The European Parliament has passed strengthened accounting rules to increase transparency and hopefully avoid some of the pitfalls of recent accounting scandals.

Companies in the European Union will now be required to disclose off-balance sheet arrangements and their financial impacts. Listed EU companies will be required to publish annual corporate governance statements as well.

The amendments to the Accounting Directives also require the disclosure of any unusual transactions in an effort to avoid hiding poor financial results. The balance sheet total and net turnover thresholds for small and midsized limited-liability companies will also be increased by 20 percent. Corporate boards will also be held collectively responsible for information published in annual accounts and annual reports under the new legislation.

"This is good news," said Internal Market and Services Commissioner Charlie McCreevy, in a statement. "The approach followed by the European Parliament is totally in line with what I intend to achieve with better regulation. We improve disclosure for the more complex listed and unlisted companies, and, at the same time, allow member states much more scope for reducing burdens on small and medium sized companies from red tape, which will spur economic growth."

The European Commission first proposed the new rules in October 2004.

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