The European Council (EC) has adopted new
requirements which allow for a less onerous reporting regime for

The move follows the European Union (EU)
parliament vote in December 2011 to exempt micro-entities from its
financial reporting requirements and marks the conclusion of a
three-year project.

Following the EC’s adoption, member countries
can now decide individually whether or not to implement changes to
existing micro-entities’ reporting rules.

The Institute of Chartered Accountants in
England and Wales (ICAEW) financial reporting faculty head Nigel
Sleigh-Johnson said the exemption, part of the EU Fourth Company
Law Directive, was “a long-awaited step towards establishing a more
appropriate accounting regime for small companies” describing the
importance of reducing regulatory requirements on micro-entities as
“vital to the UK’s economic recovery”.

“Micro-businesses represent a substantial
proportion of the UK economy, and is a key source of start-up
activity and innovation,” Sleigh-Johnson noted

The ICAEW strongly supports reducing the
regulatory burden on these businesses where possible but
Sleigh-Johnson warned that any “potential changes to the UK
reporting requirements for our smallest businesses do not reduce
access to reliable financial information or send misleading signals
about the importance of sound financial management”.

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Sleigh-Johnson also called for Financial
Reporting Standards for Smaller Entities (FRSSE) to be revisited
and a reporting regime designed specifically for small companies to
be worked on.