European micro-companies may be exempted from certain accounting obligations. The Council formally approved without debate, on 21 February, this measure contained in the proposal for an amendment of the fourth accounting directive (Directive 78/660/EEC), which is expected to reduce significantly the administrative burden on very small companies. The European Parliament adopted on 13 December the compromise on this subject worked out with the Council (during a trialogue meeting in November).

Under the compromise, the thresholds for exemption from certain financial reporting and accounting obligations for micro-entities were raised (at the request of the Parliament). The exemptions will concern companies that do not exceed the limits of two of the following three criteria: a balance sheet total of 350,000 euros, net turnover of 700,000 euros and an average of ten employees during the financial year.

If member states choose to apply the measure, very small businesses may therefore be exempted from the obligation to keep accounts on prepaid expenses and prepaid income for certain headings, thus reducing accounting information to key elements and ensuring a minimum level of transparency. Member states will have the possibility to relieve micro-entities from the obligation of drawing up annexes to their accounts (the information will be contained in the balance sheets) and calculating general charges at the end of the year. States may also choose to grant such firms exemptions from the general obligation to publish annual accounts provided the balance sheet information is registered by a competent authority, transmitted to trade registers and available on request.