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The Department of Business, Innovation and Skills and the Financial Reporting Council have published a discussion paper containing proposals to simplify the financial and corporate reporting requirements for 5 million of the UK's smallest businesses.
The paper proposes easing corporate reporting procedures so that micro-entities are only required to file a simplified Trading Statement (in place of the current Profit and Loss account), a simplified Statement of Position and a simplified Annual Return. The discussion paper envisages considerable cost savings in relation to the preparation of accounts.
The paper also proposes developing an integrated software package to help small businesses prepare financial information. This could allow managers to gain a better understanding of the trends in their businesses' performance and help them plan for the future.
The deadline for comments on the proposals is 30 October 2011. Further information can be obtained here. CIMA is interested in your views on the proposals.
| Attachment | Size |
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| CIMA to BIS Simpler Reporting Final (1).pdf | 79.05 KB |
Nick,
Surprisingly for a Gov't department this seems well thought out. The ideas presented make sense to me, especially the focus on cash.
The only downside I can see is the banks. I expect them to insist on more data. However, if the business has good records then a reasonable accountant (or bookkeeper) should be able to prepare the numbers quite quickly.
So, subject to the banks requirements, I support it.
Al.
CIMA's response to this consultation welcomed the proposals in the joint BIS / FRC discussion paper and the increased focus on cash accounting for the smallest of companies. Effective cash management is essential for any organisation but none more so than these micro-entities. Preparing cash based accounting statements is likely to increase awareness of the nature of cash flows and so help these organisations survive the current tough economic conditions.
However, we believe that the concept of ‘profit' or ‘earnings' is very important and believe that cash accounting is only relevant for the smallest of businesses for instance for those with up to three employees. The extension of cash accounting as a basis for financial reporting to business entities of greater size may lead to unintended consequences especially with regard to profitability calculations.
The full consultation response is attached above.