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FEE is supportive of the Commission initiative to improve transparency and accountability related to payments to governments of resource rich countries, although FEE does not believe that these objectives will be best met through disclosures mandated in the annual financial report as proposed in the amendments to the Transparency Directive.
In FEE's view, the accounting requirements for the preparation of annual financial report including the financial statements should remain principles-based providing broad guidelines applicable for a variety of situations and on the basis of which the need for any particular disclosure can be determined. Describing specific and detailed rules for disclosures in such a level of granularity as proposed in the amendments would divert from this general principle and would result in information overload and unnecessary complexity in the annual financial report and especially the financial statements.
However, including payments to governments in a report separate from the annual financial report, specifically dedicated to such disclosures, would not be bound by these general principles as described above and could go into the level of detail and granularity as put forward.
Therefore, FEE recommends that the presentation of payments to governments should be included in a separate report outside the annual financial report and outside the annual financial statements (for instance in a report available on the company’s website).
This should be clearly stated in both the Accounting and Transparency Directives in a consistent way.
FEE also notes that amendments to the Transparency Directive make reference to the principles of integrated reporting, and would like to observe that ‘Integrated Reporting’ is a concept that is currently still in development. While FEE strongly supports the development of integrated reporting, it is concerned that such a reference at this point in time may be misleading and may have unintended consequences, including on the promising development of integrated reporting.
FEE supports a principles-based Accounting Directive. Therefore, FEE welcomes the introduction of high level general accounting principles, e.g. true and fair view, materiality, substance over form and prudence. Such principles should be applicable to all annual financial statements of all limited liability companies, regardless of the size of the company.
Some of these principles are not novel to the Accounting Directive but they are essential for accounting to fulfil its primary function of providing relevant and useful information to various users. For the faithful representation to be achieved, it is important that these interrelated concepts be generally applicable to all aspects of financial reporting including recognition, measurement, presentation and disclosure.