Auditing and Accounting

The technology risk area organizes a session on the new DORA regulation

- May 12, 2023 -

This past Thursday, May 11, the technology risk area of our firm organized an event to analyze the new DORA regulation that requires financial institutions to increase their security against possible threats in terms of #cybersecurity.

The event included an initial presentation by Manuel Mendiola Antona, technology risk partner, who explained the details of this new European regulation. This was followed by a panel discussion with experts from BBVA, BME | Bolsas y Mercados Españoles, Cecabank, Allfunds and CAD IT ES Spain.

MORE INFORMATION ABOUT OUR TECHNOLOGY RISK AREA

Renfe chooses PKF Attest as auditor until 2024

- January 18, 2023 -

The railway operator Renfe has appointed PKF Attest as the new auditor for the 2022, 2023 and 2024 financial years, with the possibility of extending the contract until 2025.

Alfredo Ciriaco, audit partner at PKF Attest, highlights the appointment of the firm as the new auditor "for three fundamental aspects. The first, due to the importance of this client within the state public sector. The second, due to its weight within the railway transport sector and the third, due to the special relevance that the coming years will have in the future of the operator; mainly characterized both by the liberalization of the railway sector, by which it has begun to compete in the national market with other operators, and by the internationalization process that the operator is carrying out, with the launching of large projects in Arabia, the United States and Mexico, among others".

Media appearances:
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Proposed emergency intervention to address high energy prices

- September 14, 2022 -

September 14, 2022

The Commission is proposing emergency intervention in European energy markets to address recent price rises. These measures follow on from those previously agreed on filling gas storage and reducing gas demand to prepare for the coming winter.

The first response to high prices is to reduce demand. To target the most expensive hours of electricity consumption, when gas-fired electricity generation has a significant price impact, the Commission proposes an obligation to reduce electricity consumption by at least 5 % during the selected peak price hours. Member States will be required to identify the 10% of the hours with the highest expected price and reduce demand during those peak price hours. The Commission also proposes that Member States should aim to reduce overall electricity demand by at least 10% by 31 March 2023.

The Commission also proposes a temporary revenue cap for "infra-marginal" producers of electricity, i.e. technologies with lower costs, such as renewables, nuclear and lignite, which supply electricity to the grid at a cost below the price level set by more expensive "marginal" producers. The Commission proposes to set the cap on infra-marginal revenues at EUR 180/MWh. Revenues above the cap will be collected by Member State governments and used to help energy consumers reduce their bills. Member States trading in electricity are encouraged to conclude bilateral agreements to share part of the infra-marginal revenues collected by the producer State for the benefit of end-users in the Member State with low electricity production. These agreements shall be concluded no later than December 1, 2022 when a Member State's net electricity imports from a neighboring country are at least 100%.

Third, the Commission also proposes a temporary solidarity contribution on windfall profits generated by activities in the oil, gas, coal and refining sectors that are not covered by the infra-marginal revenue cap. It would be levied by member states on 2022 profits that exceed the average profits of the previous three years by more than 20%. Member states would collect the revenues and redirect them to energy consumers, in particular vulnerable households, severely affected businesses and energy-intensive industries. Member States may also finance cross-border projects in line with the REPowerEU targets, or use part of the revenues for the common financing of measures to protect employment or promote investments in renewable energy and energy efficiency.

In a new intervention in electricity market rules, the Commission also proposes to extend the available Energy Price Package to help consumers. The proposals would authorize below-cost regulated electricity prices for the first time and extend regulated prices to include small and medium-sized enterprises as well.

Limits applicable in different aspects (Annual Accounts)

- July 11, 2022 -

Limits applicable in different aspects: formulation of abbreviated or normal CCAA, consideration of small or medium-sized companies, exemption from consolidation, audit obligation, obligation to present the Statement of Non-Financial Information, etc.

For the sole purpose of clarifying the limits applicable to each of these situations, we have prepared this outline, which is presented below:

(1) Audit obligation (TRLSC): If during two consecutive fiscal years they meet, at the closing date of each of them, two of the circumstances indicated.

With the following two qualifications:

Companies will be exempt from this obligation if they fail to meet, during two consecutive fiscal years, two of the aforementioned circumstances.
In the first fiscal year after their incorporation, transformation or merger, companies are obliged to be audited if they meet, at the close of said fiscal year, at least two of the three aforementioned circumstances.

(2) Formulation of balance sheet, ECPN, Annual Report and abridged Profit and Loss Account (RD 602/2016 amending the PGC): If during two consecutive fiscal years they meet, at the closing date of each one of them, two of the circumstances indicated.

With the following nuances:

Companies will lose this power if they cease to meet, during two consecutive fiscal years, two of the aforementioned circumstances.
In the first fiscal year after their incorporation, transformation or merger, companies may prepare an abbreviated balance sheet, NCPF and Profit and Loss Statement if they meet, at the close of said fiscal year, at least two of the three aforementioned circumstances.
When the balance sheet can be prepared in an abbreviated form, the ECPN and EFE are not mandatory.
If the company forms part of a group of companies in the terms described in the 13th annual accounts preparation standard. Group, multi-group and associated companies contained in this third part, for the quantification of the amounts, the sum of the assets, the net turnover and the average number of employees of all the entities comprising the group shall be taken into account, taking into account the eliminations and incorporations regulated in the consolidation rules approved in development of the principles contained in the Code of Commerce. This rule shall not apply when the financial information of the company is included in the consolidated annual accounts of the parent company.

(3) Waiver of the obligation to consolidate (RD 1159/2010)

(4) Limits consideration Small and Medium-sized companies (LAC 22/2015): If during two consecutive fiscal years they meet, at the closing date of each of them, two of the circumstances indicated.

With the following nuances:

Entities will lose this consideration if they cease to meet, for two consecutive fiscal years, two of the aforementioned circumstances.
In the first fiscal year after its incorporation, transformation or merger, the entities will be considered as such if they meet, at the close of said fiscal year, at least two of the three aforementioned circumstances.

(5) They shall be considered Public Interest Entities (Art. 8.1. of the RLAC):

a) Credit institutions, insurance companies, as well as issuers of securities admitted to trading on official secondary securities markets or on the alternative stock market (MAB) belonging to the expanding companies segment.
b) Investment services companies and collective investment institutions which, during two consecutive fiscal years, as of the closing date of each of them, have at least 5,000 clients, in the first case, or 5,000 unitholders or shareholders, in the second case, and the management companies that manage such institutions.
c) Pension funds that, during two consecutive fiscal years, at the closing date of each of them, have at least 10,000 participants and the management companies that manage such funds.
d) Banking foundations, payment institutions and electronic money institutions.
e) Those entities other than those mentioned in the preceding paragraphs whose net turnover and average number of employees during two consecutive fiscal years, as of the closing date of each of them, exceed 2,000,000,000 euros and 4,000 employees, respectively.
f) Groups of companies in which the parent company is one of the entities referred to in the preceding paragraphs.

(6) Small-size companies (LIS)

In the immediately preceding tax period.

(7) Obligation to present Non-Financial Information Statement (NFS)

The text of Law 11/2018, of December 28, which amends the Commercial Code, the Consolidated Text of the Capital Companies Act approved by Royal Legislative Decree 1/2010, of July 2, and Law 22/2015, of July 20, on Auditing of Accounts, in matters of non-financial information and diversity, was published in the Official State Gazette. The obligation of disclosure of non-financial and diversity information by certain entities and groups was introduced in Spain by Royal Decree-Law 18/2017, of November 24, which came to transpose to our regulations Directive 2014/95/EU of the European Parliament and of the Council, of October 22, 2014, and which amended the Commercial Code, the Consolidated Text of the Capital Companies Act and Law 22/2015, on Account Auditing. With the new Law 11/2018, its scope is extended to certain entities, even if they do not qualify as public interest entities (EIP), and the content of the information required is expanded, providing greater specificity on the content of the EINF.

Three years after the entry into force of this law, the obligation to file the consolidated [art. 49.5b) of the Commercial Code] and individual [at. 265 b) of the TRLSC] is applicable to all those companies with more than 250 employees that either have the consideration of EIP, except entities that have the qualification of small and medium-sized companies in accordance with Directive 34/2013 (art. 3.9 and 3.10 LAC), or for two consecutive fiscal years meet at the closing date of each of them at least one of the following circumstances:

Total assets must exceed €20 million.
The net amount of the annual turnover exceeds €40 million.

DISPENSA

A subsidiary belonging to a group is exempt from this obligation if this company and its subsidiaries, if any, are included in the consolidated management report of another company in which this obligation is complied with. In response to this question, the ICAC issued a consultation on certain issues related to the scope of application of the obligation to publish the Statement of Non-Financial Information. If a company avails itself of this option, it must include in the management report a reference to the identity of the parent company and to the Mercantile Registry or other public office where its accounts must be deposited together with the consolidated management report or, if it is not obliged to deposit its accounts in any public office or has opted for the preparation of a separate report, a reference to where the consolidated information of the parent company is available or can be accessed. Likewise, according to the new wording of Article 262.1, companies that have the qualification of small and medium-sized companies, in accordance with Directive 34/2013 (art. 3.9 and 3.10 LAC), are exempted from the obligation to include information of a non-financial nature.

Interim Sustainability Agreement

- June 23, 2022 -

Proposal for a Directive on corporate reporting on sustainability.

The Council and the European Parliament today reached a provisional political agreement on the Directive on corporate sustainability reporting.

The proposal aims to address the shortcomings of the current rules on disclosure of non-financial information, the quality of which was insufficient for investors to be able to take it properly into account. Moreover, these shortcomings hinder the transition to a sustainable economy.

The Corporate Sustainability Reporting Directive amends the 2014 Non-Financial Reporting Directive. It also introduces among other things:

More detailed reporting requirements and ensures that large companies are obliged to publish information on sustainability issues, such as environmental rights, social rights, human rights and governance factors.

A requirement to certify the information published on sustainability, as well as to improve access to information, by establishing that it must be published in a specific section of the companies' management reports.

The European Financial Reporting Advisory Group (EFRAG) will be responsible for setting European standards, with technical advice from various European agencies. The scope of the EU regulations on non-financial reporting is as follows:

Large public interest companies with more than 500 employees and all large companies and companies listed on regulated markets. These companies are also responsible for the evaluation of information by their subsidiaries.
Listed SMEs, taking into account their specific characteristics. SMEs will have the possibility of anopt-out during a transitional period, i.e. they will be exempt from applying the Directive until 2028.
As regards non-European companies, the obligation to submit a sustainability report applies to all companies that generate a net turnover in the EU of more than EUR 150 million and have at least one subsidiary or branch in the EU. These companies must report on their ESG effects, i.e. environmental, social and governance aspects as defined in the Directive.

The information must be certified by an auditor or an accredited independent certifier. In order to ensure that companies comply with the reporting standards, they will ensure that the sustainability information is in accordance with the certification standards adopted by the EU. Information submitted by non-European companies must also be certified by a European auditor or an auditor established in a third country.

Regarding the implementation of the Regulation, it will be carried out in three phases:

January 1, 2024 for companies already subject to the Non-Financial Disclosure Directive;
January 1, 2025 for large companies not currently subject to the Non-Financial Disclosure Directive;
January 1, 2026 for listed SMEs, as well as for small and non-complex credit institutions and captive insurance companies.

The provisional agreement reached must be endorsed by the Council and the European Parliament.

Likewise, as far as the Council is concerned, the provisional agreement will be submitted to the Permanent Representatives Committee (Coreper) for approval before proceeding to the formal stages of the adoption procedure.

Finally, the Directive shall enter into force on the twentieth day following that of its publication in the OJEU. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with the Articles of this Directive not later than eighteen months after its entry into force.

Regulation & Public Policy

We offer regulatory advisory services in a business environment in which it is essential to have as much information as possible to support decision making. From the Regulation & Public Policy Group we are able to help manage business regulatory risk through our regulatory monitoring and regulatory intelligence services.