Faced with continuous change in accounting and auditing standards and guidance, it can be hard for practitioners to remember and make time to explain these to clients.
Taking extracts from our Audit and Accounting Update 2012 course notes, we have prepared a series of tips to assist you when 'Talking to your clients' to provide proactive, responsible and timely advice thereby saving you time.
The new EC Accounting Directive (which is currently making its way through the European Parliament) will, once introduced into UK law, significantly simplify the disclosures for small companies in their full accounts for members. The Directive will also increase the small company size limits to €10m turnover and €5m balance sheet total (no change to employee numbers), meaning that more companies will be affected. Rather than the typical 15-20 pages of accounts that are currently prepared for a small company's members, the Directive proposes that small company accounts in future will consist only of:
- An abridged balance sheet (slightly different detail from the present headings);
- An abridged profit and loss account; and
- Five notes only being:
- Accounting policies- Guarantees, commitments, and contingencies and arrangements not in the balance sheet- Long-term and secured debts- Non-adjusting post balance sheet items- Related party transactions
This will likely run to 3-4 pages. The Directive aims to prohibit Member States from adding any additional disclosure, to ensure maximum harmonisation across Europe (although the ICAEW and others have strongly criticised this move).
The timescale for implementation in UK law is uncertain, but the UK Government appear to want to press ahead as soon as possible once the Directive has been ratified in late 2012. Your clients may be surprised to receive a substantially slimmer set of accounts in future years! In the next post, we'll consider how the abbreviated accounts filed at Companies House will change.