The Financial Reporting Council has confirmed that it plans to issue a consultation document on the accounting arrangements for small companies going forward, effectively replacing the current Financial Reporting Standard for Smaller Entities (FRSSE) accounting rules.
The changes are the result of the pending implementation of the new EU Accounting Directive which are expected to make significant changes to the small companies’ regime. This means that it is likely that a further standard will be issued primarily aimed at micro-entities.
In the latest FRC newsletter, Setting the standard, the accounting regulator said: ‘We have continued to develop our thinking in this area. As the legal changes to the small companies’ regime will be significant, retaining the FRSSE in its current form is not a realistic option, nor really is having accounting standards for small companies that are based on standards for larger companies that have been withdrawn.
‘We have been giving more thought to how we will replace the FRSSE for small entities and micro-entities, as we develop a consultation document that will seek formal stakeholder feedback.
‘We expect to issue this in the summer, alongside a consultation from the Department for Business, Innovation and Skills (BIS) which will discuss its proposals for implementing the Accounting Directive in the UK.’
The FRC will also be looking for stakeholder feedback on outline plans for bringing small entities within the scope of FRS 102, Financial Reporting Standard applicable in the UK and Republic of Ireland (with reduced disclosures)
There are plans to introduce a Financial Reporting Standard for Micro-entities (FRSME), which will be based on the new micro-entities regime. It is likely to reflect a simplified accounting framework to meet the needs of the smallest businesses with recognition and measurement simplifications at the heart of the plans.
Based on the typical turnaround time for consultations, which normally allow for a 60 to 90-day consultation period, it is unlikely that an exposure draft will be issued before Q4 2014.
FRS 102 is effective from 1 January 2015.