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FRC needs to get it right for SMEs

ACCA urges the FRC to get it right first time for small businesses

Micro entities need a separate financial reporting standard, says ACCA (the Association of Chartered Certified Accountants) in its response to Financial Reporting Council exposure drafts regarding financial reporting standards for micro and small businesses.

The first exposure draft supports a standalone reporting standard for micro businesses, separate to FRS 102 which covers accounting and reporting requirements for unlisted entities.

ACCA believes, however, that it would be helpful for the content of the standard to be less closely linked to FRS 102. A separate table of derivations would be useful for businesses that will be, or are growing, and so are likely to be required to apply FRS 102 in the future. ACCA also believes that for the sake of a common reporting platform, a standard is needed that will be available to unincorporated micro businesses and LLPs as well as limited companies.

In response to FRC’s second consultation, ACCA supports the withdrawal of the Financial Reporting Standard for Smaller Entities (FRSSE) and its replacement for small businesses by accounting based on FRS 102. However, the standard should be made more user friendly by applying the ‘think small first’ principle especially to the disclosure requirements.

Richard Martin, ACCA head of corporate reporting, said: “The ultimate aim of financial reporting standards should be to ensure a true and fair view for small and micro businesses. Both of these exposure drafts raise new questions about the meaning of the true and fair view, whether that what is required in the case of small or presumed in the case of micros. So the FRC needs to provide new guidance on the issue to help achieve that. The number of such businesses means that they are crucial to growing the economy, so care needs to be taken in establishing standards which are suitable for them – not lengthy, but clear and concise.”

To read the full consultation responses, visit: http://www.accaglobal.com/gb/en/technical-activities/technical-resources-search/2015/april/cdr1341.html and http://www.accaglobal.com/gb/en/technical-activities/technical-resources-search/2015/april/cdr1340.html

This was posted in Bdaily's Members' News section by ACCA .