondary  forests  are 
natural  forest  which  have  been  logged  at  least  once.  An  important  portion  of  logging  companies  operate 
outside primary forests. 

24   EU Timber Regulation (EUTR – Regulation (EU) No 995/2010). 
25   https://www.euflegt.efi.int/documents/10180/452147/FLEGT+factsheet+Trade+and+market.pdf/5ceb3405-

3161-26a8-a03c-de87eba7dc5a 

11 

 
 
                                                           
In the sample of reports VVA studied, most companies had provided the required information. 
Several  areas  in  which  there  is  room  for  improvement  were  identified.  These  areas,  which 
appear to have more to do with weaknesses or flexibility in the reporting standard than with 
compliance, are listed below. 

 

Identification of governments by name – the name of the government entity that received 
payment  is  not  always clearly spelled out  in  the  reports. Many companies only mention 
the name of the country and/or ‘national’, ‘regional/local’ or ‘municipal’ government. As 
a result, the right government entities cannot easily be identified and held to account. 

  Project  definition  –  the  legal  implications  of  the  wording:  ‘substantially  interconnected 
agreements’  defining  a  project  is  open  to  different  interpretations  by  companies. 
Consequently,  reporting  on  each  project  varies  across  companies,  making  it  difficult  to 
have a complete and consistent overview of projects involving several companies. 

  Joint ventures – joint ventures occur frequently in the extractive sector. Companies tend to 
team  up  with  other  companies,  including  State-owned  companies,  to  share  investments 
and operations. Usually, one of the ventures is in charge of keeping records of operations 
for all the ventures. In the absence of clear instructions in EU law, there are various ways 
of reporting payments: (i) proportionally to the venture’s own share in the joint venture, 
(ii) 100% of the joint venture’s payments reported by the venture in charge (in which case 
other ventures may consider not reporting despite being under a legal obligation to do so), 
or (iii) other ways. Consequently, reporting results are not fully comparable, or absent.  

  Digital  usability  –  absent  machine-readability,  users  find  it  difficult  to  exploit  data 

reported on a large and recurring scale.  

There are clear signs that CBCR is used, mainly by civil society to raise awareness, to prepare 
digests or infographics, or to request clarifications from governments and companies, thereby 
making  them  accountable.  Given  this  is  a  recent  policy,  public  awareness  of  the  reports 
remains  limited  in  most  countries.  It  is  still  too  early  to  notice  significant  changes  in 
government accountability (especially in the case of less democratic or open governments) or 
in  resource  governance in resource-rich countries. An unintended impact  of the Directive is 
that the CBCR is used a lot by civil society to question companies and hold them to account. 
In  any  event,  the  reporting  requirements  have  been  deemed,  at  least  by  civil  society,  to  be 
effective in increasing the transparency of payments made by companies to governments for 
the exploitation of natural resources. 

The case for including the additional information suggested in the review clause, namely the 
average  number  of  employees,  the  use  of  subcontractors  and  any  pecuniary  penalties 
administered by a country, does not  seem  to  have widespread public support  according to  a 
VVA  survey.  Civil  society  would  in  principle  welcome  additional  transparency,  but  these 
items  are  not  their  top  priorities.  Business  is  generally  reluctant  to  add  any  reporting 
requirement,  on  the  basis  of  cost-benefit  ratios.  National  authorities  also  tend  to  not  be 
convinced that these extra items would make it possible to better achieve the objectives of the 

12 

 
 
reporting  requirements.  The  Commission  included  the  number  of  employees  in  its  proposal 
for public CBCR by large multinational companies in 2016 (26). 

International developments, impacts of other international regimes 

Canada,  Switzerland,  the  United  Kingdom  and  the  European  Economic  Area  have  effective 
legislation  in  place  to  ensure  CBCR  by  their  respective  extractive  industries  (27).  Canada 
adopted  CBCR  legislation  (28)  as  of  1  June  2015.  The  EU  considers  the  Canadian  standard 
equivalent  to  its  own  (29).  Likewise,  the  Canadian  Minister  for  Natural  Resources  has  the 
authority  to  allow  reporting  entities  to  substitute  reports  prepared  in  another  jurisdiction 
(whose requirements are considered an acceptable substitute) to meet Canada’s requirements 
in  the  EU  as  well  as  in  the  European  Economic  Area.  This  way,  the  EU  and  Canada  avoid 
multiple  reporting  and  therefore  undue  burden  for  companies.  The  EU  and  the  United 
Kingdom are the sole jurisdictions that require public CBCR for logging industries. 

In  parallel,  the  Extractive  Industries  Transparency  Initiative  (EITI)  is  a  private  initiative 
aimed  at  making  the  extractive  sector  accountable.  The  EITI  is  an  international  non-profit 
association  registered  under  Norwegian  law.  It  brings  together  members  from  governments, 
oil, gas and mining companies, institutional investors, and civil society organisations, in order 
to  improve  openness  and  accountable  management  of  revenues  from  natural  resources.  It 
currently  consists  of  52  implementing  countries.  EITI  reports  –  published  under  member 
countries’  governmental  authority  –  contain  the  payments  received  by  governments  from 
extractive  companies  active  in  their  jurisdiction.  Reports  drawn  up  under  this  initiative  are 
public  and  machine-readable.  They  show  payments  broken  down  by  project  in  a  given 
country, along the same lines as EU policy.  

EITI  and  EU  CBCR  complement  each  other.  From  the  outset,  EU  CBCR  has  required  the 
disclosure  of  types  of  payments  consistent  with  EITI  requirements.  Likewise,  EU 
requirements  have influenced EITI requirements  to  a certain  extent, for instance on project-
by-project reporting. In any given country, the EITI is likely to present more comprehensive 
information in relation to that country than EU CBCR. This is because EITI reports cover not 
only  operations  controlled  by  the  EU  or  Canadian  industries,  but  also  by  other  foreign 
companies and national companies – including State-owned ones. However, EITI reports are 
geographically  limited,  because  one  report  covers  only  one  country.  EITI  reports  are  also 
usually  published  over  1  year  later  after  an  EU  CBCR  report  for  a  given  year.  EITI 
membership has increased since the Accounting Directive was adopted. There is no clear or 
direct  correlation  between  the  two,  but  that  does  not  detract  from  the  objective  stated  in 
Recital 45 of the Accounting Directive that CBCR should help governments of resource-rich 

26   Commission proposal for a Directive as regards disclosure of income tax information by certain undertakings 

and branches, COM/2016/0198 final - 2016/0107 (COD), April 2016. 

27   To be effective, Section 1504 of Dodd  - Frank Act requires a Rule to be adopted by the US Securities and 
Exchange  Commission  (SEC).  Such  a  Rule  was  not  yet  in  force  at  the  date  of  this  report.  As  a  result, 
companies  listed  on  a  US  stock  exchange  (US  and  foreign  private  issuers)  have  so  far  had  no  CBCR 
obligations to fulfil, but the situation may change in the near future.  
28   Canadian Extractive Sector Transparency Measures Act (ESTMA). 
29   Commission Implementing Decision (EU) 2016/1910 of 28 October 2016. 

13 

 
 
                                                           
countries to implement EITI principles and criteria. A number of factors prevent, at least for 
now, EITI requirements from prevailing over EU ones, and the other way round.   

Civil  society  and  industry  call  on  the  Commission  to  continue  reaffirming  the  EU’s 
commitment to promoting transparency in the extractive sector in international fora, in order 
to  encourage  the  its  international  partners  to  introduce  similar  reporting  requirements 
worldwide. 

Effects on competitiveness and security of energy supply 

The EU is  heavily dependent  on  a few countries for both  its  crude oil  and gas supply. Any 
limitations of the operations of EU companies in strategic resource-rich partner countries due 
to the reporting requirements would have an impact on energy security. 

VVA found no evidence that competitors from non-EU countries have significant competitive 
advantages by not being required to report on payments to governments. Nor did it find any 
cases  of  non-EU  countries’  limiting  the  operations  of  EU  companies  due  to  reporting 
requirements. Nevertheless, business remains concerned with the lack of a level playing field, 
because  the  US,  Chinese  and  other  competitors  are  not  under  the  same  transparency 
obligations.  The industry is concerned about competitiveness risks in the long run on account 
of this  lack of a level  playing field.  An academic study (30) seems  to  support this assertion, 
finding that companies disclosing CBCR tend to increase their payments to host governments 
and  to  decrease  and  reallocate  investments  relative  to  non-disclosing  competitors  in  those 
countries. 

Nevertheless, so far there have been no otherwise tangible effects on the EU’s energy supply. 
CBCR policy is only a couple of  years old. This  is much less than the usually much longer 
industry cycles in mining, oil, etc. from exploration and investment to closure. For this reason, 
a close eye should be kept on the situation from a risk point of view. 

Extension of the reporting requirements to additional industry sectors 

For civil society, to extend CBCR to additional industry sectors (e.g. telecoms, construction) 
could help mitigate societal and investor risks, as well as preventing and deterring illegality, 
corruption and fiscal mismanagement. Nevertheless, experts and NGOs tend to recognise the 
unworkability of a one-size-fits-all solution – just wholesale transferring CBCR standards for 
extractive  industries  to  other  industries  by,  for  instance,  merely  expanding  the  scope  of  the 
Directive.  Tailored  requirements  would  be  necessary  for  any  additional  sector.  Another 
concern is that the effectiveness of such a measure also depends heavily on a firm’s size and 
the internationality of the sector. This means it might be impractical to define an appropriate 
scope  in  EU  law  for  certain  sectors,  as  it  would  depend  on  how  much  EU  industries  are 
invested  abroad  locally  in  the  relevant  sector,  large  enough  in  their  own  right,  and  paying 
significant amounts to governments. In addition, whereas the objective of CBCR is primarily 

30   Thomas  Rauter,  Disclosure  Regulation,  Corruption,  and  Investment:  Evidence  from  Natural  Resource 

Extraction – February 2019. 

14 

 
 
                                                           
to empower local populations faced with the exploitation of their natural and non-renewable 
resources,  such  reporting  may  not  be  suitable  for  achieving  similar  objectives  in  sectors  of 
which environmental and vicinity factors are not intrinsic parts. 

Audit 

Audit  is  not  a  mandatory  reporting  requirement.  Nevertheless,  certain  large  multinational 
companies  voluntarily  use  the  services  of  independent  auditors  to  provide  additional 
assurance, in order to increase the credibility and reliability of their reports for users. 

If audit were mandatory, stakeholders would like to have further specification of the type of 
engagement,  level  of  assurance,  timing,  reporting  content  and  publication.  Assuming  a 
traditional audit engagement, VVA put  the estimated annual  costs in  the range of  EUR 450 
000  to  EUR  1  500  000  per  company.  Assuming  a  simpler  review  engagement  with  limited 
assurance,  this  would  go  down  to  between  EUR  250  and  EUR  450,000.  The  costs  of  other 
types of engagement – with or without assurance services – were not assessed. 

The audit of CBCR is not a top priority for civil society, as users, even though they recognise 
that an audit of CBCR would increase confidence and streamline the application of standards. 
Expectations that the audit function could help remedy weak points in standards, such as those 
set  out  in  this  report,  may  in  any  event  be  misplaced.  Business  and  regulators  tend  to  not 
support (or at least to challenge it) the audit from a cost-benefit perspective. 

Public CBCR applicable to multinational companies in general 

In 2016, the Commission proposed legislation to require large companies to produce annually 
a  CBCR  for  each  Member  State  and  non-EU  countries  in  which  they  operate,  containing 
information on profits made and taxes paid on profits (31). 

Sourcing minerals (due diligence) 

The  EU  has  passed  legislation  on  supply  chain  due  diligence  obligations  in  relation  to 
minerals sourcing (Regulation (EU) 2017/821) (32).  

Conclusion 

CBCR is a recent reporting obligation. Reports have been available for a few financial years 
only.  A  longer  observation  period  would  be  necessary  to  more  thoroughly  assess  certain 
aspects  of  effectiveness  and  any  long-term  effects  on  the  EU’s  energy  supply.  The  review 
highlights a number of weaknesses in reporting standards. These hamper access to, and use of, 
the reports, but are not fatal flaws. The way the logging sector is incorporated into legislation 
in this area, in particular, appears to be suboptimal. The policy overall undeniably makes the 

31   Commission  proposal  for  a  Directive  as  regards  disclosure  of  income  tax  information  by  certain 

undertakings and branches, COM/2016/0198 final - 2016/0107 (COD), April 2016. 

32   Regulation  (EU)  2017/821  of  the  European  Parliament  and  of  the  Council  of  17  May  2017  laying  down 
supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores, and gold 
originating from conflict-affected and high-risk areas. 

15 

 
 
                                                           
sector more transparent, but global alignment remains a major concern for the industry. This 
is  why  both  civil  society  and  industry  would  like  regulators  to  step  up  efforts  to  achieve  a 
global level playing field. 

16 

 
 
Non-financial information to be published by certain public-interest 
entities 
Review clause: Directive 2014/95/EU (Non-Financial Reporting Directive) – Article 3 

Effectiveness 

The  staff  working  document  attached  to  this  report  has  examined  the  effectiveness  of  the 
Non-Financial  Reporting  Directive  (NFRD)  from  different  points  of  view,  including  the 
relevance,  reliability  and  comparability  of  the  information  disclosed  in  accordance  with  its 
requirements. 

On the relevance front, there is a significant amount of evidence that many companies do not 
disclose material non-financial information on all major sustainability-related matters. At the 
same time, companies disclose significant amounts of information that is immaterial, making 
it harder for users to find the information they are looking for. These conclusions are true for 
information about the company’s impact on sustainability-related matters and for information 
about the impact of these matters on the company’s development, performance and position. 
In the public consultation organised by the Commission services in 2020 to prepare a revision 
of  the  NFRD,  only  6%  of  users  said  that  they  did  not  experience  problems  regarding  the 
failure of companies to disclose all relevant information.  

The  Taxonomy  Regulation  will  lead  to  progress  in  corporate  reporting  on  the  impact  of 
companies’  activities  with  regard  to  EU  environmental  objectives.  Initiatives  in  the  field  of 
natural capital accounting and environmental footprint methodologies are also relevant in this 
regard.  

The  use  of  the  term  ‘non-financial  information’  is  problematic  in  the  case  of  sustainability-
related information. This is because information related to physical, transition or reputational 
risks can in fact be financially material, even if it does not fulfil the recognition or disclosure 
requirements of the accounting framework applicable to financial statements.  

On the comparability front, respondents to the public consultation carried out in 2018 as part 
of  the  Fitness  Check  exercise  on  the  EU  corporate  reporting  framework  claimed  to  have 
difficulty comparing the non-financial information disclosed by companies. This is consistent 
with the conclusions of most reports and analyses and with the views of various stakeholders. 
In response to the 2020 public consultation, 84% of users said that the limited comparability 
of non-financial information was a significant problem.  

There  is  a  lack  of  consistency  in  both  the  content  and  presentation  of  sustainability-related 
information.  Existing  standards  and  reporting  frameworks  have  not  been  able  to  adequately 
resolve this situation. Users of non-financial information, including investors and civil society 
organisations,  have  also  indicated  that  the  variety  of  locations  where  non-financial 
information  is  reported  can  hinder  access  to  the  information  and  strongly  affect  its 
comparability. As noted in the staff working document, digitalisation could also play a role in 
improving the accessibility and usability of non-financial information. 

17 

 
 
A large majority (82%) of all respondents to the 2020 open public consultation believed that 
requiring  companies  to  use  common  reporting  standards  would  resolve  the  main  problems 
with current non-financial reporting.  

In response to the 2020 public consultation (33), 73% of users said that the limited reliability 
of non-financial information in company reports was a significant problem. Many users argue 
that  this  is  mainly  due  to  the  absence  of  an  assurance  requirement  for  the  content  of  non-
financial  statement.  Some  stakeholders  argue  that  in  order  to  be  able  to  assure  information, 
there  has  to  be  a  reporting  standard  or  framework  against  which  audit  firms  can  assess  the 
information reported by companies.  

In addition, the option of allowing the publication of a company’s non-financial statement in a 
separate report, taken up by 20 Member States, appears to undermine the effectiveness of the 
Directive. The disclosure of non-financial information  in  a separate report,  instead of in  the 
management  report,  might  lead  to  the  supposition  that  the  information  disclosed  is  not 
important for understanding the company’s financial performance, but this is not always the 
case. 

Furthermore, in many Member States there are enforcement and supervision gaps arising from 
a  number  of  factors.  These  include  uncertainty  about  the  legal  mandate  of  supervisory 
authorities in this field. Supervisory authorities themselves point out that the enforceability of 
the Directive is made harder by the flexibility of some of the disclosure requirements. 

The NFRD is also not considered fully effective from the point of view of preparers, many of 
whom incur unnecessary costs associated with non-financial reporting. The flexibility and 
lack of granularity in the NFRD mean that many preparers have to contend with difficulty and 
complexity when deciding what information to report. They are also under pressure to report 
in accordance with a variety of overlapping private reporting frameworks and initiatives, and 
to respond to information requests from stakeholders in addition to what they must report 
pursuant to the NFRD.  

Scope   

Many companies from whom users need non-financial information are under no obligation to 
report  such  information.  The  2020  public  consultation  found  that  a  majority  of  respondents 
are  in  favour  of  extending  the  scope  of  the  directive  to  all  large  companies  (70%  of 
respondents)  and  all  companies  with  securities  listed  on  EU  regulated  markets  (62%  of 
respondents).   

The reasons for considering extending the scope to large non-listed companies include the fact 
that the impact of a company on society and the environment is not determined by whether it 
is listed or not. An extension of the scope to all listed companies might be considered 
important from the perspective of investor protection, considering the growing relevance of 

33   See European Commission website. 

18 

 
 
 
                                                           
sustainability-related risks. It may also be necessary in order to ensure that financial market 
participants have the information they need from all investee companies to be able to fulfil 
their own sustainability disclosure requirements under the Sustainable Finance Disclosure 
Regulation, and to ensure that they do not decide to exclude smaller listed companies from 
investment portfolios on the basis that such companies do not report the necessary 
information.  

Relevance 

Although the initial objectives of the NFRD are still highly relevant, the Directive is no longer 
fit  for  purpose.  This  is  because  of  other  policy  and  legislative  developments,  a  growing 
demand for information from investors, and recent developments in internationally recognised 
reporting frameworks and guidelines.  

At  a  global  level,  the  2015  agreement  on  the  UN  Sustainable  Development  Goals  and  the 
2016  Paris  Agreement  on  climate  change  have  given  a  stronger  political  impetus  to  the 
transition to a sustainable economy, and contributed to a growing awareness of the strategic 
importance of sustainability issues among businesses and investors.  

At EU level,  the 2018 Sustainable Finance Action Plan and the 2019 European Green Deal 
have significantly increased Europe’s political ambition to move as rapidly possible towards a 
sustainable economic and financial  system. As part of the Sustainable Finance Action Plan, 
the  EU  has  adopted  the  Taxonomy  Regulation  and  the  Sustainable  Finance  Disclosure 
Regulation  (SFDR).  Both  pieces  of  legislation  have  important  implications  for  the  non-
financial  information  companies  should  disclose.  By  imposing  sustainability  disclosure 
requirements  on  financial  market  participants,  the  SFDR  will  have  a  direct  impact  on  the 
information  they  need  from  investee  companies.  The  Taxonomy  Regulation  imposes  new 
requirements  on  companies  under  the  scope  of  the  NFRD  to  disclose  their  alignment  with 
activities that qualify as being environmentally sustainable according to the taxonomy.   

There  have  been  some  significant  developments  in  international  non-financial  reporting 
frameworks and guidelines. Since 2014, there has been a proliferation of different initiatives 
that  partially  overlap  and  are  not  always  consistent  with  each  other.  In  2016  the  Global 
Reporting  Initiative  (34) published its first  standards, building on its previous generations of 
guidelines.  In  2018,  the  Sustainability  Accounting  Standards  Board  (SASB)  published  77 
industry standards for the disclosure of financially material sustainability-related information. 
The Task Force on Climate-related Financial Disclosures  (TCFD), established by the G20’s 
Financial  Stability  Board,  published  its  recommendations  in  2017.  The  recommendations 
sparked  widespread  interest  in  the  market.  Other  developments  since  2014  include  a 
Statement  of  Intent  from  five  international  sustainability  reporting  initiatives  to  cooperate 
more  closely,  an  initiative  by  the  World  Economic  Forum  to  develop  common  reporting 
indicators,  and  the  launch  in  2020  of  a  public  consultation  by  the  International  Financial 

34   www.globalreporting.org 

19 

 
 
                                                           
Reporting  Standards  Foundation  on  the  possible  extension  of  its  work  to  non-financial 
reporting.  

Level of guidance and methods provided 

In mid-2017,  as  required in  accordance  with  the Directive, the Commission  published Non-
Binding Guidelines, to  help  companies implement  it. They  provide  general  non-prescriptive 
guidance for companies, including disclosure examples for each reporting area.  

There is little evidence that the non-binding guidelines on non-financial reporting, published 
by  the  Commission  pursuant  to  the  Directive  in  2017,  have  had  a  significant  impact.  The 
voluntary nature of the guidelines means that companies are free to apply them or not as they 
see  fit.  Overall,  this  means  that  on  their  own,  they  cannot  ensure  the  comparability  of 
information between companies or the disclosure of information users believe is relevant. The 
non-binding guidelines may even exacerbate the complexity preparers have to contend with. 
This risks being the case if preparers perceive them as additional to the various private non-
financial standards and frameworks, without removing the pressure to take each standard and 
framework  into  account  individually  and  respond  to  stakeholders’  additional  information 
requests. 

In June 2019 the Commission published a supplement to its 2017 guidelines, focusing on the 
reporting  of  climate-related  information  and  integrating  the  recommendations  of  the  TCFD. 
Because  it  focuses  on  one  particular  issue  (climate),  this  supplement  is  expected  to  have  a 
more significant impact on the comparability of information disclosed by companies.  

Conclusion 

In the European Green  Deal,  the Commission  announced its intention to  review the NFRD. 
According  to  its  revised  2020  Work  Programme,  the  Commission  will  adopt  a  proposal  to 
revise  the  NFRD  in  2021.  The  main  issues  at  stake  include:  the  limited  comparability  and 
reliability  of  reported  information;  the  fact  that  many  companies  do  not  report  information 
users  consider  relevant;  and  the  failure  of  many  companies  from  whom  users  need  non-
financial  information  to  report  such  information.  Imposing  a  requirement  on  companies  to 
report according to common non-financial reporting standards is a crucial part of the puzzle in 
addressing these issues. 

20 

 
 
Disclosure requirements for issuers with securities listed on the EU 
regulated markets  
Review clause: Directive 2013/50/EU (the Transparency Directive) – Article 5 

Impact of the Directive on small and medium-sized issuers  

Directive 2013/50/EU amending Directive 2004/109/EC (the Transparency Directive or TD) 
abolished the obligation to  publish quarterly  financial information  (35). The aim in  doing so 
was  to  reduce  administrative  burden  for  listed  companies  (36),  encourage  longer-term 
investments  and  improve  access  to  capital  for  small  and  medium-sized  issuers  (37).  The 
Directive allows Member States and regulated markets to require quarterly reporting insofar 
as  it  is  proportionate  to  the  factors  contributing  to  investment  decisions  and  does  not 
constitute a disproportionate financial burden for the issuers of the Member State concerned. 
It also extends, to 3 months after the end of the reporting period, the deadline for publishing 
half-yearly  financial  reports,  in  order  to  provide  additional  flexibility  and  increase  the 
visibility of small and medium-sized issuers. 

A few years on, the markets consider these transparency rules to be overall proportionate and 
accurate  for  small  and  medium-sized  issuers  (38).  The  abolition  of  the  quarterly  reporting 
obligation is perceived as alleviating the administrative burden on listed companies, without 
any adverse impact on investor protection. However, there is evidence that many issuers still 
disclose  quarterly  reporting  –  either  voluntarily  (39),  or  because  it  is  required  by  their 
respective Member States or regulated market (40). This has had the effect of limiting the scale 
and weakening the impact of abolishing the quarterly reporting obligation.  

35  Either  quarterly  financial  reports  or  interim  management  statements,  generally  referred  to  as  quarterly 

financial information. 

36   In  the  staff  working  document  accompanying  the  Commission’s  proposal  for  Directive  2013/50/EU 
(COM(2011)  683  final}{SEC(2011)  1280  final}),  the  Commission  services  estimated  the  average  direct 
monetary  costs  of  producing  quarterly  information  linked  to  editing,  printing  and  translating  reports  as 
varying from EUR 2 000 per year/to EUR 60 000 a year/per small and medium-sized issuers.   

37    EU  legislation  does  not  define  small  and  medium-sized  issuers.  There  are  a  few  EU  definitions  of  SMEs 
covering  small-sized  enterprises.  However,  these  do  not  differentiate  between  listed  and  non-listed 
companies. The reference to small and medium-sized issuers in this report should be understood as referring 
to the existing national concepts in the different Member States. 

38   According to the responses to several consultations, but in particular the Commission’s  Summary Report of 
the Public Consultation on the Fitness Check on the EU framework for public reporting by companies. The 
government experts in  the Expert Group of the  European  Securities Committee (EGESC), consulted in Q1 
2019, also tend to confirm this. 

39   On  the  basis  of  the  outcome  of  the  EGESC  consultation  in  at  least  15  Member  States,  issuers  choose  to 
publish their quarterly financial information in order to give their investors customised information or simply 
in response to peer pressure. The larger the company, the more willing it is to report quarterly.  

40    Based  on  the  outcome  of  the  EGESC  consultation,  at  least  5  Member  States  still  require  the  disclosure  of 
quarterly reports, and in at least 7 where quarterly reporting is not mandatory, the regulated markets require 
disclosure.  

21 

 
 
                                                           
Digitalisation 

The  TD  requires  each  Member  State  to  establish  a  storage  mechanism  (the  Officially 
Appointed  Mechanism  or  OAM)  to  ensure  that  the  public  can  access  the  information 
disclosed by listed companies. The TD prepares the ground for centralised access to regulated 
information, in the form of a European Electronic Access Point (EEAP). The EEAP is not yet 
operational,  but  Regulation  2016/1437  (41)  is  a  stepping  stone  on  the  way  towards 
streamlining access to information with this access point (42). Access to information remains 
nevertheless  fragmented.  In  its  new  Action  Plan  on  the  Capital  Markets  Union  (CMU)  (43), 
the European Commission proposes to complete the CMU by setting up an EU-wide platform 
– the European Single Access Point (ESAP). Likewise, the Digital Finance Strategy (44) aims 
to create a European financial data space in order to promote data-driven innovation, building 
on the European data strategy, including easier access and use of data. 

Further  to  the  2013  amendments  to  the  TD,  in  2019  the  Commission  adopted  a  Delegated 
Regulation  to  establish  a  European  Single  Electronic  Format  (ESEF)  for  the  preparation  of 
Annual Financial Reports (AFRs) by listed companies (the ESEF Regulation) (45). The ESEF 
Regulation will apply to companies from financial year 2020 (i.e. the first AFRs in ESEF will 
be  published  in  2021)46.  The  objective  is  to  make  reporting  easier  and  facilitate  the  digital 
analysis and comparability of AFRs by the users of the information. The ESEF combines the 
extensible  hypertext  mark-up  language  format  with  the  internal  data  structure,  building  on 
inline eXtensible Business Reporting Language (iXBRL). The ESEF Regulation provides for 
a  gradual  development  of  ESEF.  The  block  tagging  of  notes  will  become  mandatory  from 
financial  year  2022.  In  addition,  specifications  on  the  taxonomy  to  be  used  for  legal  entity 
reports  using  national  Generally  Accepted  Accounting  Principles  or  non-EU  country 
Generally Accepted Accounting Principles remain to be addressed.  

Even  though  it  has  not  yet  been  applied,  the  ESEF  Regulation  has  raised  a  number  of 
concerns for the reporting companies, national  regulators and oversight  bodies, in  particular 
about the audit of ESEF-compliant financial statements. In order to provide the market with 
guidance and to ensure the convergence of national auditing practices, in November 2019 the 
Committee  of  European  Auditing  Oversight  Bodies  (CEAOB)  published  non-binding 

41   Commission Delegated Regulation (EU) 2016/1437 of 19 May 2016 supplementing Directive 2004/109/EC 
of  the  European  Parliament  and  of  the  Council  with  regard  to  regulatory  technical  standards  on  access  to 
regulated information at Union level, OJ L 234, 31.8.2016, p. 1–7. 

42   For instance, most OAMs have structured their public search tools along the lines of the classification in this 

Regulation. 

43   New CMU action plan.  
44   Digital finance package. 
45   Commission  Delegated  Regulation  (EU)  2019/815  of  17  December  2018  supplementing  Directive 
2004/109/EC of the European Parliament and of the Council with regard to regulatory technical standards on 
the specification of a single electronic reporting format, OJ L 143, 29.5.2019, p. 1–792. 

46   During  trilogue  negotiations  for  the  Capital  Markets  Recovery  Package  held  in  December  2020,  the  co-
legislators agreed to include in the package an amendment to Article 4(7) of the Transparency Directive that 
allows Member States to opt for a 1-year postponement of the ESEF obligation, provided that they notify the 
Commission of their intention to postpone and that such intention is duly motivated.  

22 

 
 
                                                           
guidelines  on  how  to  audit  ESEF  in  practice47.  In  addition,  the  Commission  published  an 
interpretative Communication in November 2020 (48). 

Application of the TD sanctioning regime   

In  order  to  ensure  further  harmonisation  and  reinforcement  of  national  sanctioning  regimes 
(49),  the  2013  TD  amendments  require  each  National  Competent  Authority  (NCA)  to  have 
minimum sanctioning powers for breaches of certain key provisions. In particular, it imposes 
the establishment by Member States of minimum administrative measures and sanctions (e.g. 
issuance of pecuniary sanctions and publication of the measures and sanctions issued by the 
NCA) that need to be effective, proportionate and dissuasive, and that must be applicable to 
both  natural  and  legal  persons.  Member  States  are  in  any  case  allowed  to  provide  for 
additional sanctions or measures and for higher levels of administrative pecuniary sanctions. 

According to the results of consultations and analysis (50), the 2013 amendment to the TD has 
led to more homogeneous sanctioning regimes across Member States. However, there could 
be  greater  harmonisation  in  the  application  of  effective,  proportionate  and  dissuasive 
administrative  measures  for  breaching  transparency  rules.  There  are  also  concerns  about 
enforcement activities, which may jeopardise the conform application of the TD sanctioning 
regime. The TD obliges Member States to provide NCAs with minimum supervisory powers, 
but does not specify further how to exercise these powers. ESMA devotes important efforts to 
achieve  supervisory  convergence  of  NCAs’  enforcement  practices  (51).  However,  national 
practices  tend  to  remain  heterogeneous  from  an  EU  perspective,  for  instance  in  terms  of 
scoping,  enforcement  measures  (52)  or  the  publication  of  sanctions.  Also,  because  of  the 
minimum  harmonisation  approach,  the  definition  of  supervisory  powers  tends  to  differ 
significantly  across  Member  States.  For  instance,  certain  NCAs  have  limited  powers  to 
conduct investigations into non-financial reports when they are separate from the management 
reports.  Against  this  backdrop,  the  collapse  of  Wirecard  (53)  highlighted  that  some  national 
practices may not be as effective as intended, and shed light on additional potential areas for 
improvement. In particular, ESMA’s Fast Track Peer review (54) identified deficiencies in the 

47   CEAOB guidelines on the auditors’ involvement on financial statements in ESEF. 
48   ESEF Interpretative Communication. 
49   Following  the  Commission’s  December  2010  communication  Reinforcing  sanctioning  regimes  in  the 

financial services sector.  

50   In particular the outcome of the consultation of the EGESC in Q1 2019.  
51   ESMA  fosters  convergence  through  guidelines,  Q&As,  work  programmes,  the  committee’s  work,  activity 
reports,  etc.  In  2014  it  published  its  Guidelines  on  the  enforcement  of  financial  information,  which  were 
revised  in  2020.  Its  Q&As  on  the  Transparency  Directive,  also  covering  aspects  of  the  application  of  the 
sanctioning regime, are regularly updated. 

52   See for instance ESMA’s Report Enforcement and regulatory activities of European enforcers in 2019. As 
regards the publication of sanctions, a survey of experts at the EGESC shows that there are various practices, 
involving  for  instance  the  non-publication  of  the  measures  in  certain  circumstances,  as  permitted  in 
accordance  with  the  TD.  Access  remains  fragmented  geographically,  for  the  lack  of  an  EU  single  access 
point.  

53   Wirecard,  a  German  company  with  shares  listed  on  regulated  markets,  declared  bankruptcy  in  June  2020 

after revelations that €1.9 billion in cash reported in the group’s balance sheet was missing. 

54   ESMA,  Fast  Track  Peer  Review  on  the  application  of  the  Guidelines  on  the  enforcement  of  financial 

information (ESMA/2014/1293) by BAFIN and FREP in the context of Wirecard, 3 November 2020. 

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enforcement  of  Wirecard’s  financial  reporting  in  Germany,  showing  -  inter  alia  -  that  some 
national  rules may  not  be sufficient  to  ensure  an efficient  exchange of information  between 
national  authorities  and  an  examination  of  financial  information  by  independent  competent 
authorities.  The  TD  offers  the  possibility  to  designate  a  competent  authority  other  than  the 
central competent  authority to  examine that the information is drawn up in accordance with 
the relevant reporting framework, and to take appropriate measures in case of infringements. 
However,  TD  remains  silent  as  regards  the  need  for  this  authority  to  be  independent  and 
respective responsibilities of both the central and the other authority. Following up on its Fast 
Track Peer Review, ESMA has engaged in discussions on potential improvements to the TD 
and  considered  that  the  following  actions  could  help  achieving  a  more  timely  and  effective 
enforcement of  financial information: (i) enhancing the cooperation between TD  NCAs and 
other  authorities;  (ii)  enhancing  the  coordination  of  enforcement  of  financial  information  at 
national  level  between  central  competent  authorities  and  delegated  entities/designated 
authorities; (iii) strengthening of the independence of national competent authorities; and (iv) 
strengthening of harmonised supervision of financial and non-financial information across the 
EU (55). The Commission is closely monitoring the Wirecard case. Additional lessons may be 
drawn up in relation to the TD or other areas over time. 

Functioning and effectiveness of the method for calculating voting rights in relation to 
financial instruments under Article 13 of the TD 

Under TD rules, all natural and legal persons holding financial instruments relating to shares 
must notify the issuer of the acquisition or disposal of major holdings. To prevent the use of 
new types of financial instruments to secretly acquire stocks in companies (56), the 2013 TD 
amendment  stated  that  all  instruments  with  the  economic  effect  of  holding  shares  or  being 
entitled  to  acquire  shares  must  be  taken  into  account.  The  full  notional  amount  of  shares 
underlying  the  financial  instruments  is  retained.  For  cash  settlements,  the  number  of  shares 
held  is  calculated  on  a  delta-adjusted  basis  (57),  by  multiplying  the  notional  amount  of 
underlying shares by the delta of the instrument. This calculation method is further specified 
in  Commission  Delegated  Regulation  (EU)  2015/761  (58).  It  allows  issuers  and  investors  to 
have  comprehensive  knowledge  and  an  accurate  picture  of  the  structure  of  corporate 
ownership and voting rights. 

55   See ESMA’s Letter to Commissioner McGuinness of 26 February 2021 on the next steps following Wirecard.  
56   Which  could  result  in  market  abuse  and  give  a  false  and  misleading  picture  of  economic  ownership  of 

publicly listed companies. 

57   The  delta  of a financial instrument  is the  ratio that compares the change in the price  of an asset, usually a 
marketable  security,  to  the  corresponding  change  in  the  price  of  its  derivative.  It  indicates  how  much  a 
financial instrument’s theoretical value would move in the event of a variation in the underlying instrument’s 
price, giving an accurate picture of the holder’s exposure to the underlying instrument. 

58   Commission  Delegated  Regulation  (EU)  2015/761  of  17  December  2014  supplementing  Directive 
2004/109/EC  of  the  European  Parliament  and  of  the  Council  with  regard  to  certain  regulatory  technical 
standards  on  major  holdings.  This  Regulation  states  in  particular  that  basket  and  index  instruments  should 
only be  reported if the relevant securities represent 1% or more of the underlying issuer’s voting rights, or 
20%  or  more  of  the  value  of  the  securities  in  the  basket/index,  or  both.  A  principles-based  approach  was 
adopted as the method for determining the delta. This method nonetheless provides sufficient accuracy and 
comparability  if  consistently  supervised.  It  also  allows  newly  developed  derivative  instruments  to  be 
captured, minimising the scope for regulatory arbitrage. 

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In its 2014 cost-benefit analysis (59), ESMA documented that costs for regulators and issuers 
were likely to be minimal. In the consultations carried out (60), no concerns were raised about 
costs.  A  few  stakeholders  (companies,  NCAs),  as  well  as  some  government  experts  (61), 
however  argued  that  the  method  for  calculation  voting  rights  could  be  seen  as  complex  or 
difficult to interpret. 

In most cases, Member States did not transpose these provisions into their national legislation 
until early 2016. The Commission Delegated Regulation on the calculation methods for major 
holdings  was  directly  applicable  by  the  end  of  2015.  Based  on  the  Commission’s  prior 
assessment,  it  might  be  too  soon  to  draw  conclusions  about  the  effectiveness  of  this 
calculation method for transparency purposes. A six-year application period would be needed 
to observe the possible progressive modification of the different stakeholders’ behaviour and 
the possible development of new financial instruments.  

Notification of major holdings by shareholders 

In  order  to  improve  legal  certainty,  enhance  transparency  and  reduce  administrative  burden 
for cross-border investors, the TD established a more harmonised regime for the notification 
of major holdings of voting rights by shareholders. Member States are not allowed to adopt 
more stringent rules except in specific circumstances (62). Shareholders are encouraged to use 
the  standard  format  designed  by  ESMA  for  submission  to  both  the  issuer  and  the  relevant 
NCA (63). 

The possibility for Member States to introduce more stringent requirements for shareholders’ 
notification in specific circumstances has led to diverging notification regimes across Member 
States (64). Eight Member States decided to set a lower threshold than the 5% specified by the 
TD. The vast majority of Member States also included additional higher thresholds. National 
rules  also  vary  on  the  definition  of  the  event  that  triggers  the  notification  obligation  for 
shareholders, the amount of time after which a shareholder is deemed to have learned of the 
triggering  event,  the  deadline  for  the  shareholder  to  notify  the  issuer,  the  communication 
channel for submitting the notification (email, digital portal, fax or post). Consultations have 

59   See Annex III to the  Consultation Paper on Draft Regulatory Technical  Standards on major shareholdings 
and  indicative  list  of  financial  instruments  subject  to  notification  requirements  under  the  revised 
Transparency Directive.  

60   See the responses to the Commission’s public consultation on public corporate reporting by companies and 

the responses to the EGESC questionnaire (re Annex III of the SWD on the fitness check). 

61   EGESC. 
62   Under Article 3(1a) of the TD,  Member States are allowed to impose more stringent requirements when: (i) 
setting  both  lower  and  additional  thresholds  for  the  notification  of  holdings  of  voting  rights,  and  requiring 
equivalent  notifications  of  thresholds  based  on  capital  holdings;  (ii)  imposing  stricter  obligations  for  the 
content (such as the disclosure of shareholders’ intentions), process and timing of notification; (iii) applying 
laws,  regulations  or  administrative  provisions  adopted  on  takeover  bids,  merger  transactions  and  other 
transactions  affecting  the  ownership  or  control  of  companies  supervised  by  the  authorities  appointed  by 
Member  States  pursuant  to  Article  4  of  Directive  2004/25/EC  (the  Takeover  Bids  Directive)  that  impose 
more stringent disclosure requirements. 

63   The form is available at https://www.esma.europa.eu/document/standard-form-major-holdings 
64   See ESMA’s 2019 Practical guide on national rules on notification on major holdings. 

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shown that this results in additional cross-border investment costs for shareholders, given the 
variety of applicable regimes depending on the issuer’s home Member State.  

The  situation  is  similar  for  the  deadline  and  format  for  issuers  to  make  shareholders’ 
notifications  public.  According  to  the  majority  of  respondents,  the  different  notification 
regimes  across  Member  States  can  be  challenging  for  users  of  information  disclosed  by 
issuers, especially in terms of timing and communication channels. Some users would be in 
favour of a mandatory standard form for the issuers’ disclosure of shareholders’ notifications 
in order to make it easier to compare and to analyse the information disclosed. The standard 
form  published  by  ESMA  is  not  mandatory  (although  NCAs  are  expected  to  provide  an 
explanation if they decide not to impose it on the issuers they supervise). This results in the 
use of different notification forms.  

For these reasons, the Commission is being urged to exercise its delegated powers in order to 
adopt  technical  standards  specifying  –  and  harmonising  –  notification  requirements  to  the 
extent necessary.  

Report on payments to governments by companies active in the logging or extractive 
sectors (country-by-country reporting/CBCR)  

Complementing  Chapter  10  of  Directive  2013/34/EU  (the  Accounting  Directive),  the  2013 
TD  amendment  introduced  the  obligation  for  issuers  with  activities  in  the  extractive  or 
logging sectors of primary forest industries to publish an annual report on payments made to 
governments  in  the  countries  in  which  they  operate.  This  report  must  be  prepared  in 
accordance with Chapter 10 of the Accounting Directive.  

Overall,  Member  States  correctly  transposed  this  provision  for  capital  markets.  See  the 
section on CBCR in this report for further details. 

Conclusion 

The 2013 amendment to the TD has generally improved the functioning of capital markets by 
alleviating  the  burden  for  small  and  medium-sized  issuers,  by  allowing  machine-readability 
(ESEF)  to  be  brought  in  to  improve  the  comparability  of  listed  companies’  information  for 
users, and by harmonising the calculation of voting rights. However, the Commission notes a 
number  of  concerns,  especially  as  regards  the  enforcement  of  financial  and  non-financial 
information.  Some  national  practices  may  not  be  as  effective  as  intended  since  they  are 
perceived  as  insufficient  to  ensure  an  efficient  exchange  of  information  between  national 
authorities and an examination of financial information by independent competent authorities. 
The  Commission  also  notes  the  adverse  impacts  of  divergent  national  rules  concerning 
shareholders’ notifications on the integration of EU capital markets. 

26