Accounting by small and medium-sized entities

Reparis Workshop

Annette DavisMarch 2006

Topics• EU law for limited liability companies• Unlisted companies: SME criteria• Unlisted companies: accounting requirements• SME exemptions• Implementation of SME exemptions• IASB SME project: Commission view• EFRAG / FEE joint working group

EU law for limited liability companies

Unlisted companies:

– Fourth Directive 1978

– Seventh Directive 1983

– as transposed into National legislation

– Local accounting standards

Listed companies:

– 2002 IAS Regulation

– Apply “endorsed” IASB Standards and Interpretations

– From 1 January 2005

Unlisted companies: SME criteria

Criteria Small companies

Medium-sized companies

Turnover €7 300 000 €29 200 000

Balance sheet total (i.e. gross assets)

€3 650 000 €14 600 000

Number of employees

50 250

Population of Fourth Directive and IFRS companies in Europe

5 000 000 – 7 000 000Total number of companies8 000

Listed companies

3 700 000Small companies

66 000Medium-sized

companies

Large unlistedcompanies

Unlisted companies: accounting requirements

• Publication of annual accounts to include– Balance sheet– Profit and loss account– Notes to the accounts– Using prescribed formats

• Must show true and fair view• Publication of annual report • Must be audited

Small company exemptions from accounting requirements

• Publication of abridged balance sheet

• Publication of abridged notes to the accounts

• Omit publication of profit and loss account

• No requirement for an annual report

• No requirement for a statutory audit

Medium-sized company exemptions from accounting requirements

• Publication of a partially summarised profit and loss account

• Publication of abridged balance sheet

• Omit non-financial information from the annual report

• No requirement to draw up consolidated financial statements

Implementation of small company exemptions

Exemption MS using exemption*

No publication of profit and loss account

14

No publication of annual report 7

Publication of abridged balance sheet 15

Publication of abridged notes to the accounts

16

No audit 9 (fully)

4 (partially)

* From survey of 19 MS

Implementation of medium-sized company exemptions

Exemption MS using exemption*

Publication of abridged balance sheet 9

Publication of different profit and loss account

7

No publication of non-financial information in the annual report

6

No consolidated financial statements Unknown

* From survey of 19 MS

IASB SME project: Commission view

• IASB SME working group– Commission is a member

• Once Exposure draft is issued we will consult Member States on their views

• Any decision taken would require a separate legal measure

EFRAG / FEE joint working group

• Proactive group–Met in January to discuss IASB’s tentative decisions so far

• There concerns are:–That some simplifications proposed by EFRAG were not taken into account

–Discussed further simplifications–That it should be a simplification of principles rather than extracts from full IFRS

Contacts

• Internal Market and Services website:

– http://europa.eu.int/comm/internal_market/en/index.htm

– annette.davis@cec.eu.int