Certain types of investment firms are required to provide country-by-country reporting under the Capital Requirements Directive IV (CRD IV).

Following the introduction of CRD IV across the European Economic Area (EEA) on 1 January 2014, certain types of investment firms in the UK are now subject to its requirements. For firms affected, the first disclosures will be required by 1 July 2014.

The directive requires credit institutions and IFPRU firms to disclose annually, specifying by member state and by third country in which they have an establishment, the following information on a consolidated basis for the financial year.

  1. Name of company, subsidiaries or branches, nature of activities and location
  2. Turnover
  3. Number of employees
  4. Profit or loss before tax
  5. Corporation tax paid
  6. Public subsidies received

The information relates to the institution's period of account ending immediately before the date of its publication. The information must relate to the firm's total (not just regulated) activities. This requirement is known as country-by-country reporting (CBCR).

Which firms need to comply with CBCR?

Firms within the scope of CRD IV must comply. In the UK, these are credit institutions and IFPRU firms.

A parent company may publish the information on a consolidated basis for the relevant group, as long as all institutions within the scope of the regulations are covered in the group disclosure.

If an institution is a member of a group and a fellow group company in the UK or an EEA state has already published the group's CBCR information, the institution will not be required to republish this if it publicly discloses where the CBCR information can be found.

When does CBCR need to be published?

Points 1 to 3 will need to be disclosed on or before 1 July 2014 (interim reporting obligations). In addition, globally systemically important institutions are required to report items 4 to 6 confidentially to HM Revenue & Customs (HMRC) and the European Commission by 1 July 2014.

All points need to be published annually on an ongoing basis from 1 January 2015, with the first disclosure to be made before 31 December 2015 (ongoing reporting obligations).

Examples

31 March year-end

An institution has a year-end of 31 March and prepares its annual report in June. In 2014, the interim reporting obligations apply to information within the 31 March 2014 annual report and therefore the interim reporting obligations disclosure must be published on or before 1 July 2014.

30 November year-end

An institution has a year-end of 30 November 2014 and produces its annual report in February. In the first year of the ongoing reporting obligation, it will be required to publish the CBCR disclosure on or before 31 December 2015. The institution may choose to publish its disclosure in February 2015 (relating to the year ending 30 November 2014) and would therefore meet its obligation to publish on or before 31 December 2015.

Where does CBCR information need to be published?

Similar to the Pillar III disclosure requirements, the CBCR is intended to be publicly available. Institutions must therefore publish the CBCR information in a way that is easily and freely available, for example, within their annual report or on a website. They must state in their annual report where the information can be found and if published on a website the government expects institutions to provide a website link in the report. They must also publish how they comply with their CBCR obligations.

We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014. 14/494. exp: 30/11/14