Over the last few months many practitioners have been getting to grips with the new small companies’ reporting regime.
The Companies Act 2006 was revised following the transposition of the EU Accounting Directive and the new regime becomes mandatory for accounting periods starting on or after 1 January 2016, although earlier adoption is permissible for accounting periods starting on or after 1 January 2015 but before 1 January 2016, if the directors so wish.
This article will focus on some of the more common questions that have been asked by practitioners over the last few months, particularly in light of the fact that abbreviated financial statements are abolished.
Early-adopting the new regime
The revised Companies Act 2006 becomes mandatory for accounting periods starting on or after 1 January 2016. However, there has been an early-adoption clause built into the legislation which says that a company can choose to early-adopt the regime if the directors so wish.
An early-adoption clause was built into the legislation because the government anticipate that some 11,000 businesses which would have fallen to be classed as medium-sized under the previous Companies Act 2006 will now fall to be classed as small and hence be able to apply the small companies’ regime when preparing their financial statements.
There are two points worthy of emphasis where early-adoption is concerned. First, where a company that was previously medium-sized now falls to be classed as small it can choose to early-adopt the legislation and prepare its financial statements for the year-ended 31 December 2015 under the small companies’ regime.
However, the company will not be allowed to use the Financial Reporting Standard for Smaller Entities (the FRSSE) to do this; the company must instead use FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and Section 1A Small Entities.
Secondly, early-adopters of the revised legislation will not be able to claim audit exemption. This is because the revised audit exemption thresholds (which reflect the new small company thresholds) can only be applied to periods starting after 1 January 2016 and no early-adoption is permitted...
Register with AccountingWEB for free or log in to see the full article which also covers:
- Filing requirements at Companies House
- Limited liability partnerships (LLPs)
- Financial instruments
About Steven Collings
Steve Collings, FMAAT FCCA is the audit and technical partner at Leavitt Walmsley Associates Ltd where Steve trained and qualified.