The European Council (EC) has adopted new requirements which allow for a less onerous reporting regime for micro-enterprises.
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”.
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“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”.
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.