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Financial reporting obligations for limited liability companies

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Financial reporting obligations for limited liability companies

The directive modernises financial reporting obligations and reduces costs, particularly for SMEs. It creates a framework where businesses and governments must disclose revenues from natural resources, contributing to the fight against tax fraud and corruption. It merges and improves two existing pieces of legislation: Directive 78/660/EEC on individual financial statements and Directive 83/349/EEC on consolidated financial statements.


Directive 2006/43/EC of the European Parliament and of the Council of 17 May 2006 on statutory audits of annual accounts and consolidated accounts, amending Council Directives 78/660/EEC and 83/349/EEC and repealing Council Directive 84/253/EEC


The directive simplifies the preparation of financial statements for small companies and requires Member States to distinguish small companies from larger ones.

For small companies only a balance sheet, a profit and loss account and notes are to be prepared to satisfy regulatory requirements. Member States may allow small companies to submit only abridged versions of these. This will ensure they need to provide information more proportionate to their size. There is no EU requirement for small companies to have an audit.

Categories of undertakings

The directive defines micro, small and large enterprises as follows.

  • Micro companies have fewer than 10 employees, a turnover of not more than EUR 0.7 million and/or a balance sheet total of not more than EUR 0.35 million.
  • Small companies have fewer than 50 employees, a turnover of not more than EUR 8 million and/or a balance sheet total of not more than EUR 4 million. Member States may use higher thresholds of up to EUR 12 million and EUR 6 million for turnover and balance sheet totals respectively.
  • Large companies have 250 or more employees, a turnover of EUR 40 million and a balance sheet total of EUR 20 million.

More than 90 % of EU companies will be in the small category for accounting purposes. This is more than previously, but better reflects the current structure of businesses in Europe. The notes they will have to supply will include between 8 and 13 items compared to between 14 and 24 previously.

The directive helps strengthen the single market. The comparable, clear and easy to understand financial statements it requires can facilitate cross-border activities and make it easier for companies to find funding beyond their home base.

Country-by-country reporting

The directive requires certain large undertakings and public-interest entities operating in the extractive industry or logging of primary forests to disclose annually material payments exceeding EUR 100 000 per financial year made to governments in the countries in which they operate on a country-by-country and project-by-project basis.

The following payments have to be reported: production entitlements; taxes levied on the income, production or profits of companies; royalties; dividends; signature, discovery and production bonuses; licence fees, rental fees, entry fees and other considerations for licences and/or concessions; and payments for infrastructure improvements.

The detailed reporting breakdown will improve the transparency of payments made to governments around the world by the extractive and logging industries. It will also provide civil society with more information of the payments EU companies make to host governments to extract their natural resources.

The provisions of the directive will apply for the first time to statements for financial years beginning on or after 1 January 2016.



Entry into force - Date of expiry

Deadline for transposition in the Member States

Official Journal

Directive 2006/43/EC



OJ L 157 of 9.6.2006

Amending act

Entry into force - Date of expiry

Deadline for transposition in the Member States

Official Journal

Directive 2013/34/EU



OJ L 182 of 29.6.2013

Last updated: 10.03.2014