Don’t scrap current financial reporting too hastily, warns ICAEW

The Department for Business, Innovation and Skills (BIS) has published its response to the proposals for changes to the UK micro business reporting regime, back-tracking on some of the proposals that could have had a negative impact on market confidence and firms’ ability to access finance.

Dr Nigel Sleigh-Johnson, Head of the Institue of Chartered Accountants for England and Wales (ICAEW) Financial Reporting Faculty, said: “Micros will be allowed to pick and choose which of the newly-available exemptions they take up – they still have the option to continue providing exactly the same amount of financial information they provide today.

“It is critical that each micro business carefully considers the options available and assesses the practical impact any changes might have on the business. Managers need to ask themselves whether there are risks involved in reducing the financial information they make available to finance providers and other stakeholders, and in no longer having easy access to key performance indicators critical to efficient management of the business. What is appropriate will differ from business to business.

“The Government’s response to the various consultations on financial reporting by micro businesses shows that they have listened to concerns. We were seriously worried that proposals – now dropped – to allow a partial exemption from tried and tested accruals accounting would have a negative impact on market confidence, and potentially hamper micro businesses’ ability to access finance.

“We are strong supporters of efforts to tackle excess regulation of UK businesses, but have repeatedly cautioned against presenting requirements on businesses to produce and publish important financial information as simply another aspect of red tape.”

The changes to the UK reporting requirements for micros follows on from the decision at EU level last year to allow each member state to decide which reporting options should be available to the smallest businesses.