The European Commission has undertaken a review of the thresholds set out in the Accounting Directive. What are the regulatory consequences to be anticipated at European and national level? Here are some explanations.
On Wednesday 13 September 2023, the European Commission undertook to correct the thresholds set out in the "Accounting Directive"(1). Article 3 of the Directive, which categorizes a company according to its size, has been amended several times in a draft delegated act submitted for public consultation (now closed). It revises upwards (by 25%) the turnover and balance sheet total criteria for micro, small, medium-sized and large enterprises and small, medium-sized and large groups.
Changes to these criteria would allow certain small and medium-sized enterprises to change category and escape the regulatory provisions that previously applied to them.
At European level
The increase in the thresholds provided for in the draft delegated act reduces the number of companies affected by the publication of the annual report and other financial information, which has been mandatory since the entry into force of the Accounting Directive.
The same applies to the publication of non-financial information, as several European directives and regulations governing non-financial reporting expressly refer to the thresholds set out in the Accounting Directive.
Chronological and regulatory overview of non-financial information
The NFRD(2) (Non-Financial Reporting Directive) came into force in 2014, amending the Accounting Directive by requiring the publication of a non-financial statement by large companies and groups with the status of public interest entity and more than 500 employees.
In 2019, the Environmental Taxonomy Regulation(3) requires economic actors publishing a non-financial statement (category of actors subject to the NRFD directive) to disclose information on their activities considered to be environmentally sustainable.
In 2022, the CSRD(4) (Corporate Sustainability Reporting Directive) revised the Accounting Directive and clarified the regulations. From now on, non-financial reporting will become sustainability reporting. This information must be published by large companies (listed or unlisted) and small and medium-sized enterprises with public-interest status(5).
With the changes to the thresholds provided for in the draft delegated act :
- some companies will be exempt from publishing sustainability information ;
- others will no longer have to prepare for the implementation of the detailed European Sustainability Reporting Standards (ESRS);
- the timetable for implementation of the CSRD directive, which sets out the categories of companies, will be radically altered.
At national level
European directives are transposed into national law. Today, French law also categorizes companies according to the cumulative criteria of turnover, balance sheet total and average number of employees during the financial year. However, there are 5 categories of company under French law(6) :
- Micro-businesses employing fewer than 10 people and with an annual turnover or balance sheet total of less than or equal to €2 million;
- Small and medium-sized enterprises, also known as SMEs, employing fewer than 250 people and with an annual turnover not exceeding €50 million or a balance sheet total not exceeding €43 million;
- Intermediate-sized companies (ETI), as distinct from SMEs, employing 500 people and with an annual turnover not exceeding €1,500 million or a balance sheet total not exceeding €2,000 million;
- Large companies (LCCs) are those that do not meet the criteria of the previous categories.
EU Member States have some leeway in transposing the Accounting Directive and may adapt their thresholds without exceeding certain numerical limits.
Regulatory clarification
Article D123-200 of the French Code of Commerce is closer to the categories and thresholds set out in the Accounting Directive, but these only apply to traders covered by Articles L.123-16 and L.123-16-1 of the French Commercial Code in the context of the presentation of their accounting period.
The draft delegated act provides for the new provisions to be transposed into national law by January 2024. Should this come into force, it will be interesting to monitor developments in French administrative acts: will this directive be transposed before the CSRD?
(1) Directive 2013/34/EU of the European Parliament and of the Council.
(2) Directive 2014/95/EU of the European Parliament and of the Council.
(3) Regulation (EU) 2020/852 of the European Parliament and of the Council.
(4) Directive (EU) 2022/2464 of the European Parliament and of the Council.
(5) Public interest companies: companies whose securities are traded on a regulated market, as well as banks and insurance companies.
(6) Article 3 of Decree no. 2008-1354 of 18 December 2008 on the criteria for determining the category to which a company belongs for the purposes of statistical and economic analysis.