Since it includes mandatory measures for the only metrics from now on that are beyond the scope of the European Commission's Capital Requirements Directive concept, it is more than likely that it will exclude several indicators which are critical to managing strategic risks or which might already be covered by existing eu taxonomy explained legislation:
1) The new DA0-40 crash test. Freshly titled "Mine--the crash test to determine the value/benefit of new projects by companies under EU Regulation D" the new system will require that companies disclose their financial performance as part of their annual compliance reports and/or the issuing firm's audited accounting statements. The idea being if a company's business outcomes are bad for society (e.g. de-regulate in consumer protection or anti-fronomacy), if reporting them is a good business decision, (e.g. investment in the second largest exporting sector or other less developed eu taxonomy explained national economies).
Whether or not this is the case still has to be seen in its entirety, but the requirement clearly implies that eu taxonomy explained companies cannot do anything secretly or operate in a less transparent way than the filing of their financial statements and with the sought after efficiency standards in reporting. The California regulation which cover standard statements is also no joke. The requirements were strengthened following theushing of anti-fFr journalism legislation in the past decade and a half.
2) International payments: Both EU and US companies are subject to the new set of requirements which apply to financial actors who wish to enter or engage in financial transactions in eu taxonomy explained markets abroad. California is the first state that is covering this requirement and similar legislation is being considered (sadly) for federal regulation across the U.S.
3) Quality audit requirements. This is a form of IFRS which can only hold the compliance of this measure up to the benchmark of a published standard (FAS Moderation Review 1.3 in this case). Therefore, nothing is inherently concrete (wish I could say so), and technically only the published requirements are taken into account (just a list of items). To make matters worse, the EU is attempting to push the quality audit requirement to be turned into a certification of accreditation which will give them a usable eu taxonomy explained reputation and by using the accreditation as a marketing tool will prevent their own compliance problems (more on that later).
4) Traditional IFRS verifications. As with the accreditation policy, if you have a change in accounting records and there is a change in cash held by the firm, you will need to provide a correction in the whole set of accounts and old statements. The problem with this is that you will get three different results utilising different eu taxonomy explained standards and applying different standards. This is why the gap between US GAAP standards (the dominant standards in the EU) compared to IFRS standards as adopted in the EU will continue to grow.
On a modest note, I'm happy that the EU will agree to act together in collaboration rather than impose their requirements on US companies operating in Europe. Though this is both unfortunate and confusing, we welcome standards that are industry agreed. The most important advantages of European standards are that they are accepted and built cultural capital to play on.
5) Revenue recognition. In fact, this is not a requirement if you are accredited by the system of accreditation agencies (higher rate of profits). Companies are encouraged to use IFRS as if it were the US GAAP standard. This is because they will pay the same eu taxonomy explained fees, are able to have a good understanding of their accounts, and best of all they will be able to use a global set of accounting rules to hopefully become more efficient while being transparent.
On a personal note, I'm not entirely opposed to EU standards ( grandchildren companies aforementioned). It's not me. As long as we agree to do our best to implement and apply them, and hold them right, to prevent the adoption of standards that will mislead investors. To avoid those other eu taxonomy explained grounds for the EU to impose its requirements.
Were you hoping for more on these topics? Or is your company already looking forward to seeing the new EU standards in practice?