What is going on?
As you well know the EU Directive 2013/34, in the form of the Companies (Accounting) Bill 2016 is late. It is not just a little bit late. It is really really really late! The EU Directive should have been transposed into Irish Law by 20th of July 2015. 20 months later this has still not happened and there seems to be no sense of urgency in relation to getting the Bill which was published on the 3rd of August 2016 enacted into legislation.
The Impact on Accountants
You may have heard me discuss this issue in my videos and at my seminars but on the off chance that you have not, I would like to first set the background. The September 2015 version of FRS 102 is available to entities with accounting periods commencing on or after 1st of January 2016. Early adoption of this version of FRS 102, containing Section 1.A for small entities, was permitted for periods commencing 1st of January 2015. In drafting the standard the FRC decreed that early adoption could only be applied, provided the financial statements were prepared in accordance with the formats prescribed in the EU Directive.
In 2016 anybody who applied FRS 102 could not use the September 2015 version of the standard and had to apply the August 2014 version of FRS 102 meaning that small entities had to prepare accounts with an excessive amount of disclosures including the requirement for a cash flow statement when there was a simpler option available.
For periods commencing on or after 1st of January 2016 this issue is now compounded, as applying S.1A of FRS 102 hinges on having the underlying disclosure requirements specified in Company Law. In absence of the Companies (Accounting) Bill 2016 those accounting disclosures are not specified so it is not practically possible to apply S.1A of FRS 102.
Because S.1A of FRS 102 was not available last year many firms adopted the FRSSE for their small entities on the basis that the enactment of the Companies (Accounting) Bill 2016 was imminent and it would save them from going to full FRS 102 implementation for entities that do not need this level of disclosure. The FRSSE has now expired as it can only be applied for periods commencing before 31st of December 2015. Companies are now being forced into preparing full FRS 102 financial statements.
FRS 105 for Micro Entities was also available for early adoption for periods commencing on or after 1st of January 2015. This standard can not be applied. To apply FRS 105 we need a micro entity framework established within company law. We need the Companies (Accounting) Bill 2016, which based on the draft legislation had a target enactment date of 24th of December 2016.
Why am I writing letters to the Minister?
We are a small SME business which happens to operate in the accountants market providing training and consultancy services. As a commercial organisation lobbying or seeking legislative progress should not be our remit. The reason why I sent the letter to the Minister and the reason why I am sending you this email is out of frustration. The failure to enact the Companies (Accounting) Bill 2016 has caused significant difficulties for the accountancy profession and is now dominating nearly every conversation I have with practising accountants. This needs to be resolved.
I started raising this issue on a monthly basis with the Department of Jobs, Enterprise and Innovation back in January 2015. I could see the potential issues coming down the track. I could not comprehend their lack of understanding of the practical impact on accountants in practice. I officially gave up ringing them 24 months later in January 2017 because it was clear that nothing was happening. It really bothered me when the guy in the Department told me that if this was really important that other people would be pushing to get the legislation enacted but that did not appear to be the case. I then started speaking directly to politicians. The politicians I spoke to who operated in this arena and were familiar with the legislation, were oblivious to the practical impact on accountants.
I am not naive enough to write this letter in the anticipation that the Minister will read and respond. I am writing this in the hope that somebody will acknowledge the issue facing the accounting profession and that they will take action.
What Can You Do?
As well as a copy of my letter to the Minister for Jobs, Enterprise and Innovation I have included a template letter which you can send to your TD or Senator. Maybe if we can get more public representatives aware of the issue we can speed up the process. If you feel that direct contact with politicians could accelerate this legislation you can write your own letter or you can just drop the template and your details into an email or onto headed paper, edit as you see fit and send it off.
I have kept your template letter fairly simple as most public representatives will not have detailed knowledge of the financial reporting regime. I have also given the option for you to include my letter which has more detail and background into the situation if you feel that they would benefit from a deeper understanding. To save you time and speed things up even further we have pulled together a database of all TDs and Senators.
Well that’s my bit on the Companies (Accounting) Bill 2016 for today. Back to trying to run a profitable and rewarding business for the rest of the week.
Yours in Hope
PS You may note in my letter to the Minister that I raised the issue in relation to the term “locksmith” being protected. You have probably heard the radio adds running in the last month. I really am delighted that the next time I engage a locksmith that I will be engaging someone who is properly trained, experienced and regulated. It is just hard to believe that it is an offence to hold yourself out as a locksmith without being properly authorised but that there is no similar requirement for accountants. #protectthetermaccountant