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Legislative changes to December 2016 year end accounts

13 February 2017

Previous Business Edge articles have considered 2015 and 2016 regulations issued to revise company law to implement the EU Accounting Directive. In general, the regulations apply to financial years beginning on or after 1 January 2016 and as a reminder for companies preparing accounts to 31 December 2016 we have listed some of the changes below.

Changes for small companies

  • An increase in qualifying conditions for turnover and balance sheet total.
  • The definition of an ineligible group narrowed (“a public company" is replaced by “a traded company”).
  • A plc is still excluded from the small companies’ regime but may be exempt from the requirement to prepare group accounts if it would be subject to the small companies’ regime but for being a plc (provided it is not a traded company).
  • Abbreviated accounts as a document distinct from that prepared for members have been abolished. The company will file the version of the balance sheet and profit and loss (where the profit and loss is filed) which was prepared and sent to the shareholders.
  • Small companies may prepare an abridged balance sheet and an abridged profit and loss account for members and filing, provided this approach is considered to give a true and fair view, and all members give consent.
  • Small companies may continue to omit the profit and loss and directors’ report from the accounts filed with Companies House. However, if they do, they must also omit the audit report and include an additional note relating to the audit.
  • The number of notes that a small company can be mandated to provide in Companies Act accounts is reduced - although the requirement to provide a true and fair view remains.
  • Some additional disclosures are required regarding off balance sheet events (section 410A) and employee information (section 411).

Other changes

  • Medium sized companies can no longer file abbreviated accounts.
  • Wider scope of the audit report.
  • For Companies Act accounts, it is permitted to adapt the balance sheet formats to distinguish between current and non-current items in a different way and / or profit and loss account formats as set out in the regulations provided that specified criteria are met.
  • All related undertakings must be disclosed and some changes in the level of details to disclose. For small companies details of related undertakings are only required if they voluntarily prepare group accounts.
  • All companies must state specified information about themselves, eg where registered in the UK and registered number.
  • Requirements in relation to directors’ advances, credit and guarantees are extended to include amounts written off or waived.
  • For Companies Act accounts, the notes to the accounts must be presented in the order in which the items to which they relate are presented in the balance sheet and profit or loss account.
  • For a parent company utilising the exemption from publishing its own profit and loss account when preparing group accounts, the profit or loss for the year must be shown on the face of the individual balance sheet. Details on employee numbers and costs are required for the individual financial statements as well as in the consolidated accounts.
  • The intermediate parent company exemptions from preparing group accounts are amended as regards the ability of minority shareholders to require that a parent company, that is included in a larger group, prepare group accounts. Specifically, where the parent undertaking holds 90% or more of the allotted shares in the intermediate company, the remaining shareholders must have approved the exemption.
  • For Companies Act accounts, a cap of 10 years (previously five) on the useful economic life of intangible assets in the exceptional cases when the useful life cannot be reliably measured. Reinstatement of goodwill previously written off as impaired is prohibited.

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