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The Financial Reporting Council (FRC) has updated and simplified UK and Ireland accounting standards. The changes, made in response to the implementation of the new EU Accounting Directive, include:
- a new standard, FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime and the withdrawal of the Financial Reporting Standard for Smaller Entities;
- a new section 1A “small entities” of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and
- other changes necessary for continued compliance with company law.
They will have the effect of cutting red tape for any small company in the UK that chooses to take up the exemptions, according to Danielle Stewart, Baker Tilly’s head of financial reporting.
She said, “While some accountants may mourn the withdrawal of the current accounting standard for smaller entities, the new replacement standard will allow about 1.5 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.”
Stewart added that a significant aspect of the new regime was the raising of the upper turnover threshold for small companies from £6.5m to £10.2m, the highest level permitted under the EU directive, meaning “thousands of companies newly qualifying as small will have significantly limited disclosure requirements. It will also be the first time under new UK generally accepted accounting practice that small companies will not have to include a cash flow statement in their accounts.”
The main changes are effective for accounting periods beginning on or after 1 January 2016, with early application permitted for accounting periods beginning on or after 1 January 2015.
