ICAS is recommending its members 'think very carefully' before advising micro-entities to adopt proposed exemptions from a number of financial reporting requirements.

As part of new government proposals, micro-entities would be freed from the obligation of presenting and recognising prepayments and accrued income and accruals and deferred income, and would be exempted from drawing up certain notes to their accounts.

ICAS director of technical policy James Barbour said: 'The Micros-exemption won't save money for these smaller businesses in the preparation of their accounts, and there is a real danger that they would lead to an abuse of the "true and fair" view of accounts.'

'Accounts which in normal circumstances would not be held to show a "true and fair" view, such as those which do not include an amount of accrued income which is material in the circumstances, will be held to show a "true and fair" view if the Micros-Exemption is enacted. This sets a dangerous precedent,' Barbour argued.

Barbour also warned that the proposals could potentially have negative implications for the availability of credit for micro-entities, by making it more difficult to ascertain their full financial position.

'We support the government's overall objective to support growth and encourage enterprise, whilst reducing unnecessary burdens on businesses. But this is not the way to do it,' Barbour said.

Get the latest news in your inbox. Sign up to receive the> Accountancy Live e-> newsletter, HERE