ACCA has warned that as a result of the government’s attempts to reduce the administrative burden on smaller businesses by simplifying accounting requirements, there is a risk that important information may be lost from financial statements which could compromise a ‘true and fair’ view as companies move towards the use of abbreviated accounts report Harris & Co accountants Northampton, the specialist small business accountants
The institute made its comments in its response to the recent Department for Business Innovation & Skills (BIS) consultation on the UK implementation of the EU accounting directive, which must be in place from 2016.
ACCA says it believes that the limits of a smaller company’s size should be increased to the maximum permitted by EU law for accounting purposes, but that the size limits for audit purposes should remain at the levels currently set by UK law.
It says that ‘many interested parties, including ACCA, would be cautious about an increase in the audit exemption limit to the same extent as the small company accounting limit. The value often perceived to be added by an external audit indicates that an impact assessment would, at least, be needed.’
The institute flags up concerns over the reduction in notes to the financial statements for smaller companies, saying that abbreviated accounts are not a good idea as ‘important information may be lost from the financial statements that stakeholders such as creditors and shareholders may want to see’.
However, it concedes that the UK has limited room for change given what is in the EU directive.