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December 12, 2011

Micro-entities exempt from EU reporting rules

The EU parliament has voted to exempt micro-entities from the EU’s financial reporting requirements, which will enable member states to individually decide what reporting rules to apply for small businesses.

The exemption, part of the EU Fourth Company Law Directive, was said to be a “step in the right direction and the culmination of an initiative that has been underway for nearly three years” by the Institute of Chartered Accountants in England and Wales (ICAEW).

ICAEW head of financial reporting faculty Nigel Sleigh-Johnson said as the majority of businesses of this size don’t operate beyond their home country’s borders, “it makes sense to allow each member state to decide what reporting rules are appropriate”.

“There is an important balance to be struck here, as there will be continuing demand from various types of user for reliable financial information about micro businesses. It is also absolutely critical that any initiatives to reduce or change the reporting requirements are not confused with the importance of sound financial management by these businesses,” Sleigh-Johnson said.

Once the European Council gives its seal of approval on the voted exemption, member countries will have to decide whether or not to implement changes to existing micro-entities’ reporting rules.

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