ICAS: Micro-entity reporting exemptions risky

FINANCIAL REPORTING exemptions for micro-entities are misguided and could hamper trade and credit, ICAS has warned.

The institute questioned small company preparers and users of accounts: respondents said in a highly risk-sensitive environment that reducing disclosures could undermine companies' positions when it comes to financiers, credit reference agencies and insurers.

Micro-entities already prepare abbreviated accounts and stakeholders said that, rather than cut disclosure, more information would be welcome, including extra details on creditors.

David Wood, executive director of technical policy and services at ICAS, said: "While abbreviated accounts may not be ‘perfect', they do provide a balance between the needs of users and preparers of accounts. We believe that the usefulness of abbreviated accounts could be improved with some additional disclosures while still retaining a confidentiality element that preparers greatly value."

The UK government and European Commission have been considering ways to reduce the reporting burden for micro-entities, including cutting requirements to 'skeletal' reporting. However, critics say such a move would limit transparency and could encourage financial indiscipline.