Accounting Act Reform: Large Corporations to Report Non-Financial Information

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The Directive of the European Parliament and the Council on the disclosure of non-financial information has been implemented via amendments to the Finnish Accounting Act. In this article I cover the key amendments made to the Accounting Act. The amended act requires that affected undertakings make the first report in 2018, which will cover information on the year 2017.

What Companies Will be Affected?

According to the directive, the obligation to report non-financial information will apply to large public interest entities with more than 500 employees during the financial period. If an entity fulfils these three criteria it will have to draft a report. You can use the checklist below to easily check whether the company or entity you represent falls under the new obligation.

What Information Needs to be Reported?

There are already 150 Finnish companies that publish annual corporate responsibility reports, even though they have not previously been legally obligated to do so. These companies will have to check that their existing reporting and the underlying systems cover the subjects required by the amendment. Companies that have not previously published corporate responsibility reports, but that are now obligated to report non-financial information, have much more work ahead of them.

The report must include information on environmental matters, social and employee-related matters, respect for human rights, anti-corruption and bribery matters. The amended law requires the report to include at least the following:

Undertakings can report the information required by the amendment either in their annual report or separately, for example, in a corporate responsibility report. It should be noted that it is not necessary to certify the report. However, the auditor must check that the report has been published and that the information in the report is in line with the information in the financial statements.

The Effects of the Amendment Extend to Companies outside its Direct Scope

Finland’s largest companies are already used to drafting corporate responsibility reports. Their existing reporting practices will make it easier to adapt to the new regulations. However, these companies, too, will have to ensure that the matters required by the amendment and their underlying processes are in order for the first statutory reporting cycle.

Companies falling outside the scope of the new obligations, for their part, must now take into account that large corporations will be required to report non-financial information on their business relationships, for example, to provide information on effect in their supply chain. Companies should be prepared for large companies to send an increasing number requests for information to their subcontractors due to the amendment.