Summary financial statements move a mixed blessing says ACCA
Regulations issued today and coming into force on 1 October 2005 will extend to non-listed companies the option to prepare and distribute summary financial statements. ACCA (the Association of Chartered Certified Accountants) believes this could help to save large private companies money - but will do little to help small companies.
ACCA also believes that by restricting this option to companies that have had their accounts audited, the Department of Trade & Industry is sending out confusing signals to small companies on the value of the audit.
John Davies, Head of Business Law at ACCA, said: “The DTI is giving out a mixed message with this reform. With last year's raising of the audit threshold to £5.6 million, the government signalled that the audit is an unnecessary piece of red tape for small companies. Yet now it is effectively implying that an audit is, after all, required, to protect the interests of small company shareholders. Either the audit is a valuable tool or it is not – companies should be given a consistent message from government.
"Allowing all companies to produce summary statements is, in any case, unlikely to produce benefits for small companies – most of these are owner-managed and there will be little difference between their full accounts and their summary accounts. The only companies that may derive any real benefit from this change are the very large unlisteds, which have large numbers of shareholders and currently spend large amounts on printing and posting their annual reports out to all their members."
ACCA believes it will only be worth companies going to the expense of preparing another set of accounts if the great majority - if not all - of their shareholders are happy to receive the summary statement rather than the full accounts.
Davies added: “It may be that the Government's decision to give all shareholders the right to decide which set of statements they receive - the full accounts or the summary statement - may have the effect of limiting the numbers of companies which decide to take up the new option. But shareholders' interests must be protected and it is only right that they be given the final say on this matter.”