The Department for Business has issued a short consultation on plans to implement the new EU-led rules for micro-entities accounting, focusing primarily on plans for exemptions.
Issued on 27 February, this short three-week consultation is calling for response on proposals for the UK implementation of the European Directive exempting micro-entities from certain financial reporting obligations. In particular, the government is looking for evidence on potential benefits or costs of the proposals, or any unforeseen consequences.
The proposals would make a significant change to accounting for smaller businesses if adopted. There are also potential knock-on effects on plans for the revised FRSSE, which is due to be issued by the Financial Reporting Council later this year. The FRSSE changes would affect companies with a turnover of less than £6.5m, and need to be updated as a result of the introdiuction of new UK GAAP in 2015. 'If we get the micro-entities rules, why would we need FRSSE - there would be duplication effectively. Of course, not everyone agrees on that but it is an issue,' explains Julia Penny, CCH audit and accounting manager.The EU defines micro entities as companies which, on its balance sheet date, do not exceed the limits of two of the three criteria: balance sheet, £289,415 (€350,000); net turnover, £578,830 (€700,000); and average number of employees during the financial year must be 10 or less.
The EU proposals would mean that under specific circumstances, micro-entities would be exempted from certain accounting obligations. These include:
1. present 'prepayments and accrued income' and 'accruals and deferred income';
2. recognise certain types of 'prepayments and accrued income' and 'accruals and deferred income';
3. draw up notes to the accounts;
4. prepare an annual report; and
5. publish annual accounts provided the financial data information contained in balance sheet items is filed with a designated competent authority.
The new rules will also allow micro-entities to draw up a greatly abridged balance sheet and profit and loss accounts.
Accounts that are drawn up in accordance with the requirements applicable to micro-entities will be deemed to give a true and fair view of the undertaking's financial position.
The closing date for the consultation is 22 March 2013.
The consultation document is available on the BIS website, click HERE
Pending review of the feedback, BIS will issue draft regulations for further consultation.
This shorter consultation builds on the joint BIS and Financial Reporting Council discussion paper on 'Simpler Reporting for the Smallest Businesses', issued in August 2011, which sought views from a wide range of stakeholders over a 12-week period.
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