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.
Our last post in this series considered the impact of the new EC Accounting Directive for small companies in their full accounts for members. In this post we'll consider the impact on abbreviated accounts.
The goodnews is that, as currently, the profit and loss account will not need to be filed at Companies House. Therefore the set to be filed will consist of a balance sheet (slightly abridged from its current form) and five notes.
The bad news is that one of those five notes will be full disclosure of related party transactions. While directors' transactions (more recently in the form of advances, credits and guarantees made in favour of directors) have always been included in abbreviated accounts, other related party disclosures have not. This is because the additional disclosure requirements of the FRSSE do not apply to abbreviated accounts. But the Directive seems set to require a complete related party note in both members' accounts and those filed for public record.
The ICAEW and others have been critical of this requirement in their response to the proposals; however it remains to be seen whether the proposals will be watered-down in response.
If your client has sensitive related party relationships and transactions, you may need to alert them in good time that these are likely to become public in the near future.