Accounting by small and medium-sized entities Reparis Workshop Annette Davis March 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 CriteriaSmall companies Medium-sized companies Turnover€ € Balance sheet total (i.e. gross assets) € € Number of employees 50250

Population of Fourth Directive and IFRS companies in Europe – Total number of companies Listed companies Small companies Medium-sized companies Large unlisted companies

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 ExemptionMS using exemption* No publication of profit and loss account 14 No publication of annual report7 Publication of abridged balance sheet15 Publication of abridged notes to the accounts 16 No audit9 (fully) 4 (partially) * From survey of 19 MS

Implementation of medium-sized company exemptions ExemptionMS using exemption* Publication of abridged balance sheet9 Publication of different profit and loss account 7 No publication of non-financial information in the annual report 6 No consolidated financial statementsUnknown * 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: –