The European Union published the EU Accounting Directive 2013/34/EU (‘the Directive’) on 26 June 2013. The Directive aimed to simplify the accounting requirements for small companies and improves the clarity and comparability of companies' financial statements within the Union.

Following a consultation by BIS in August 2014 and government response in January 2015, regulations were made (the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015) which implemented the EU Accounting Directive for limited companies.  Changes were also made by the Financial Reporting Council (FRC) to UK accounting standards in July 2015 to implement those changes.  At that time, the Government indicated that it would be consulting separately for LLPs and qualifying partnerships.

The LLPs and qualifying partnerships consultation proposed to introduce similar changes to the regulatory framework for LLPs.

There was broad support for the proposals with “almost all” of respondents encouraging the government to introduce the revised framework as soon as possible.  As a result of the responses to the consultation, the government will introduce the following key changes for LLPs and qualifying partnerships:

• Increase thresholds used to determine the size of LLPs. The thresholds for determining what is a small LLP will, as for companies, be raised to the top end of the range permitted by the Directive. An LLP will be small if it meets at least two of: total assets <£5.1m, turnover <£10.2m, <50 employees.  An LLP will be medium-sized if it meets at least two of: total assets<£18m, turnover <£36m, <250 employees. 
• Limit the number of mandatory notes required of small LLPs. 
• Introduce a micro-entity regime for LLPs and qualifying partnerships. 
• Provide LLPs with the opportunity to use alternative layouts when preparing their profit and loss account and balance sheet, provided that the information given is at least equivalent to the information otherwise required by the standard formats. 
• Allowing small LLPs to prepare an abridged balance sheet and profit and loss account if approved by all members of an LLP. 
• Amend the approach in relation to the writing off of goodwill and development costs. In the rare situations where the useful economic life cannot be reliably estimated, these should be amortised over a maximum of ten years (the top end of the range permitted by the Directive).  Reversals of goodwill impairment will be prohibited. 
• Permit the use of the “equity method” in individual LLP statements. 

In addition to aligning the accounting requirements between companies and LLPs, BIS will also align the auditing provisions as well.

The new framework will apply for financial years beginning on or after 1 January 2016.  However, early adoption is permitted for LLPs and qualifying partnerships and groups who still have not agreed and filed their 2015 accounts prior to the regulations coming into force in 2016. 

*Update 11 March 2016 - Draft Regulations have been laid before parliament.  Click here for link to the draft regulations*

Click for:

• Full government response to the consultation (link to BIS website)
• Our previous news item on the original consultation