ACCA responds to the BIS consultation on UK implementation of the EU Accounting Directive

11 Nov, 2014

The Association of Chartered Certified Accountants (ACCA) has published its response to the consultation issued by the Department for Business, Innovation and Skills (BIS) on the UK implementation of the EU Accounting Directive ("the Directive").

The ACCA 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 comments 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."

It also expresses concern over the reduction in notes to the financial statements for smaller companies, commenting:

ACCA does not believe that this is a good idea, as important information may be lost from the financial statements that stakeholders such as creditors and shareholders may want to see. The UK, however, has limited room for manoeuvre given what is in the EU Directive. We agree with the notes that BIS intend to require and understand that the overriding obligation for the accounts to show a true and fair view remains. But this combination is not going to make life easier for small companies. Directors, and in some cases auditors, will have to consider whether the few disclosures mandated by the law will be sufficient for their accounts to show a true and fair view. We think in many cases, more will be needed.

The ACCA supports the extension of small company relaxations to public limited companies which would otherwise qualify as small if they were private, regarding this as "appropriate for the size and ownership profile of these companies". The response is not in favour of the proposals to permit small companies to prepare only abbreviated accounts, however, noting that it considers "...the stewardship responsibilities of directors to the company’s shareholders to be very important and transparency via the annual report and accounts are an important element in their discharge." It suggests that, as a minimum, shareholder approval should be required.

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