The preparation of accounts for a business is as involved and costly, proportionate to the size and complexity of the business itself. Different accounting principles and rules apply depending on the type, size and structure of the business i.e. that of a sole trader, a partnership or a limited liability partnership or limited company.
The government has acceded to pressure in recent years to simplify the accounting reporting requirements of small businesses and make their compliance obligations less onerous.
These terms of reference, through the office of tax simplification, for example, are now manifested in the shape of, only basic accounts being mandatorily required, in accordance with FRS 105, for micro entities i.e. limited liability companies that don’t exceed certain criteria, in respect of turnover, number of employees and the value of its net assets.
New accounting standards, regulating the accounting principles to be applied to the financial transactions of small and medium enterprises, which exceed the above-mentioned criteria, are topical right now, as FRS 102 of UK GAAP, are now having to be applied, in the computation and preparation of their financial statements, going forward.
Size classification thresholds for financial reporting periods ending in 2015
|Type of entity||Turnover thresholds
|Balance sheet total||No. of employees|
|Medium and large
A company qualifies if it does not exceed two or more of these thresholds in any financial year.
Reporting frameworks for all entities
|Type of entity||Reporting Framework 2015||Reporting Framework 2016+|
|Micro entities||FRSSE 2008/15 Micro-entity regulations||FRSME (Micro-entities) /FRS 105/ FRSSE|
|Small companies||FRSSE or FRS 102||FRSSE or FRS 102|
|Medium and large entities (unlisted)||FRS 102 or full IFRS||FRS 102 / IFRS|
Similarly, Medium and Large entities, in accordance with the above threshold criteria, are statutorily required to undergo an audit, by a member firm, of a recognised professional body, such as the ICAEW or ACCA.
These are the biggest fundamental changes governing the preparation and disclosure requirements, of the accounts of limited liability companies, for more than twenty years.
When I first entered the accountancy profession, in 1978, there were only a handful of professional accountancy practices on the high street of any one given market town, and furthermore, one had to be either, an articled and qualified by examination, member of the ICAEW, or ACCA, to act for, and prepare the financial accounts of, a limited liability company, for submission to The Registrar of Companies, or HM Inland Revenue, as was.
In common with many forms of employment back then, the accountancy profession was effectively a closed shop. The de-monopolising and deregulation of many forms of business and commerce, along with this profession, for example, can be traced back to Thatcher’s era of Government.
Time marches on.