Companies (Accounting) Act 2017 Implementation

Part 3 - Now Live

 Companies (Accounting) Act 2017 Implementation

Part 3 Training Video & Quick Guides

Companies (Accounting) Act 2017 Highlights

The principle differences from the existing legislation are:−

  • An increase in the current size thresholds for small and medium companies together with the introduction of thresholds for a medium group and micro company thresholds. See existing and new thresholds below:

  • A reduction in size criteria for holding companies exempt from preparing consolidated financial statements. Under the Act 2017 all companies other than small or micro group’s (that can avail of the small or micro companies regime) must prepare consolidated financial statements. Currently all medium sized groups avail of this exemption which is not permitted under the Act 2017.
  • Expanded definition of whether a lower company is a subsidiary company of a superior company to include persons acting in their own name or on behalf of the superior company− An increase in the number of groups and small companies that can avail of the audit exemption and/or file small company abridged financial statements if applicable as a result of the increased thresholds.
  • Once the small company definition is met then that company can qualify for the small companies regime. This will allow companies to adopt Section 1A of FRS 102. Section 1A of FRS 102 requires the financial statements to be prepared using the recognition and measurement requirements of FRS 102 but to use the disclosure requirements of the Companies Act small companies regime as opposed to the more detailed disclosure requirements of each of the Sections within FRS 102.However, as the financial statements are still required to show a true and fair view, directors of companies will still have to consider whether additional disclosures on top of the Companies Act disclosures are required to show the true and fair view. Once Section 1A of FRS 102 can be claimed it will allow entities to claim exemption from the requirement to prepare a cash flow statement.Although not required by company law Section 1A encourages entities to include the below in order to ensure the financial statements show a true and fair view:

a) include a statement of compliance with FRS 102;
b) a statement that it is a public benefit entity if applicable;
c) the disclosures relating to going concern;
d) a transition note where it is the entities first time adopting FRS 102;
e) present a statement of comprehensive income (i.e. an OCI) – there is a legal requirement to detail movement on any revaluation reserve.

  • Once the micro company definition has been met then that company qualifies for the micro companies regime. Once the company applies the micro companies regime it may then apply the financial reporting standard ‘FRS 105’. FRS 105 does not require any further disclosures in addition to those required by Company Law. Under FRS 105:
    • assets are not permitted to be carried at fair value or revalued amounts;
    • all amounts on the balance sheet must be recognised at historic cost;
    • development expenditure must be expensed;
    • investment property must be depreciated;
    • no deferred tax is required to be recognised.

This is a very simple standard and the financial statements will just include:

  • a profit and loss account (format to be in accordance with Schedule 3B of the Act 2017),
  • a balance sheet (format to be in accordance with Schedule 3B of the Act 2017); and
  • limited notes to comply with the micro companies regime, the main ones being the disclosure of:
    • the accounting policies note;
    • movement and details of loans given to the directors and guarantees or credit transactions entered into for the benefit of directors;
    • details of contingencies, guarantees and commitments;
    • pension scheme accruals;
    • the write off period for goodwill and the reasons for choosing it;
    • dividend declared, not paid but accrued;
    • a note detailing any departure from company law in order to show a true and fair view;
    • a change in classification in the profit and loss or balance sheet from the prior year;
    • a change of accounting estimate; and
    • movement on the profit and loss reserve in the current and prior period.
  • No business review required to be included in the directors report for small companies applying the small companies regime.
  • A holding company of a group must meet the medium/small group requirements/thresholds in order for a small/medium holding company to be able to be classified as a small/medium company for company law purposes. This differs from existing legislation as even where a small company does not meet the definition of a small group and consolidated financial statement are not prepared it can apply some of the exemptions available to small companies in its own right if the company itself meets the definition of a small company (e.g. the ability to file small company abridged financial statements).
  • The ability for medium companies (as defined in new Section 280G) to file abridged financial statements will no longer be available.
  • Companies that apply the micro companies regime in the preparation of financial statements are deemed to show a true and fair view. No further disclosures are required.
  • Additional disclosures required to be included by directors in the small company abridged financial statements given the fact that the new Act 2017 requires the balance sheet and all notes included in the full S.1A FRS 102 financial statements to be included in the abridged financial statements (i.e. it is only the directors report and profit and loss account that is excluded in the abridged financial statements). Current legislation provides very specific guidance on what notes to include. That said there is no requirement to disclose wages & salaries of employees or details of name, class of share, net assets & profit for investments where >20% interest in a class of share is held.
  • Introduction of three new schedules dealing with the format requirements for companies applying the small and mirco entities regime; Schedule 3A for small companies regime, Schedule 3B for the micro companies regime and Schedule 4A for small group companies applying the small companies regime.
  • Small changes to the existing Schedule 3 of Companies Act 2014 which deals with the accounting principles, format and content of financial statements. Examples of changes include: no need for a comparative fixed asset note, accrued income to be disclosed separately in the notes, wording in the profit and loss account is to exclude the words ‘on ordinary activities’.
  • Ability to apply the IFRS formats to the profit and loss and balance sheet− Ability for the profit and loss account to be referred to as an ‘income and expenditure account’ if applicable.
  • In the consolidated financial statements where exemption is claimed not to disclose the parent entity profit and loss account, the profit/loss must be disclosed in the face of the entity balance sheet (currently disclosed in the notes).
  • Where first annual return is late the company is not excluded from claiming audit exemption (currently only permitted by concession by the CRO).
  • The Act 2017 requires that the Irish Auditing and Accounting Supervisory Authority (IAASA) shall be allowed to attach terms and conditions to an authorisation of certain categories of liquidator.
  • The Act 2017 abolishes “non‐filing structures” in their current form for Irish unlimited companies by expanding the definition of designated ULCs to include additional corporate structures.
  • The Act 2017 requires entities where a limited liability company is included above an unlimited company (i.e. a limited parent company with a ULC subsidiary/subsidiaries) to file financial statements for the ULC with the CRO by expanding the definition of designated ULCs to include additional corporate structures such as these. This would mean entities that have structures whereby at least 51% of a ULC is held by a limited company or the Limited company holds a golden share (i.e. it is a subsidiary of a parent) with the remainder (or even 1 share) owned by an individual, then these ULC’s will require accounts to be filed.
  • The Act 2017 requires entities where a limited liability company is included above an unlimited company (i.e. an ULC parent company with subsidiaries) to file the unlimited Company financial statements with the CRO by expanding the definition of designated ULCs to include additional corporate structures such as these. This section does not commence until 1 January 2022.
  • The Act 2017 inserts a new Part 26 ‘Payments to Governments’, containing the Directive’s requirements with regard to preparing and filing with the CRO, by large companies, large groups and public interest entities active in the mining, logging and extractive industries, annual reports on payments made to governments.
  • The Act 2017 obligates auditors to report on the corporate governance statement to ensure information is consistent, whether material misstatements have been noted and that the report complies with the requirements of the Act.

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