Small companies will be able to report under the new EU Accounting Directive from 1 January 2016 with companies up to a turnover threshold of £10.2m able to use the new accounting regime. The rules will come into force on 6 April 2015 and early adoption of the new accounting directive will be permitted.
Meantime, the Financial Reporting Council has confirmed that it will release the response to its consultation into the new FRSSE (Financial Reporting Standard for Smaller Entities) 2015 in March. It is not clear at this stage whether the EU Accounting Directive would effectively make the FRSSE 2015 redundant.
The legislation will permit companies to access the new financial reporting regime ahead of the mandatory application date. This responds to concerns from stakeholders that companies might have to report under two accounting systems in consecutive years if a company applying FRS 102 for the first time in 2015, which then qualifies as small in 2016 under the new thresholds, had to apply the small company accounting regime in their 2016 accounts.
The new accounting rules see adoption of the EU’s recommended maximum threshold of £10.2m in net turnover for small company accounts, a balance sheet of £5.1m and maximum 50 staff. As a result, small companies will be allowed to prepare an abbreviated balance sheet and profit and loss account, if approved by all of the company’s directors. The number of mandatory disclosures will be reduced to 13, down from the current requirement for 17 notes, while micro-entities will no longer require a directors report.
For the time being, the government will not amend the audit exemption threshold but stressed that this is under separate review as part of a BIS consultation on auditor regulation, issued in December 2014. Depending on the response to this proposal, the government could legislate for a change to the threshold in the Companies Act later in 2015.
For further information please contact Lesley Malkin.