When the Statutory Instruments No 304 for the revised Small Company criteria and No 308 relating to the new Audit Exemption limits were first announced in August, they caused some confusion as to what financial years the new thresholds could be applied to as the instruments did not make any reference to any commencement date when introduced.
After weeks of seeking clarification, legal advice has been received and we can now confirm the new limits for both small companies and audit exemption and how they can be applied.
Small Company Changes
On the 3rd of August 2012 the European Union (Accounts) Regulations 2012, Statutory Instrument No 304 was enacted. The new regulations had increased the size criteria for small companies. The balance sheet total was increased to €4.4 million and the turnover figure was increased to €8.8 million.
The new legislation now means that for a company to be defined as a small company it must meet 2 of the follow 3 conditions in that financial year and in the previous financial year:
- Balance sheet total does not exceed €4.4 million
- Turnover does not exceed €8.8 million
- Average number of employees do not exceed 50
From the 3rd of August 2012, the new thresholds will be applied to both the current and preceding financial year when determining the size of the company for the current financial year.
The new limits have the benefit for an increased number of companies falling within the small company size limits having to produce small company abridged accounts as opposed to the onus of having to prepare medium sized accounts.
It has finally been clarified that the new criteria relates only to accounts which have not been finalised or approved before the 3rd August 2012 and to abridged accounts yet to be filed by small companies for the relevant financial years, irrespective of when the statutory accounts have been finalised or approved.
Audit Exemption Changes
On the 7th of August 2012 the Companies (Amendment)(No.2) Act 1999 (Section 32) Order 2012-Statutory Instrument No. 308 of 2012 brought about the much anticipated increase in the current audit exemption limits. The effect of these changes means that a company can now avail of audit exemption if it has satisfied the required criteria and its turnover figure does not exceed €8.8 million and the balance sheet total does not exceed €4.4 million.
Companies hoping to avail of the exemption must satisfy the all criteria as set out under Section 32 of Companies (Amendment)(No.2) Act 1999 in order to avail of audit exemption:
- Is a company to which the Companies (Amendment) Act 1986 applies;
- The turnover of the Company does not exceed €8.8 million
- The balance sheet total does not exceed €4.4 million
- Average employees does not exceed 50
- The company is not one of the following
- A company limited by guarantee
- A public limited company
- Bank or Insurance Company
- A group company (i.e. parent, holding or subsidiary company)
- An investment, stock broking, building society, credit institution, management or trustee company.
- The company must be up to date both this year and last year with its filing requirements at the Companies Registration Office.
- The company should satisfy all the conditions in respect of the financial year in which the company is to avail of the exemption and the previous financial year.
The increase to the audit exemption limits has been welcomed by many, in particular by small and medium sized businesses that should benefit greatly from the removal of the burden and expense in preparing for and filing audited accounts
The new audit exemption limits will relate to financial year ends on or after the 7th August 2012. In order to avail of audit exemption, the company must avail of the exemption within the financial year in question and this cannot be done retrospectively. For this reason the new thresholds will only apply to financial years ending on or after the 7th August 2012. In order to avail of the exemption, Section 32(3) of the Companies (Amendment)(No 2) Act 1999 requires that the criteria should be met for the current financial year and the preceding financial year and the revised criteria will apply when making these assessments on for financial years ending on or after 7th August 2012.
Head of Company Secretarial,
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