The Administrative Amendments for Smaller Companies must not compromise true and fair view of accounts says ACCA
Options about how to reduce the administrative burden on smaller businesses (with a turnover of less than £10 million) have been laid out in a government consultation which has been responded to by ACCA (the Association of Chartered Certified Accountants).
The global body for professional accountants responded to questions from the Department of Business Innovation & Skills about how these options, which will be available when the EU accounting directive must be implemented in the UK from 2016.
Richard Martin, ACCA's head of corporate reporting, said: “Our views have been developed with the input of members of our Global Forum for Corporate Reporting. At ACCA, we believe that the limit of a smaller company's size should be maximised according to EU law for accounting purposes, but for audit purposes the limits, those that are already set by UK law should be upheld. Companies should maintain their transparency and accountability unless a case is subsequently made for a relaxation.
Also discussed in the consultation is the UK requiring smaller companies to submit fewer notes than they currently do, in an attempt to make the reporting task less onerous.
Richard Martin comments: “ACCA does not believe that this is a good idea, as important information may be lost from the financial statements that stakeholders such as creditors and shareholders may want to see. The UK, however, has limited room for manoeuvre given what is in the EU Directive. We agree with the notes that BIS intend to require and understand that the overriding obligation for the accounts to show a true and fair view remains. But this combination is not going to make life easier for small companies. Directors, and in some cases auditors, will have to consider whether the few disclosures mandated by the law will be sufficient for their accounts to show a true and fair view. We think in many cases, more will be needed.
“Financial statements should have more compulsory components so smaller companies know for sure what is needed for be a fair and complete set of publicly available accounts. We look to the Financial Reporting Council (FRC) to help here when the accounting standards for small companies to go with the new law are finalised.”
ACCA also supports small company relaxations being extended to Public Limited Companies (PLCs) which would otherwise qualify as small if they were private ('Ltd'). ACCA regards this as appropriate for the size and ownership profile of these companies.
Richard Martin concludes: “Relaxations in regulations that help to keep the UK economy competitive, but are not impractical or create uncertainty around the effects of them, is key to helping smaller businesses reduce unnecessary administrative workloads and concentrate on their real jobs at hand.”