Micro entities legislative changes have started. Are you prepared?
A tsunami of legislative changes has started
As I reported last year , there are some major changes coming to financial reporting in the UK. The first of which is already upon us.
Micro entities regulations came into force on the 1st December 2013 and can be applied to financial years ending on or after 30th September 2013. The micro entity exemptions are only available to companies, and even then there are some exclusions – best to check the detail before applying to your own clients.
As a reminder, there is a strict definition as to what a micro entity is. A micro entity company must meet at least 2 of the following criteria:
- Turnover of £632k or less
- Balance sheet total £316k or less
- Average number of employees is 10 or less
The accounts prepared under the micro entity regulations greatly simplified from a presentation perspective. The profit and loss and balance sheet have little detail, the directors’ report is likely to be prepared with small company exemptions so will state little more that the names of the directors and only two notes to the financial statements are required.
The assumed benefit to this simplification is that for small businesses it will reduce the need to use external bookkeeping and accountancy services. I am not so sure though.
As we all know, much of the effort needed to prepare a set of accounts centres around the preparation of financial data in accordance with accounting principles. This will not go away and the only time saved is in presentation.
Furthermore, many businesses will still need more detailed information than offered by micro entity regulations. For example, to secure credit and maintain a good credit rating, a business might want to disclose more information than the regulations suggest.
I am sure that many businesses will listen to their accountant and follow what they recommend. What the accountant needs is the right tools to be able to take the most appropriate course of action.
At IRIS, we always deliver legislative updates when our users need them. So, despite my own opinion, our job has been to ensure that IRIS Accounts Production includes these requirements at the earliest opportunity.
That’s why I am pleased that IRIS Accountancy Suite v11.4 includes new functionality so that micro entity accounts can be prepared. With no additional re-work, accountants can prepare FRSSE or micro entity accounts, and then generate iXBRL accounts already attached to the CT600 return.
That’s the power of the deep integration offered by IRIS. Make the right decisions for your client, safe in the knowledge that you do not have lots of rework to do.