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Medium-sized abbreviated accounts

Medium-sized abbreviated accounts

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I have always been of the opinion that medium-sized abbreviated accounts are a bit of a waste of time because the only difference from the full accounts is the aggregation of a few items on the P & L Account and the omission of the analysis of turnover. Now a client is telling me that Related Party Transactions need not go in either. He is, of course, looking at SI 2008/410 para 4 (2) (b) which exempts the company from the para 72 disclosures. However, my view is that since the accounts must, subject to the listed exemptions, be the Companies Act accounts (i.e. the Members' accounts), Accounting Standards still apply (notwithstanding the exemption from having to state that fact). So if Accounting Standards still apply, that must include FRS8. So the Related Party Transactions note must still go in (along with Cash Flow, lease commitments, etc.). Any views?

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By taxguru
10th Sep 2014 18:38

1. The accounts of a company must give a true and fair view (s.393). To do so the accounts must comply with the accounting standards which means full disclosures including related parties.

2. In the case of a medium sized company the directors have the option to file abbreviated version of the accounts with the registrar (s.445) which do not, as you have stated, need to  disclose transactions with related parties. Still transactions with directors must be disclosed (s.413).

So, whilst the directors may choose to file an abbreviated version with the registrar, the full accounts showing a true and fair view must be prepared, which is only possible when the accounts have complied with the accounting standards!

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By TerryD
11th Sep 2014 12:14

Thanks, but...

Yes, I understand that full accounts must be prepared, but my query relates solely to the abbreviated accounts for filing with the Registrar. Are you saying that medium-sized abbreviated accounts need contain no information that is drawn solely from accounting standards, as opposed to the Companies Act? This is, of course, the case with small company abbreviated accounts, but they are drawn up according to specific rules laid down by CA2006 and are not, by inference from s. 444, the "company's annual accounts". With medium-sized companies, though, the abbreviated accounts must be "the company's annual accounts" (s.445) simply adjusted for the different P & L Account and omitting the items listed in SI 2008/I410 para 4 (3). In my mind, the term "company's annual accounts" refers to the s. 393 accounts - i.e. the full members' accounts. So the full FRS8 note would be required in these abbreviated accounts.

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By taxguru
11th Sep 2014 13:56

Interesting question!

1. Annual accounts is defined under s.471 which basically means Companies Act individual accounts per s.396

2. The individual accounts under s.396 is prepared in accordance with SI 2008/410. Para 4(2(a) of this instrument clearly states that AS disclosures are not required. Further, as you see the special auditor's report on abb accounts, the auditor never certifies it's 'true and fair' which again means it need not comply with AS disclosures.

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By TerryD
11th Sep 2014 14:19

I agree, but disagree!

SI 2008/410 para. 4(2)(a) says that the abbreviated accounts don't have to STATE that they comply with AS, not that they don't have to actually comply - nit-picking possibly. I understand your argument (and hence my client's), and I agree that what you say can easily be inferred from the references you have quoted. But my problem is still the use of the term "annual accounts" in s. 445 which defines the abbreviated accounts as being these annual accounts (i.e "true and fair" accounts) subject only to the adjustments/omissions specified in s.445 (3).

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By taxguru
11th Sep 2014 15:09

Please read again -

Para 4(2)(a): The individual accounts for the year need not comply with the following provisions of Schedule 1 to these Regulations— (a) paragraph 45 - disclosure with respect to compliance with accounting standards

Para 45:

Disclosure of accounting policies (this is the title - see the para 45 text below)

44.  ....................

45.  It must be stated whether the accounts have been prepared in accordance with applicable accounting standards and particulars of any material departure from those standards and the reasons for it must be given (see regulation 4(2) for exemption for medium-sized companies).

So you do not need to comply with the accounting standards!!

 

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By TerryD
11th Sep 2014 15:40

I have, and.....

I read para 45 as simply meaning that the company must disclose the fact that the accounts are prepared under GAAP. The requirement to actually do so is in SI 2008/410 sch. 1 para. 9 - and that is not excluded in para. 4(2)! The "annual accounts" must, I think, be prepared in accordance with that provision.

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By taxguru
11th Sep 2014 16:09

I would the go to my first

I would then go to my first post - accounts must be prepared applying GAAP - however disclosure with regard to FRS 8 - RP is not required for the reasons stated above.

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By TerryD
11th Sep 2014 16:50

So then would you also omit, say, the Cash Flow statement (not a CA2006 requirement, but a FRS1 requirement)? Ditto any other disclosure emanating purely from an accounting standard?

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By taxguru
11th Sep 2014 18:55

From abbreviated accounts, yes I would

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By TerryD
12th Sep 2014 12:05

OK - I think we're going to have to agree to disagree on this one. Whilst I do follow your logic, for me the use of the term "annual accounts" in s. 445(3) coupled with the failure of SI 20081/410 to include in para 4 (2) an exemption from Sch. I para. 9 is, I think, crucial (although I accept that one could also interpret that paragraph to relate solely to the numbers in the P & L and balance sheet, and not to other notes). Thanks very much for debating this with me - made me think around it a lot more.

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