I am currently visiting Indonesia, Singapore and Malaysia on a presidential trip. More on that to come in the next blog. But back in Europe, there is an important meeting going on in Brussels which could have a major bearing on the accountancy profession.
The so-called JURI, or Legal Affairs, committee is today considering some amendments to European Commission proposals on the accounting and reporting requirements for small and medium-sized companies and groups.
Some ACCA members will remember being surveyed about these plans last year. In the name of cutting red tape for SMEs (a goal we all support), the Commission was proposing abolishing reporting requirements, a classic case of throwing the baby out with the bathwater. ACCA lobbied hard against these plans but, a year on, they have rematerialised and a group of MEPs is pushing hard for even more extensive application of the original proposals. In short, this would mean no published accounts would be required for businesses with up to €2m turnover, double the amount proposed in the original Commission consultation.
There is also no economic impact assessment planned for these changes, contrary to the principles of better regulation.
To briefly recap ACCA's position:
- We do not believe the plans would result in a reduction in business costs or time, as banks, suppliers and tax authorities will still insist that accounts are prepared.
- SMEs which do not provide accounts will find it more difficult to access finance. This is particularly pertinent at the moment due to the economic climate arising from the credit crisis.
- These proposals may also leave SMEs more open to financial mismanagement and insolvency. Preparing accounts is an important business discipline and the changes would give entirely the wrong message about the importance of good financial management.
- If these amendments were to be passed, an important element of public accountability and transparency would be lost for the 90% of EU companies which come into this category. Incorporation brings privileges which should be matched by a degree of public accountability.
- The current regime, which requires all company accounts to be published, provides comfort to employees, shareholders, creditors and prospective suppliers who, acting alone, may not have sufficient leverage to obtain financial information from companies directly.
- Finally, these proposals also sit uneasily with the fight against fraud and money-laundering.
In short, we believe these proposals are in no one's best interest. They are a smokescreen for real deregulation of SMEs, which continues to be an important objective for ACCA. We will continue to put these arguments to MEPs and to campaign on this issue.
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