The European Council has approved new requirements that will slash red tape and create a less onerous accounting and financial reporting regime for micro-enterprises.
The new rules should dramatically cut administrative bureaucracy for companies that do not exceed the limits of two of the following criteria: a balance sheet total of €350,000 (£293,000), a net turnover of €700,000 and an average of 10 employees during the financial year.
The directive allows EU member states to exempt micro-enterprises from the publication of annual accounts.
Dr Nigel Sleigh-Johnson, ICAEW's financial reporting faculty chief, said the decision — a conclusion to the three-year project, was a long-awaited step towards establishing a more appropriate accounting regime for small companies.
'Micro-businesses represent a substantial proportion of the UK economy, and is a key source of start-up activity and innovation, vital to the UK's economic recovery. Reducing the regulatory burden on these businesses where possible is something we strongly support.
'It is, however, paramount 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.'
He said that now the UK — along with other EU member states — had been given free rein to determine their own rules for the smallest companies, it 'is a good time to revisit the debate about the FRSSE (Financial Reporting Standards for Smaller Entities), and how a reporting regime can be designed for all small companies that is fit for purpose - there is still important work to do in this area.'
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