New Small Business Accounting Standards

One of the big problems with understanding the accounts of small businesses in different countries has been that the applicable accounting standards have varied greatly from country to country. Large business entities are covered by standards issued by the International Accounting Standards Board (IASB), which are intended to ensure comparability between accounts of companies across the world. However, large entities constitute only five per cent of companies. The IASB has now released new accounting standards for small- and medium-sized businesses.

The 230-page document dictates accounting treatments that largely mirror those used by large companies, so should make comparing the accounts of large and small companies simpler. Adoption of the new standards will be a matter of choice for each country. However, EU Commissioner Charlie McCreevy pointedly did not sign the charter and the memorandum of understanding which set out the principles of international standard-setting. This would seem to indicate the EU’s lack of enthusiasm for the proposals.

In the UK, small companies do not require an audit and in any event the responsibility of auditors to third parties is severely limited. A reader of accounts who relies on them without doing the necessary due diligence work takes a big risk and this will continue to be the case.