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Companies (Accounting) Bill 2016 - Changes to companies accounting law on the way

07 September 2016

The Companies (Accounting) Bill 2016 (the Bill) was published on 5 August 2016. Once enacted, the Bill will amend and supplement the Companies Act 2014 in a number of aspects.

Purpose

The main purpose of the Bill is to transpose the Accounting Directive 2013 (the Directive), which provides significant simplifications and reductions of administrative burdens with regard to the preparation of financial statements for enterprises − in particular SMEs. It also introduces mandatory requirements for large companies, large groups and ‘public interest entities’ that are active in the mining and extractive industries or the logging of primary forests to prepare and file annual reports on payments made to governments.

In addition, the Bill makes a number of miscellaneous amendments to the Companies Act 2014 not related to the transposition of the Directive.

Non-filing structures

One of the most significant aspects of the Bill is that, when enacted, it will require a much broader scope of corporate structures to file financial statements than is the case at present. In particular, it seems that the current non-filing structures in use in Ireland for unlimited companies will no longer be effective once this section is commenced.

General accounting provisions

Thresholds

The Bill provides sets out new criteria for companies to qualify as ‘small’, ‘medium’ or ‘large’ and introduces a new ‘micro’ category of company. The current thresholds are indicated in brackets.

 

Micro

Small

Medium

Net turnover

€700,000

€12m (€8.8 million)

€40m (€20 million)

Balance sheet total

€350,000

€6m (€4.4 million)

€20m (€10 million)

Average no. of employees

10

50

250

 

To qualify, a company must not exceed two of the three thresholds. Large companies are ones which exceed two of the three thresholds for medium companies.

A simplified regime for micro companies with regard to the preparation and filing of financial statements is proposed. Among other things, micro companies will be exempt from disclosing directors' remuneration in the financial statements and exempt from preparing a directors' report.

Exemption from obligation to prepare group financial statements

More companies will be required to prepare group financial statements as the exemption on grounds of size will only apply to small and micro companies.

Abridged financial statements

Only small and micro companies will be permitted to file abridged financial statements with the CRO. Medium sized companies will be required to file full financial statements.

Timing

It is not possible to say when the Bill will be enacted, although it is likely that it will be dealt with as quickly as possible in the Oireachtas, given that Ireland is over a year late in transposing the provisions of the Directive. In any event, there will be no progress on the Bill until the Dáil and Seanad resume in late September.

The timing for when the new provisions will take effect and whether any transitional arrangements will be permitted remains to be seen, and will be dealt with in the commencement order once the Bill is enacted. The Directive states that the new rules must apply for financial years commencing on or after 1 January 2016, although it is possible that this could be extended to 1 January 2017 given the delay in transposing the Directive.