EU proposes to exempt smallest businesses from accounting obligations

At a recent meeting European business ministers agreed on a proposal to exempt very small businesses from certain accounting obligations. The proposal is now being considered by the European Parliament. If passed, the agreement will give EU member states the option to exempt very small companies from publishing annual accounts, although some simple balance sheet and profit and loss account information will still be required.

I sounded out Roger Marshall’s view on this and he said to me “I am not sure that the ASB has a role in considering the EU proposal as this would be a change in the law. Clearly we are taking account of what is decided in considering the future of the FRSSE.”

Roger Marshall is the Chairman of the UK’s Accounting Standards Board (ASB).

It is hard to imagine that the UK would want to relax the need for businesses of whatever size to produce accounts in accordance with well established accountancy practice.

The EU describes the smallest businesses as micro-entities which they define as businesses were two of the following three criteria are not exceeded:

• a balance sheet total of €250,000
• a net turnover of €500,000
• an average of 10 employees during the financial year in question.

Currently these businesses are included within the UK definition of small companies which are expected to produce their accounts in accordance with the Financial Reporting Standard for Smaller Entities (FRSSE).  These are businesses were two of the following three criteria are not exceeded:

• a balance sheet total of £3.26 million
• a net turnover of £6.5 million
• an average of 50 employees during the financial year in question.

Other UK companies which are not listed groups have a choice between UK Generally Accepted Accounting Practice (UK GAAP) and EU adopted International Financial Reporting Standards (IFRS). A UK listed group has to produce its consolidated accounts using IFRS.  There is the intention that UK GAAP users will move to IFRS or a proposed new standard, Financial Reporting Standard for Medium-sized Entities (FRSME).

We have two seminars which will help UK companies prepare their accounts in accordance with the right financial reporting standards for their company.

Preparing Small Company Accounts provides comprehensive coverage of all aspects of FRSSE.

Preparing UK GAAP users for IFRS and FRSME provides comprehensive coverage of all aspects of UK GAAP, IFRS and FRSME.

Stephen Smith
Managing Director
UK Training (Worldwide) Limited