Companies face numerous challenges when they acquire businesses in foreign countries or expand their existing businesses internationally. In this three-part series, our professionals from Forvis Mazars highlight issues that such companies should consider. This second installment focuses on environmental, social, and governance (ESG) requirements and financial reporting.
ESG Requirements
U.S. businesses expanding internationally should consider local, state/provincial, and federal ESG and sustainability regulatory requirements, such as:
- The European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD)
- The EU’s Corporate Sustainability Due Diligence Directive (CSDDD)
- Mandatory sustainability reporting under the International Financial Reporting Standards’ (IFRS) sustainability reporting standards1
While each country typically has unique requirements and focus areas, the global emphasis has generally been on climate-related topics, such as greenhouse gas (GHG) emissions and climate-related risk management and understanding and actively managing your supply chain human rights risks.
For more information on these and related topics, see the following resources from Forvis Mazars:
- Assessing the Impact of the Corporate Sustainability Reporting Directive (CSRD) on Non-EU Groups & Their EU Subsidiaries
- Preparing for the Corporate Sustainability Reporting Directive (CSRD)
- European Sustainability Reporting Standards Set 1: What Companies Should Know to Prepare
- Preparing for Implementation Challenges of IFRS Sustainability Reporting
- EU Taxonomy Guide: Navigate the EU Taxonomy and Related Regulations
- First Omnibus proposal: Navigating the future of sustainability reporting – Forvis Mazars Group
Financial Reporting
When acquiring a foreign entity, it is important to understand the financial reporting requirements of the newly acquired entity and the parent entity. Certain countries require statutory audits for entities exceeding a revenue threshold, with some thresholds as low as $10,000. These statutory audits may require financial statement audits under an accounting framework different from the parent.
In addition to national requirements of the respective countries, lender requirements may change under the new organizational structure. For example, a parent company may need to report under IFRS, whereas a U.S. subsidiary may need to report under U.S. GAAP. It is important to get all lending parties involved in international expansion discussions early, so that lender documents can be aligned and companies can work with lenders and other financial statement users to enhance the consistency of reporting across user groups.
Related to acquisitions, these changes in financial reporting requirements may also impact valuations and other key assumptions made in due diligence.
For more issues to consider, read the first part of our series on tax structuring and look for the third part on data privacy and cybersecurity coming soon. If you have any questions or need assistance, please reach out to a professional at Forvis Mazars.
- 1“Jurisdictional Sustainability Consultations,” ifrs.org, 2025.