Following publication of the Government’s decision on the UK implementation of the EU Accounting Directive the FRC has issued its proposals to amend UK and Irish accounting standards.
The proposals will benefit 1.5 million of the smallest companies (“micro-entities) in the UK by simplifying their reporting requirements. There will also be changes for the 1.5 million other companies that fall within the “small” company size threshold, including improving accounting for financial instruments and supporting the implementation of legislative changes. Listed groups will benefit from greater flexibility and greater efficiency in reporting formats.
Melanie McLaren, Executive Director of Codes and Standards said:
“Our proposals support the implementation of the new Accounting Directive in the UK and the Republic of Ireland. They simplify reporting for some entities and are intended to assist the directors of small entities in applying their judgement to the new presentation and disclosure requirements of the Accounting Directive.
Overall we believe our proposals provide a consistent framework for reporting by all entities in the UK and Republic of Ireland, building on the legal framework and proportionately tailored to the size of the entity and users’ information needs.”
Key aspects of the proposals include:
- The withdrawal of the FRSSE (Financial Reporting Standard for Smaller Entities) for accounting periods beginning on or after 1 January 2016;
- A new accounting standard for micro-entities offering some simplifications in accounting;
- New recognition and measurement requirements for other small companies aligned with new UK GAAP, and disclosure requirements based on the new legal framework;
- Greater flexibility in relation to the format of the profit and loss account and balance sheet in FRS 101, allowing the use of IFRS-based presentation requirements similar to those used for group accounts.
The proposals are intended to be 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. The proposals are open for comment until 30 April 2015 and the final standards and amendments are expected to be issued in July 2015.
Notes to editors:
- The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
- A Consultation overview: FREDs 58, 59 and 60 summarises the proposals, the proposed new financial reporting framework, eligibility criteria for each regime and the related accounting standards. The proposals are set out in more detail in:
- These proposals were first consulted on in a consultation document Accounting standards for small entities – Implementation of the EU Accounting Directive which set out a high-level overview of the proposed changes to the UK and RoI financial reporting framework. In general, there was strong support for the proposals made.
- The numbers of companies falling within the “micro-entity” and “small” company thresholds are drawn from information published by the Department for Business, Innovation and Skills as part of its consultation on implementation of the Accounting Directive.