TURNOVER BALANCE SHEET TOTAL AVERAGE NO. OF EMPLOYEES Micro-entity < £632,000 < £316,000 < 10 Small company < £10.2 million < £5.1 million < 50 Small group < £10.2 million net OR < £5.1 million net OR < £12.2 million gross < £6.1 million gross < 50 Medium-sized company < £36 million < £18 million < 250 Medium-sized group < £36 million net OR < £43.2 million gross < £18 million net OR < £21.6 million gross < 250 Large company ≥ £36 million ≥ £18 million ≥ 250 Large group ≥ £36 million net OR ≥ £43.2 million gross ≥ £18 million net OR ≥ £21.6 million gross ≥ 250 Reference to “balance sheet total” in the Regulations refers to fixed assets plus current assets (ie the aggregate of the amounts shown in the company’s balance sheet). The number of employees in the table above means the average number of employees employed by the company in a year. This figure is calculated as follows: 1. For each month in the financial year, find the number of persons employed under contracts of service by the company in that month (whether throughout the month or not). 2. Add together the monthly totals. 3. Divide by the number of months in the financial year. Disclosure notes Under the new small companies regime (not the micro-entities regime), there will be a maximum of 13 mandatory disclosure notes. However, care must be taken where these disclosure notes are concerned, because the directors of a company are still duty bound to ensure that the financial statements give a true and fair view. Where the application of the mandatory disclosures does not enable the financial statements to give a true and fair view, the directors must include the necessary disclosures in order to achieve this. This is likely to prove problematic for smaller clients, who may require assistance from their accountant to ensure that the financial statements give a true and fair view. The 13 mandatory disclosure notes are as follows: 1. accounting policies adopted; 2. fixed assets revaluation table; 3. fair valuation note; 4. financial commitments, guarantees or contingencies not included in the balance sheet; 5. the amount of advances and credits granted to members of the administrative, managerial and supervisory bodies (along with supporting information); 6. exceptional items; 18 INTERNATIONAL ACCOUNTANT ISSUE 80: MARCH/APRIL 2015 7. amounts due or payable after more than five years and entire debts covered by valuable security; 8. average number of employees during the financial year; 9. fixed asset note (in addition to the mandatory revaluation table); 10. name and registered office of the undertaking drawing up the consolidated financial statements of the smallest body of undertakings of which the undertaking forms part; 11. nature and business purpose of arrangements not included in the balance sheet; 12. nature and effect of post balance sheet events; and 13. (limited) related party transactions. The Directive allows member states the option of requiring small undertakings to disclose: 1. fixed asset note (in addition to the mandatory revaluation table); 2. name and registered office of the undertaking drawing up the consolidated financial statements of the smallest body of undertakings of which the undertaking forms part; 3. nature and business purpose of arrangements not included in the balance sheet; 4. nature and effect of post balance sheet events; and 5. (limited) related party transactions. BIS has decided that the above five optional disclosure notes are to be made mandatory in the UK, because it does not view them as overly burdensome and they are considered important to an overall understanding of the financial statements of a small company. Abridged and abbreviated financial statements Part 1 (general rules and formats) of Schedule 1 (Companies Act individual accounts) to the Small Companies Accounts Regulations is amended by Regulation 16. This allows a small company to prepare “abridged” accounts, provided that this has been approved by all of the company’s shareholders. When an abridged balance sheet is prepared (using either format 1 or format 2), it will only show those items in the Companies Act formats preceded by letters and roman numerals. Some points to note are as follows: • In the case of a format 1 balance sheet, note (5) of the notes to the formats must be complied with. • In the case of a format 2 balance sheet, notes (5) and (10) of the notes to the formats must be complied with. • All of the members of the company must have given their consent to the company drawing up an abridged balance sheet. An abridged profit and loss account can be drawn up (again provided all members agree). The revised Companies Act only provides for two possible formats (format 1 and format 2). Formats 3 and 4 of the profit and loss account have been abolished, largely because they were rarely used in practice. In preparing an abridged profit and loss account (where the directors consider it appropriate to the company’s business), the company can combine under one item called “Gross profit or loss”: • items 1, 2, 3 and 6 in the case of a format 1 profit and loss account; and • items 1 to 5 in the case of a format 2 profit and loss account. (The item numbers referred to above are the items from the statutory formats laid out in the Companies Act 2006.) Companies that were a charity at any time during the accounting period will not be able to prepare an abridged profit and loss account, or an abridged balance sheet. In respect of abbreviated financial statements (ie those accounts traditionally submitted to Companies House), Regulation 21 repeals Schedule 4 SI 2008/409, which requires abbreviated accounts to be delivered to the Registrar. This is to reflect the fact that small companies are no longer permitted to file accounts which are different to those which are prepared and sent to shareholders. The revised section 444(1) says: “The directors of a company subject to the small companies regime— a. must deliver to the registrar for each financial year a copy of a balance sheet drawn up as at the last day of that year, and b. may also deliver to the registrar— (i) a copy of the company’s profit and loss account for that year, and (ii)a copy of the directors’ report for that year.” Where the company’s profit and loss account is delivered, the directors must also deliver a copy of the auditor’s