The Limited Liability Partnerships, Partnerships and Groups (Accounts and Audit) Regulations 2016 (the Regulations) have now come into force. The Regulations extend to LLPs and qualifying partnerships a number of recent company law changes which, hitherto, applied only to companies. The effect of the Regulations is to maintain alignment between the financial reporting frameworks for companies and that for LLPs and to reduce administrative burdens for the smallest LLPs and qualifying partnerships.
The principal changes introduced by the Regulations are:
- Extending the micro-entities’ regime to LLPs and qualifying partnerships
- Raising the thresholds which determine when an LLP or group qualifies as ‘small’ for the purposes of certain accounting and reporting exemptions, and for exemption from audit
- Extending the reduced disclosure requirements applicable to small companies to small LLPs
- Allowing the same flexibility in the formats of the primary statements (particularly the balance sheet) as is available to companies.
The changes come into effect for periods beginning on or after 1 January 2016, with early adoption for periods beginning on or after 1 January 2015 possible if the accounts have not yet been filed at Companies House.
The Regulations also remove the option for LLPs to disclose only the details of principal subsidiaries and other related undertakings (eg significant holdings of 20% or more) provided that the accounts state that the exemption has been taken and that a full list is given in the annual return. Instead, like a company since 1 July 2015, an LLP must now disclose all subsidiaries and other related undertakings in its annual report, irrespective of the length of the list or the materiality of the information. This requirement has a different effective date to the rest of the Regulations; it applies for LLP annual reports approved on or after 1 July 2016.
Following the publication of the Regulations, the FRC has issued Amendments to FRS 105 – Limited Liability Partnerships and Qualifying Partnerships (the Amendments). The Amendments introduce into FRS 105: The Financial Reporting Standard applicable to the Micro-entities references to the Regulations and minor terminology changes to the prescribed primary statement formats for LLPs and Qualifying Partnerships. Otherwise, the requirements of FRS 105 are identical for all micro-entities.