UK's FRC unveils proposals to simplify accounting rules
14th April 2015 | News
The UK’s Financial Reporting Council (FRC) has issued new proposals in a bid to simplify its accounting rules, following the government’s move to implement the European Union’s Accounting Directive.
The move could aid the accounting process for three million of the UK’s smallest businesses.
The European Union (EU) Accounting Directive is designed to set thresholds for companies from micro to large, based on the size of a company’s workforce, balance sheets and net turnovers; with the UK Government opting to apply the maximum thresholds for all company sizes.
By simplifying the rules, the UK’s FRC is seeking to maximise the number of businesses which can be classified as ‘small’; subsequently simplifying the level of accounting they will have to do.
These proposals will benefit around 1.5 million of the smallest ‘micro-entities’ operating in the UK, while firms employing less than 50 staff will also benefit greatly as their accounting rules are also simplified.
The maximum turnover thresholds for micro-entities and small companies are up to £632,000 and £10.2m respectively, with balance sheet totals of up to £312,000 and £5.1m with no more than 10 or 50 employees.
The proposals also involve the withdrawal of the previous Financial Reporting Standard for smaller entities, combined with greater flexibility in the format of profit and loss accounts and balance sheets.
Melanie McLaren, executive director of Codes and Standards, said: “[Our proposals] simplify reporting for some entities and are intended to assist the directors of small entities in applying their judgment to the new presentation and disclosure requirements of the Accounting Directive.
“We believe our proposals provide a consistent framework for reporting by all entities in the UK and Republic of Ireland … and [they are] proportionately tailored to the size of the entity and users’ information needs.”
Image: Ken Teegardin