Simpler guidance for SMEs

Northampton chartered accountants Harris & Co report that the accounting regulator is to provide a simpler version of its revised Sharman guidance, published in January, specifically for the use of SMEs.

The news follows feedback from smaller businesses that the proposed new guidance – which in essence provides key guidance on the reporting of going concern and liquidity risks following on from the dire under-reporting of this during the financial crisis – in its current form is more relevant and applicable to listed entities than it is to SMEs.

In an interview with Accountancy, executive director of codes and standards, Melanie McLaren, indicated that a revamp of the draft seemed probable.

McLaren commented:

‘We have had quite overwhelming feedback that this might be a step too far for SMEs.’

Concerning the new proposed Sharman guidance, McLaren says:

‘While they have come in for a lot of criticism, we did ask the question in the consultation: Is this proportionate, or what would the problems be for SMEs?’

‘It’s seen as being too complex and potentially putting UK SMEs at a competitive disadvantage with foreign competitors. So we are giving some thought to that and are likely to alight on a much more simplified treatment for SMEs, while staying true to the real questions that Sharman was seeking to address, which were essentially about large institutions who were issuing corporate reports saying they were a sustainable business, and in quite a short period of time that was proven not to be the case.’

The FRC said it intends to publish draft guidance for SMEs in the summer.