Accounting standards for Irish small businesses
Small and micro businesses meet special accounting requirements in Ireland. The simplest requirements are contained in the Small Business Regime (SCR) and Micro Business Regime (MCR), which stem from the provisions of the 2013 EU Accounting Directive aimed at reducing administrative burdens on businesses, small and micro-enterprises across Europe. A company eligible for the SCR or the MCR can adopt this simplified accounting which concerns the financial statements and reports for a financial year.
How can companies use SCR and MCR?
In order to apply the SCR or the MCR in the preparation of its financial statements, a business must meet the conditions to qualify as a small business or micro business.
Turnover not exceeding €12 millions for small companies and €700 000 for micro business, balance sheet total not exceeding €6 millions for small business and €350 000 for micro business and an average of employee of 50 people for small business and 10 for micro business.
Can all company types qualify for the SCR or the MCR?
The following types of businesses can benefit from SCR or MCR
- Company limited by shares (LTD);
- Company limited by guarantee (CLG);
- Designated activity company (DAC);
- Unlimited Business (ULC).
In contrast, public limited companies (PLC), unlimited public enterprises (PUC) and unlimited public enterprises without share capital (PULC) cannot be qualified as small or micro enterprises.
What are the accounting standards of companies that apply the SCR and the MCR?
In both regimes, companies are required to apply accounting standards when preparing financial statements. Small companies apply FRS 102 and micro companies FRS 105.
The information to be provided in the notes to the statutory financial statements of companies adopting the SCR or the MCR is governed by the sections of the main body of CA 2014, as well as the requirements of the corresponding annex of CA 2014 (annex 3A for small companies, annex 4A for small groups or annex 3B for micro-enterprises) and the applicable accounting standard. One of the main benefits for companies adopting SCR or MCR is a general reduction in the number of notes that must be provided in financial statements.
However, the 2017 CA also introduced new disclosure requirements by tickets. For example, the requirements of Section 321 regarding the disclosure of accounting policies have been extended to include the reason for a change in accounting policy and, to the extent possible, the impact of this change on the financial statements of current years and previous. The company also has an obligation to disclose details about it, such as its name and legal form, location and registration number, address of its registered office, and additional information about the place of dissolution of the society.
Finally, in the appendices, the notes must be presented in the order in which the items to which they relate are presented in the balance sheet and in the profit and loss account.
Note that a small business is not required to submit a cash flow statement.
It is no longer mandatory, when filing an annual report with abbreviated financial statements, to attach a separate statement containing information relating to the interests of the directors in the shares and debentures.
Small and micro-enterprises are exempt from filing an administration report. Micro-enterprises are exempt from the preparation of a directors' report, provided that the required information regarding the acquisition or disposal of own shares by the company is provided elsewhere in the financial statements.
The simpler requirements of SCR and MCR are designed to reduce administrative burdens for small and micro enterprises. To fully understand these rules, consult an accountant specializing in microbusiness and SME.