Corporate financial reporting - BIS consults on audit changes

The Department for Business, Innovation and Skills (BIS) has published a consultation paper “Audit Exemptions and Change of Accounting Framework” which sets out plans to allow more small companies and subsidiaries to decide whether or not to have an audit.

Current EU rules mean that to classify as “small” for accounting purposes, a company must comply with two out of three criteria relating to their turnover, balance sheet total and number of employees. However, to obtain an audit exemption in the UK, small companies must fulfil both the balance sheet and turnover criteria.

The Government proposes to bring the UK requirements into line with the EU rules so that small UK businesses would be eligible for audit exemption by meeting any two of the three criteria. The Government is also proposing to introduce legislation next year to exempt most subsidiary companies from mandatory audit, provided their parent is prepared to guarantee their debts.

These proposals are part of the Government’s strategy to eliminate the “gold-plating” of EU legislation as well as part of its wider focus on cutting red tape and reducing unnecessary burdens on business. In its press release, the Government estimates that these changes could save UK businesses in excess of £600 million in accountancy and administration costs each year.

Additionally, following consultation by the UK Accounting Standards Board on changes to UK Generally Accepted Accounting Principles (UK GAAP), the Government is also seeking views on whether to allow companies which currently prepare accounts under International Financial Reporting Standards (IFRS) more flexibility to change their accounting framework to UK GAAP.

The consultation closes on 29 December 2011. For a copy of the consultation paper please visit the Department for Business Innovation & Skills website (www.biz.gov.uk) or click here.
 

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