The Companies (Accounting) Act 2017 comes into force on Friday and, according to the, , it will reduce the financial reporting obligations on small businesses.
One of the more significant changes in the act is the creation of a new category of company called a micro company. To be classified as a micro company, a business must not have a turnover exceeding €700,000, a balance sheet exceeding €350,000 or average employee numbers exceeding 10.
The accounting benefits of being a micro company include exemptions from disclosing directors remuneration and no obligation to prepare or file a directors report.
Small and micro companies will be permitted to file abridged financial statements under the act. Small companies are defined as those with a turnover not exceeding €12 million (up from €8.8 million), a balance sheet not exceeding €6 million (up from €4.4 million) and average number of employees not exceeding 50.
The changes in the thresholds and classification structures mean that some companies that are currently referred to as medium companies will be reclassified and see a reduction in their obligations.
But those companies that are still defined as medium-sized companies can no longer file abridged financial statements. However, the threshold to be defined as a medium company has increased. Turnover can’t exceed €40 million (up from €20 million), the balance sheet total can’t exceed €20 million (up from €10 million) while average employee numbers can’t exceed 250.
While the act reduces obligations for smaller companies, some companies will see an increase in reporting obligations regardless of size.
For example, companies with operations in mining, quarrying and logging of forests have new requirements. Those companies must make available a report on payments made to governments for each financial year.
However, payments of less than €100,000 need not be disclosed in the payment report, but no manipulation of amounts is permitted to avoid reporting, according to law firm.