You may have heard about new accounting rules which are being introduced as a result of the EU Accounting Directive, under the documents FRS102 and FRS105. Under these new accounting rules companies qualify for exemptions as follows:
Small Entities are those with less than £10.2M turnover, less than £5.1m total assets, less than 50 employees. Can exceed one of these limits and remain small. Follow FRS 102.
Micro Entities are those with less than £632,000 turnover, less than £316,000 total assets, less than 10 employees. Can exceed one of these limits and remain micro. Follow FRS 105.
The new rules apply to small and micro entities for accounting periods beginning on or after 1 January 2016. For companies with December accounts date the first new style accounts will be 31 December 2016. For all other accounts dates the first accounts under the new rules will be the 2017 accounts.
Some of the main accounting changes for small companies:
- if employees of the company have accrued unused holiday entitlement at the balance sheet date this will be included in the accounts as a liability.
- if a fixed term loan to the company (e.g. from a director) is interest free, an adjustment will be needed to recognise the “capital contribution” (interest free nature) and “expense” (notional interest charge).
- some leases will need to be reclassified. For example a car hired for three years (contract hire) may change from operating lease (rentals treated as cost in P&L) to finance lease (treated as own car with loan owed to lease company).
Some of the main accounting changes for micro entities:
- more aggregated figures in the accounts
- no deferred tax provision allowed
As with all of our tax tips and web pages this information is necessarily summarised and of a general nature. If you would like detailed specific advice please contact us.