September 15th, 2016 Business News
There are new reporting limits for small and medium sized enterprises (SMEs) which can be applied to accounting periods commencing on or after 1st January.
There are new reporting limits for small and medium sized enterprises (SMEs) which can be applied to accounting periods commencing on or after 1st January. The rules differ however for audit exemption.
The draft form of the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 were reviewed by the UK Parliament in January 2016, and revised regulations were laid down the following month.
These new regulations make amendments from the 2006 Companies Act and to the accounting regulations applicable to both small and medium sized entities and larger entities. In very high level terms, the main changes are covered below:
The thresholds for what qualifies as a “small” entity have changed – they are now slightly larger in some cases:
- Turnover less than £10.2 million (up from £6.5 million previously)
- Balance sheet total less than £5.1 million (up from £3.26 million previously)
- The number of employees remains unchanged at 50
There are also corresponding changes to the gross criteria that apply to a group-of-companies situation. Like previously, these are “base plus 20%” on the thresholds for turnover and balance sheet total. The number of employees threshold remains the same under both individual and group situations.
These new regulations impact accounting periods commencing on or after 1 January 2016. However, if the company’s directors wish to do so, they may apply the rules manually to periods commencing on 1 January 2015 and before 31 December 2015.
What is the significance of the option to adopt early? Well, it means that a company that was previously medium sized but which would be small under the new limits may now move directly to the new FRS102 rule book, with its reduced disclosers for smaller entities, as opposed to applying FRS 102 in full as a medium sized company. This is a significant benefit to the company.
Medium sized companies
The new rules also redefine a medium sized company in accordance with the following new thresholds:
- The turnover threshold, which is now £36 million (an increase of almost £10 million from £25.9 million under the old rules)
- The balance sheet total has increased significantly also from £12.9 million to £18 million
- As with the definition of a small company, the “number of employees” threshold remains unchanged – in the case of medium sized entities, the figure is 250 employees.
Similarly to the rules for small entities, there are corresponding changes to the gross criteria that apply to a group of companies situation. As with previously (and as with small entities) the above figures are increased by 20% for group situations (employee numbers remains the same however).