Commenting on the new accounting standards for micro-entities and small entities released today by the Financial Reporting Council (FRC), Danielle Stewart, Baker Tilly’s Head of Financial Reporting said:
‘The landmark changes to accounting standards released today by the Financial Reporting Council will have the effect of cutting red tape for any small company in the UK which chooses to take up the exemptions. It is a credit to the UK Government and the FRC that they have opted to deregulate as much as they were able to under the recent EU accounting directive.
‘While some accountants may mourn the withdrawal of the current accounting standard for smaller entities, the new replacement standard will allow around one and a half million of the UK’s smallest companies to benefit from far simpler reporting requirements. This should allow accounts to be prepared that are much more proportionate to their users’ requirements, saving business owners considerable time, money and hassle.
‘But perhaps the most significant impact of this new regime arises because of the upper turnover threshold for small companies being raised from £6.5m to £10.2m – the highest level permitted under the EU directive. This will mean that thousands of companies newly qualifying as ‘small’ will have significantly limited disclosure requirements. It will also be the first time under new UK GAAP that small companies will not have to include a cash flow statement in their accounts.
‘For some time, business owners have been critical of the onerous reporting requirements placed on them - these new standards represent a fundamental step towards addressing these concerns.’