Following the government’s move to implement the European Union’s Accounting Directive, it is being reported that the UK’s Financial Reporting Council, (FRC) has now issued new proposals in a bid to simplify its accounting rules.
It is believed the move could help to aid the accounting process for three million of the UK’s smallest businesses.
The European Union (EU) Accounting Directive has been designed to set thresholds for all different sizes of companies, from micro to large, and is based on the size of a company’s workforce, balance sheets and net turnovers. The UK Government has not only decided to implement the directive, but has also opted to apply the maximum thresholds for all company sizes.
Why has the Financial Reporting Council agreed to simplify its accounting rules?
Well, the FRC believes that by simplifying them it will hopefully maximise the number of businesses which can be classified as small and consequently simplify the level of accounting they will have to do.
Who is likely to benefit from the implementation of the European Union’s Accounting Directive? Well, the FRC believes the proposals will benefit around 1.5 million of the smallest ‘micro-entities’ operating in the UK. Moreover, it also believes that firms employing less than 50 staff will also benefit greatly as their accounting rules will also be simplified.
The maximum turnover thresholds for micro-entities and small companies are up to £632,000 and £10.2m respectively, with balance sheet totals of up to £312,000 and £5.1m with no more than 10 or 50 employees.
The new proposals also involve the withdrawal of the previous Financial Reporting Standard for smaller entities, combined with greater flexibility in the format of profit and loss accounts and balance sheets.
Speaking about the FRC proposals, Melanie McLaren, executive director of Codes and Standards, said:
“[Our proposals] simplify reporting for some entities and are intended to assist the directors of small entities in applying their judgment to the new presentation and disclosure requirements of the Accounting Directive.”
“We believe our proposals provide a consistent framework for reporting by all entities in the UK and Republic of Ireland … and [they are] proportionately tailored to the size of the entity and users’ information needs.”
For more information about the FRC proposals to simply accounting rules, contact Steven Glicher accountants on 0161 485 8007 or email info@.