Update and commentary on the 2016 financial statements of small and micro companies
Update on Bill / Meeting with Minister
The Companies (Accounting) Bill 2016 (‘the Bill’) is scheduled for Report Stage in the Dáil in the week commencing 20 March 2017. As reported elsewhere in this edition of eNews, the President and CEO of Chartered Accountants Ireland met with the Minister for Jobs, Enterprise and Innovation, Mary Mitchell O’Connor on Tuesday. During the meeting, President Liam Lynch welcomed the announcement of the date for the Report Stage, while emphasising the need for swift enactment of the proposed legislation and the costs and complexity for small businesses associated with the on-going delays.
Section 1A of FRS 102 / FRS 105
Chartered Accountants Ireland wishes to remind members that both the small company provisions of section 1A of FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and FRS 105 “The Financial Reporting Standard applicable to the Micro-entities Regime” for micro companies, continue to be unavailable for use by Irish companies until the Bill is enacted and subsequently commenced. Applying the FRS 102 section 1A exemptions would necessitate non-compliance with disclosures currently mandated in the Companies Act 2014 (‘the Act’) – disclosures are required in Schedules 3 and 4 to the Act and in various sections within Part 6 of the Act. The Bill proposes to introduce Schedules 3A and 4A specifically relating to small companies and groups respectively and Schedule 3B for micro companies and consequently Schedules 3 and 4 would be no longer mandatory for companies or groups qualifying for the small or micro companies regime. The Bill also proposes to include certain small and/or micro company disclosure exemptions within relevant sections of Part 6. However, as previously mentioned until such time as the Bill is enacted and subsequently commenced, the existing Companies Act 2014 disclosure requirements continue to apply to all applicable companies irrespective of size.
Cash flow statement exemption in section 7 of FRS 102
Separately, paragraph 7.1B of section 7 of FRS 102 (introduced into the standard as part of the July 2015 amendments by the FRC) provides for an exemption for small entities from the requirement to present a statement of cash flows. There is, however, a lack of clarity as to whether this exemption is available to small companies in Ireland for accounting periods commencing on or after 1 January 2016 in the absence of the enactment and commencement of the new legislation. The Companies Act 2014 does not require companies to present a statement of cash flows. Although the position is somewhat uncertain we consider that it would be reasonable for small companies, as defined in section 350 of Companies Act 2014 (i.e. the proposed new size criteria in the Bill do not yet apply), to take the view that they may avail of the cash flow statement exemption in their financial statements, in the interim period until such time as the new legislation is commenced.
Members considering the availability of this exemption, prior to the enactment and commencement of the legislation, should note that an ‘ineligible company’ would not qualify as a small company under the proposals in the Bill (see sections 12 and 15 of the Bill), and therefore would not be able to avail of this exemption.
Small unincorporated entities – application of section 1A
Small unincorporated entities are generally not subject to the requirements of the Companies Act and are, therefore, generally not restricted in the application of section 1A of FRS 102 due to the absence of the enabling legislation. These entities would also not be restricted in availing of the cash flow statement exemption in section 7. However, prior to applying section 1A and/or the cash flow statement exemption in section 7, such unincorporated entities should ensure this is not contrary to the requirements of other applicable legislation or to their own constitution or rules.
 Partnerships subject to the requirements of the European Communities (Accounts) Regulations 1993 (partnerships in which there is no person who ultimately has unlimited liability for the debts of the business) are subject to Companies Act accounting and disclosure requirements and are, therefore, restricted in a similar manner to companies.