New disclosure obligations for extractive industries
On 12 June, the European Parliament adopted directives amending the Transparency and Accounting Directives. One of the key changes to the Accounting and Transparency Directives will be the imposition of strict obligations on the large extractive industries (oil, gas and mining) and primary forest logging companies registered in the European Economic Area to disclose payments made to government entities anywhere in the world. The disclosure obligation will be required for individual payments or related aggregate payments exceeding €100,000 (£85,000) within a financial year and must be disclosed on a country and project basis. As directives, rather than regulations, the requirements now need to be implemented into member state law with the earliest likely implementation date affecting companies with financial years starting on or after 1 January 2016.
The proposals are intended to combat corruption and bribery in the extractive industries and to allow transparent accounting of government revenues in resource-rich nations. They are also intended to complement the Extractive Industry Transparency Initiative (EITI), which has been voluntarily adopted in a number of countries, as well as the US Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which contains similar reporting requirements. They are also consistent with requirements on extractive companies seeking to raise capital on the Hong Kong and London AIM stock exchanges, where such companies are already required to disclose payments to governments as part of their initial listing requirements.
This bulletin examines the new requirements and considers who will be directly affected, the reporting required and what you should be doing now if your business is affected…
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