The Government has now published their response to the Consultation regarding changes to Audit Exemptions for Small companies and Subsidiaries. The new regulations will come into force for accounting years ending on or after 1 October 2012 and will allow more companies to make a commercial decision whether or not to have an audit.
The Business Secretary, Vince Cable, stated that more than 100,000 UK businesses could save millions of pounds in annual accountancy and administration costs under these new reduced auditing and reporting requirements.
SMEs will be eligible for an audit exemption if they meet two out of the following three criteria:
This change is expected to allow 36,000 more companies to choose not to have an audit.
The Government will also exempt a further 83,000 subsidiary companies from mandatory audit, as long as their parent company guarantees their liabilities. Additionally, an estimated 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee from their parent companies.
The Government has also decided to allow companies that prepare their accounts under International Financial Reporting Standards (IFRS) to move to UK GAAP and take advantage of reduced disclosures.
These changes are part of the Government’s wider drive to reduce unnecessary burdens and make the UK one of the best places in the world to start, finance and grow a business. The new regulations will remove EU gold-plating and ensure UK SMEs are not at a disadvantage compared to their European competitors.
The Government response and associated documents are available at http://www.bis.gov.uk/Consultations/audit-exemptions-and-accounting-framework?cat=closedwithresponse