The Financial Reporting Council (FRC) has today issued Consultation Document Accounting standards for small entities - Implementation of the EU Accounting Directive, to coincide with a Department of Business, Innovation and Skills (BIS) consultation document UK implementation of the EU Accounting Directive, which is also issued today.
Following changes in EU law small companies need to include less information in their accounts and fewer mandatory disclosures. The FRC proposes to issue a new accounting standard for micro-entities, companies typically turning over less than £632,000 a year. The Financial Reporting Standard for Micro-entities (FRSME) will make accounts for these entities simpler.
The FRC will also introduce a new section into FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for small entities, proposed as those turning over less than £10.2million. The underlying accounting by small entities will in future be consistent with the standard for financial reporting used by other unlisted companies, subsidiaries of listed companies and public benefit entities such as charities; however the presentation and disclosure requirements for small entities may be more straightforward.
As a result the FRC’s existing Financial Reporting Standard for Smaller Entities (FRSSE) will be withdrawn.
Roger Marshall, FRC Board Member and Chairman of the Accounting Council, said:
“We are seeking stakeholders’ views on our proposals to revise accounting standards, particularly for micro and small entities, following the new EU Accounting Directive. We believe the FRSME will provide significant simplifications for the very smallest companies choosing to apply the micro-entities regime. For other small entities there will be improvements in some areas of financial reporting, for example, more information about areas of financial risk, and greater consistency with the accounting by larger private entities which should offer benefits to users.”
The FRC has twice consulted on proposals to increase consistency in accounting by residential management companies. This Consultation Document includes further proposals to address this issue as residential management companies will generally be micro-entities or small entities.
In addition, limited amendments will be proposed to FRS 101 Reduced Disclosure Framework and FRS 102 to reflect changes in company law.
Comments are invited by 30 November 2014 and should be sent to Jenny Carter, Director of UK Accounting Standards, or submitted via firstname.lastname@example.org. After considering the feedback to the Consultation Document the FRC will develop these proposals further and expects to issue Exposure Drafts on the detailed proposals early in 2015.
Notes to editors
Micro-entities are the smallest companies and are defined in company law. The qualifying conditions include not exceeding two of the following thresholds:
Turnover - £632,000 Balance sheet total - £316,000 Number of employees - 10
Small companies are defined in company law. BIS is consulting on changing the qualifying conditions to be eligible for the small companies accounting regime, such that they will include not exceeding two of the following thresholds:
Turnover - £10.2million Balance sheet total - £5.1million Number of employees - 50
The FRSSE was first published in 1997. It may be applied by entities eligible for the small companies accounting regime and was a simplification of the accounting standards applicable to larger entities, although few recognition or measurement differences were permitted. When the FRC was developing FRS 102 it decided to postpone a full review of the FRSSE until the new Accounting Directive was being implemented.
The most recent consultation on the financial statements of residential management companies was set out in FRED 50 Draft FRC Abstract 1 – Residential Management Companies’ Financial Statements.
The EU Accounting Directive was agreed in June 2013.
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