How “small” is your company?
Following a post I wrote back in April 2015, time seems to have flown by and as 2016 is now well under way, we are now looking at a new landscape of company size and audit thresholds as well as a major change to our accounting standards.
Ordinarily a change in any one of these areas wouldn’t be at the top of the agenda for a large number of companies; however as the change in size thresholds will impact on which accounting standards apply, and whether or not they will need to be audited, it is certainly worth revisiting the area.
“Small” Company Size Limits
For accounting periods commencing on or after 1 January 2016, revised size thresholds are as follows:
Periods commencing before 1 January 2016
Periods commencing on or after 1 January 2016
To qualify as a “small”, a company must meet 2 of the 3 criteria above.
To make matters more complicated, it is also possible for a company to apply the new size criteria for periods commencing on 1 January 2015.
Which Accounting Standard to apply
If a company satisfies the above criteria for an accounting period commencing on or after 1 January 2015, then it will need to prepare its accounts under the Financial Reporting Standard for Smaller Entities (“FRSSE”) 2015, rather than the older 2008 version of this standard.
The same company will however need to adopt a completely new accounting standard, FRS 102, for periods commencing on or after 1 January 2016.
This means than in a period of 3 years, a small company with a year-end of 31 December will prepare it accounts under 3 separate accounting standards:
31 December 2014: FRSSE (2008)
31 December 2015: FRSSE (2015)
31 December 2016: FRS 102
Do you need to be audited?
Once we have worked out the size of the company and what accounting standards we should be using, we then need to consider whether or not it should be audited.
In general, a company will be exempt from audit if it qualifies as being “small” , as shown by the table above. However, the EU directive which brought in the changes does not allow early adoption for audit purposes.
This means that for some companies, with say a 31 December 2015 year end, which satisfy the new size criteria but not the old ones, they would be treated as small for accounting purposes, but would still need to be audited.
Clearly this transition period is a minefield for small companies in the UK, and care should be taken to ensure that all regulations are being adhered to.
Fingers crossed that there aren’t any more changes for 2017!Talk to Barnes Roffe today