Small company limits and reporting – reducing the red tape
An increase in accountancy reporting thresholds in 2016 will reduce the red-tape burden for an estimated 11,000 companies by bringing them within the small company reporting regime.
The new regulations take effect for reporting periods that commence on or after 1 January 2016. Small company thresholds will increase from £6.5 million to £10.2 million turnover and £3.26 million to £5.1 million assets. The limit of 50 employees remains unchanged.
This simpler accounting regime will mean reduced disclosure requirements and the option to file abridged accounts (abbreviated accounts are being removed) if certain criteria are met.
A previously medium-size group that subsequently qualifies as small will no longer have to produce consolidated accounts. And where a small company is part of a public group, it will be able to adopt the small company reporting exemptions. (Previously, if the group was ineligible, all subsidiaries were also ineligible, regardless of their size.)
Coinciding with the change in company thresholds is a change in small company reporting. They will no longer be able to report under Financial Reporting Standard for Smaller Entities (FRSSE) and will instead have to report under FRS 102. Guidance on FRS 102 implementation can be found on our website.
Whilst this brings all companies under a common accounting regime the impact of transitioning to FRS 102 should not be underestimated. Early adoption is available for periods commencing after 1 January 2015. If a company chooses to early adopt the thresholds they must also early adopt the new small company reporting.
The companies caught between the old and new thresholds - the "newly small" companies - will have to adopt FRS 102 in full for periods commencing on or after 1 January 2015. The benefit of early adopting the new small company reporting is that they can take advantage of the reduced disclosures.
For companies that have their accounts audited, there is a proposal to increase the audit thresholds to the same level as the small company thresholds for periods commencing on or after 1 January 2016, however early adoption will not be available. We will advise on this when the government consultation has come to a conclusion.
Source - Menzies