Burdens in Financial Reporting to Lessen
The UK government and the Financial Reporting Council have proposed to simplify the financial reporting requirements for the smallest businesses in its Discussion Paper published today by the Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC).
“Simpler Reporting for Smaller Businesses’ sets out ideas to reduce the amount of reporting micro-entities would be required to undertake. This could benefit around 5 million businesses and result in considerable cost savings in relation to the preparation of their accounts,” the FRC said in a statement.
A micro-entity, according to the Competitiveness Council, is a company with a turnover of less than €500,000 (£440,000), with net assets of less than €250,000 (£220,000) and employing fewer than 10 people. This covers approximately 60 percent of companies registered at Companies house and 3.5 million unincorporated businesses.
The paper aims to ease financial reporting reporting procedures so that micro-entities are only required to file a simplified Trading Statement (in place of the current Profit and Loss account), a simplified Statement of Position and a simplified Annual Return.
The FRC, through the Auditing Practices Board, previously issued a revision of Practice Note 10(I), ‘Audit of central government financial statements in the Republic of Ireland’.
Regulators want an integrated software package to help small businesses prepare financial information. This could allow managers to gain a better understanding of the trends in their businesses’ performance and help them plan for the future.
The Minister responsible for Corporate Governance, Edward Davey said: “Reducing unnecessary regulatory burdens on the smallest businesses can give them the freedom to innovate and grow – which ultimately benefits the entire economy and is absolutely central to the Coalition’s vision for Britain.
“A new deregulation from EU rules targeted at micro businesses means we now have a chance to deliver these benefits.
“The financial reporting regime must also serve the users of the information published by companies – whether they are customers, banks or government agencies. So we look forward to receiving responses to our proposals from a broad range of interested parties in the coming months”.
The FRC emphasized that the paper is not intended as a statement of Government policy, but rather it has been developed to stimulate discussion and gather evidence before the Government decides whether to take forward any further action in this area.
The FRC seeks public comment to the proposals until October 30, 2011.
Today’s paper complements the Office of Tax Simplification’s (OTS) discussion document on options for simplifying taxation for the smallest businesses, which was published last month.