How small is small? New Accounting Directive news

BIS has issued its proposals on the UK implementation of the EU’s new Accounting Directive on financial statements and is proposing the following limits:






Total Assets



Average no. of employees



These proposals, if adopted, will apply to accounts beginning on or after 1 January 2016.

An interesting example means that a company with more than 50 employees and turnover between £6.5m and £10.2m will be required to prepare its accounts for the year ended 31 December as follows:

  • 2014 Medium sized under present UK GAAP
  • 2015 Medium sized under FRS102
  • 2016 Small sized under applicable accounting regime for small companies. More on this later.

This might change depending on whether the company is permitted to adopt the new regulations early for its 2015 accounts.

What about the audit threshold?

BIS are saying ‘for the time being’ the audit threshold will remain unchanged. Having recently harmonised the audit threshold with the small company criteria they may now move apart. So larger small companies will prepare accounts under the small company regime but will not be able to claim audit exemption.

Changes proposed by the Financial Reporting Council (FRC)

The FRC expects new and amended accounting standards to be effective from the same date as the changes in legislation, namely accounts beginning on or after 1 January 2016. Note that we already know that FRS102 applies to entities that are not small for accounts beginning on or after 1 January 2015.

The proposed accounting framework is:

  • Micro-entities will be able to apply the Financial Reporting Standard for Micro-Entities (FRSME).
  • Small entities will apply FRS102, but a new section will be inserted setting out the presentation and disclosure requirements applicable to small entities. As a consequence the FRSSE will be withdrawn.

The revised standards are not expected to be available until halfway through 2015.