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Millions to benefit from “simpler reporting”

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25th Aug 2011
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Proposals to simplify financial and corporate reporting requirements could benefit five million of the smallest businesses, resulting in considerable cost savings in accounts preparation.

The Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC) have published a paper ‘Simpler Reporting for Smaller Businesses’ that sets out a number of ideas to reduce the amount of reporting micro-entities would be required to undertake.

Under the new proposals they will only be required to file the following:

  • a simplified Trading Statement - in place of the current Profit and Loss account
  • a simplified Statement of Position
  • a simplified Annual Return

The paper also proposes developing an integrated software package to help small businesses prepare financial information, allowing 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 paper, which has been developed to stimulate discussion and gather evidence, complements the Office of Tax Simplification’s (OTS) discussion document on options for simplifying taxation for the smallest businesses, which was published last month.

Earlier this year business secretary Vince Cable also pledged to remove the need for independently audited accounts for small businesses.

Written responses to the new financial reporting proposals should be provided by 30 October 2011. Responses should be sent to Julian Thompson at mailto: [email protected].

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David Winch
By David Winch
29th Aug 2011 17:15

Cash basis for 'P & L A/c'

If I understand the proposals correctly the annual Trading Statement (to be produced instead of a Profit and Loss Account) would be on a receipts and payments basis (or 'cash basis', if you prefer).

The logic is that this would avoid the need for any accruals basis records where a business already accounts for VAT on the cash basis.

These 'cash basis' figures could then be used for tax purposes.

However the 'Statement of Position' (replacing the Balance Sheet) would include disclosure of debtors, creditors and shareholders' funds.  If I am not mistaken that WOULD require the use of the accruals basis.  That perhaps defeats the object of preparing the Trading Statement on the cash basis!

The proposal appears to be that the Statement of Position would be attached to the company's Annual Return to Companies House (in effect replacing the current requirement for abbreviated accounts).

The thinking seems to be that this would involve less work than the provision of abbreviated accounts and therefore could be completed more quickly after the financial year end.  So the Annual Return and Statement of Position would be required to be filed at Companies House 12 weeks after the year end.

I think these proposals would merit careful examination and constructive criticism.

It seems to me that if the Trading Statement is to be prepared on a cash basis then the Statement of Position should also be prepared on a cash basis - excluding trade debtors and creditors.  Otherwise there will be an apparent inconsistency between the two documents.

David

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By Maxine Ambrose
02nd Nov 2011 10:29

Simpler Reporting

Xero, the online accounting company, together with a couple of the UK's leading regional accountacy practices, have today publicly expressed their views about the implications (there's a press release out on the newswire).  I urge accountants and their micro business clients to find out more. 

I'm a small business owner established since 1995, and I personally concerned about the practical day-to-day implications of any changes and urge govt to think very seriously before taking any steps.

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