accounts Modernization Directive
Definition
An EU directive (2003) that requires companies to publish information that provides a ‘balanced and comprehensive’ analysis of their development and performance during the financial year.
This should include not only key financial performance indicators but also, where appropriate, non-financial indicators. The directive, which is binding on all medium and large companies, has necessitated changes to the UK regulations on the directors’ report.
Example
Example 1:
Similar to how the Securities and Exchange Commission (SEC) Nigeria requires listed companies to disclose both financial results and operational performance in their annual reports, the EU’s Accounts Modernization Directive pushed European companies to go beyond just profit figures and report on wider business performance.
Example 2:
Following the Accounts Modernization Directive, a large UK manufacturer like Rolls-Royce was required to include not just revenue and profit figures in their directors’ report, but also non-financial indicators like employee satisfaction, environmental impact, and supply chain performance, giving shareholders a truly complete picture of the business.