Accountants Instrumental to Micro-Entities simplifying their Accounting
EFAA Publishes Survey Report on the Acceptance Of The Micro-Entities Accounting Option In Europe
EFAA has today published a survey report ‘Acceptance Of The Micro-Entities Accounting Option In Europe’ which reveals, says EFAA President Bodo Richardt, “that accountants are instrumental in the decision of micro-entities to take-up the option for simplified accounting.”
EFAA were motivated to investigate the take-up of the micro-entities option – the extent and the reasons for promoting it or otherwise – by way of a survey of accountants in practice conducted in conjunction with its member organisations in 2017 and 2018 once the option had become established. The European Commission has long been committed to easing the administrative burden on small and medium-sized entities (SMEs), especially very small companies that are commonly referred to as micro entities. In the accounting arena this commitment manifested itself in the European Commission’s revision of the Accounting Directives in order to make them less demanding for micro-entities. This is known as the micro-entities option or regime.
Over 700 practitioners from 7 countries responded to the survey. The key findings include:
The level of awareness of the existence of the micro-entities option varies significantly from country to country;
A clear majority of accountants recommended their eligible clients to take-up the micro-entities option and actual rates of take-up closely mirror this;
The main reasons accountants gave for recommending the micro-entities option were cost savings and greater privacy from reduced disclosures; and
While most accountants did not expect to change their view of the micro-entities regime most did expect the take-up to increase in the future.
EFAA Director, Paul Thompson, one of the primary authors alongside Richard Martin who is Head of Corporate Reporting at the ACCA, said “the survey findings have various implications for regulators, standard setters and accountants, not least the European Commission in light of the fact in early 2018 it commenced the EU fitness check on public reporting by companies.” Richard Martin explains that: “the survey reveals that, as one might expect, accountants are key drivers of the decision to take-up the micro-entity regime. Many eligible micro-entities are unaware of the option. Hence, if the EU wishes to increase the take-up then it might wish to look at ways of raising awareness including through accountants bringing it to the attention of their eligible clients.”
The report goes on to state that on balance the EU initiative to introduce the micro-entities regime has succeeded if success is measured by take-up rates. Whether it has improved the quality of readily available financial information about limited liability companies, is of course a completely different question not addressed directly by this report.