The European Parliament wishes to exempt more small companies from certain accounting obligations. It consequently raised the exemption thresholds set in the draft amendment to the Fourth Accounting Directive (Directive 78/660/EEC). Meeting in plenary, on 13 December, MEPs gave their support to the agreement on this subject concluded with the Council (at a three-way meeting in November). The Council is expected to formally endorse the agreement in turn, on 19 December.

Under the compromise, the thresholds for exemption from financial reporting and accounting obligations for micro entities are raised (at the request of the EP). For balance sheets, the figure rises from €250,000 to €350,000, and for turnover from €500,000 to €700,000. The third threshold – an average of ten employees – is not changed.

Very small companies that meet two of these three criteria may, depending on the choices made by their member state, benefit from an exemption from the obligation of keeping accounts on prepayments and deferred income for certain headings, thus limiting accounting information to key elements, allowing a minimum level of transparency. The member states will also be able to discharge micro entities from the obligation of establishing annexes to the accounts (in which case the information will appear in the balance sheet) and calculating overheads at the end of the year. States will also have the choice to exempt them from the general obligation of publishing annual accounts provided the balance sheet information is registered by a competent authority, transmitted to the trade register and available on request.

The Commission will have to report on the situation of micro entities, taking into account the national context and the number of companies concerned.

Andrea Benassi of UEAPME applauded this vote, which “puts an end to four years of irritating squabbles [...] and simplifies accounting requirements for all companies, thereby reducing the administrative charge for small companies, while ensuring that accounts are accessible and available upon request. Today‟s compromise, coupled with the upcoming revision of the Accounting Directives, is fully in line with our long standing demands to simplify the prepara-tion of financial statements and to reduce the related administrative charges”.

The ACCA, representing chartered accountants and auditors, is more reserved with respect to the idea that the exemption for micro entities will save them time and money. It points out that it may reduce information on the company available to other companies and citizens. It adds that the information from which micro entities will be exempted, available within the company, is needed for borrowing purpmoses and for mergers and acquisitions, and that it is better for such information to be disseminated, particularly because information can be published at low cost using today’s communication means.