Months after the release of the new FRS 105 accounting rules for micro businesses and omission of clear guidance for partnerships, BIS has released a four-week consultation on proposed changes to financial reporting for limited liability partnerships (LLPs) and qualifying partnerships, including creating a new micro-entity regime, as part of a move to reduce the regulatory burden following implementation of the EU Accounting Directive
There is a very short consultation period and all responses need to be submitted by mid December.
The changes follow and will mirror those introduced in the new standard, FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime, with the Department for Business Innovation and Skills (BIS) saying the aim is to make sure LLPs can benefit from the same reporting process and maintain consistency across business sectors.
The planned changes include raising the thresholds for LLPs currently classed as small, and introducing a new ‘micro-entity regime’ for qualifying partnerships and the smallest of LLPs.
Under the proposals, from 1 January 2016, the thresholds for small, medium and large LLPs will change.
For individual and group LLP accounts, small will be classed as a balance sheet of under £5.1m, turnover under £10.2 and fewer than 50 employees. Medium is balance sheet below £18m, net turnover under £36m and fewer than 250 employees. Large is characterised as more than 250 employees, and a balance sheet of over £18m and a turnover exceeding £36m.
BIS says that currently, one of the main distinctions between the regulations for companies and LLPs is that companies can access a micro-entity regime, which is currently not available to LLPs. The latest proposal address this and include thresholds for micro-entity LLPs set as a balance sheet below £316,000, net turnover under £632,000, and fewer than 10 employees. These are aligned with the thresholds for micro-entity companies.
Under the proposed new rules, LLPs using the micro-entity regime will be able to publish annual accounts provided that the financial information contained in the balance sheet items is filed with Companies House. They will also have the option to prepare simpler and abridged balance sheet and profit and loss accounts and will not be required to produce the usual notes to the accounts.
The consultation states: ‘Accounts that are drawn up in accordance with the requirements applicable to micro- entity LLPs will be presumed to give a true and fair view of the undertaking’s financial position. However, micro-entity LLPs’ accounts must still be prepared in accordance with generally accepted accounting practice in respect of recognition and measurement.’
The document also outlines how the new proposals will work in circumstances where a micro-entity LLP or a small LLP is a subsidiary of a larger group.
It states that the number of mandatory notes required of small LLPs will be reduced. However, a small LLP will still be required to consider if its financial statements provide a true and fair view of its financial position and would be obliged to disclose additional notes if the mandatory notes are insufficient for this purpose.
Small LLPs will be given a choice about the level of detail included in their accounts having regard to the size and nature of their business, and will be allowed to prepare an abridged balance sheet and an abridged profit and loss account if this is agreed by all members of the LLP.
The consultation closes on 21 December.
BIS says it expects the regulations will be made by the summer of 2016, and the new framework will apply to financial years commencing on or after 1 January 2016. Details are here
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