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New small company accounting rules may mean filings are rejected

17 October 2016

The ICAEW has warned that the new accounting rules for small companies have led to Companies House rejecting accounts, with the errors primarily arising due to uncertainty over filing options.

The new requirements (2015 regulations) apply for periods beginning on or after 1 January 2016 (unless companies choose to early adopt). Similar requirements were issued for LLPs in 2016, again applicable for periods beginning on or after 1 January 2016.

A key change to the filing obligations of small and medium-sized companies is that such companies will no longer be able to file annual accounts that are an abbreviated version of the accounts which are prepared and sent to shareholders. Instead the company must send Companies House the version of the balance sheet and profit and loss (where the profit and loss is filed – small companies are still exempt from filing a profit and loss account) which are prepared and sent to the shareholders.

There were also changes in the annual accounts prepared by small companies for members. These changes reduce the number of notes that a small company can be mandated to provide, although the requirement to provide a true and fair view remains. There are additional disclosures for small companies regarding off balance sheet events and employee information. Small companies may prepare an abridged balance sheet and/or an abridged profit and loss account for members, provided this approach is considered to give a true and fair view, and all members give consent.

The Financial Reporting Standard for Smaller Entities (FRSSE) has also been withdrawn for periods beginning on or after 1 January 2016. Instead, small companies must apply the recognition and measurement requirements of FRS 102 so, for example, they will need to show derivatives at fair value, provide for deferred tax on revaluations and recognise equity settled share-based payments. A new Section 1A to FRS 102 sets out the disclosures required for small companies and includes four appendices to provide guidance on:

  • Adapting balance sheet formats
  • Adapting profit and loss account formats
  • Disclosure requirements required by company law
  • Additional disclosures encouraged

The ICAEW has issued FAQs on the new filing requirements, including appendices setting out eight common scenarios under the revised small company regime and example statements required in the accounts. For example, where applicable, statements that:

  • The accounts have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime
  • All of the members have consented to the preparation of abridged accounts
  • A statement on the balance sheet when the profit and loss account (and directors’ report) is not filed

If you would like to discuss this or other company secretarial issues please contact Mark Sykes.

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