4.1 Introduction

Annual reports are becoming more voluminous every year. In this chapter the author will address the reasons for this and in doing so will focus on new legislation for annual reports of large companies based in EU Member States as a result of the Modernisation Directive (2003/51/EC). This Directive prescribes that large companies annually report on non-financial key performance indicators, among others environmental and employee matters relating to their worldwide business activities. Annual report in this context refers to the directors' report, which together with the balance sheet and the profit and loss account constitute the annual accounts. By 2008, the Modernisation Directive's new reporting obligations had been implemented in almost all EU Member States.

In this chapter, the text of the Modernisation Directive will be examined to the extent that it concerns annual reporting and the history thereof. An overview of the status and manner of implementation of the Modernisation Directive in the EU Member States will be presented and the measures that the Commission can take in order to speed up its implementation will be briefly discussed. Subsequently, the focus will be on the Netherlands, thereby discussing other non-financial reporting requirements and relevant legal consequences of implementation of the Modernisation Directive. Finally, for illustrative purposes, a quick scan of the annual reports over 2006 of twenty-five large Dutch companies has been included with a view to demonstrating application of the new rule in practice.