Off-balance-sheet airing sought by EU.

• Author: Marshall, Jeffrey
• Position: Governance

Corporate governance reforms rushed through the European Parliament's final voting session of 2005 were expected to be voted into law by early March. The legislation, framed in response to governance issues raised by the Enron scandal and the collapse of the Italian dairy group Parmalat SpA, would require EU-listed companies to disclose off-balance-sheet arrangements. Both Enron and Parmalat used such arrangements and special purpose entities (SPEs) to conceal the true state of their finances.

Amendments spell out off-balance-sheet arrangements, possibly associated with creation of SPEs, that qualify for disclosure, BNA reported. These including risk- and benefit-sharing arrangements; obligations arising from a contract such as debt factoring; combined sale and repurchase agreements; consignment stock arrangements; "take or pay" arrangements; securitization arranged through separate firms; pledged assets; operating leasing arrangements; and outsourcing.

Based on reporting in Europe from BNA, other important changes to current EU directives on accounts would:

* establish collective...