by John McCarthy Consulting Ltd. | Apr 14, 2022 | Blog, News
A significant legislative change made five years ago will only impact affected companies this year. The amendment made by the Companies (Accounting) Act 2017 amended section 1274 dealing with unlimited companies (known as a ULCs).
‘Designated ULCs’ lose accounts filing exemption
Among other changes, certain types of ULC (known as ‘designated ULCs’) are required to file their accounts with the CRO (including group accounts where applicable) for the first time. While most changes in the law came into effect from 1 January 2017, this one was delayed until accounting periods commencing 1 January 2022.
The amended Section 1274 Companies Act, 2014 broadly states that for accounting periods commencing on or after 1 January 2022, a ULC that has been a holding company of an undertaking which was at that time limited must file financial statements along with their annual return for accounting periods commencing on or after 1 January 2022.
This applies across the board regardless of the size of the group as section 1274 does not have any exclusion clause that says the section disapplies sections 347/348 making the filing of annual returns/accounts compulsory.
ULCs may qualify for audit exemption
In a related point Section 1230 Companies Act, 2014 allows such designated groups, where they are private ULCs (provided they satisfy the ‘small’ company criteria) to claim audit exemption (assuming all the other criteria are satisfied – annual returns filed on time, no 10% shareholder objections etc., their constitution permits audit exemption etc. ) because the Table disapplying certain sections of the Companies Act, 2014 for ULCs does not disapply the audit exemption and ‘small’ company criteria for ULCs contained in Parts 1-14 of the Companies Act, 2014.
Filing Exemption Remains for non-designated ULCs
So-called ‘non designated’ ULCs under Section 1274, that do not have any limited liability subsidiaries and whose direct and indirect shareholders do not comprise solely of limited liability undertakings will continue to be exempt from the requirement to file their financial statements.
In other words where a company is a ‘pure’ unlimited company (i.e. there is no ultimate protection of limited liability in the group structure), it will still be possible to avail of an exemption from filing financial statements.
However, they will need to file an auditor’s report attached to the Annual Return which confirms that the auditors have audited the financial statements of the company for the relevant financial year in accordance with sections 336 and 391.
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by John McCarthy Consulting Ltd. | Jul 27, 2017 | News
The Companies (Accounting) Act, 2017 came into effect from 9 June 2017. It applies for accounting periods commencing on/after 1 January 2017 but early adoption of certain parts is allowed in Section 14 for accounting periods starting on/after 1 January 2015.
Early adoption of the relevant parts of the Companies (Accounting) Act, 2017 may look attractive, but there are several accounting and company law disadvantages also. Here we look at the pros and cons of adopting this legislation for the financial year commencing 1 January 2016, compared to postponing implementation to a financial year commencing 1 January 2017.
Illustrated below are some of the implications of early versus delayed adoption, for a ‘micro’, ‘small’ and ‘medium’ size company:
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Adopt new rules for accounting period commencing from
1 January 2016
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Keep old rules for accounting period commencing
1 January 2016
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Disclosure
- As best practice, include a note saying that the provisions of the Companies (Accounting) Act, 2017 have been early adopted.
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Disclosure
- Notes to the financial statements would remain silent about the Companies (Accounting) Act, 2017.
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Size thresholds
- Avail of the new ‘micro’ and ‘small’ company thresholds for audit exemption, abridged financial statements filing at the CRO and group consolidation exemption.
- The number of ‘small groups’ that don’t need to have an audit nor consolidate will grow under the new provisions.
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Size thresholds
- Cannot prepare ‘Micro’ company accounts and must follow the old thresholds for ‘small company’ abridged financial statements and the old consolidated financial statements exemption.
- See below for other positive impacts on ‘small’ entities.
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Adopt new rules for accounting period commencing from
1 January 2016
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Keep old rules for accounting period commencing
1 January 2016
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Micro company accounting
- Because the provisions of the Companies (Accounting) Act, 2017 have been early adopted, the Micro Entities Regime under FRS 105 is available to the company (provided it fulfils the ‘micro company’ size criteria) for the YE 31/12/2016, along with the rules in Schedule 3B of the amended Companies Act, 2014 which include:
- Exemption from disclosing in the shareholders’ and abridged financial statements the directors remuneration and directors’ debit and credit loans as set out in Sections 305-309 of the CA 2014.
- Exemption from producing a Directors Report and Statement of Cash Flows in both the shareholders’ and abridged financial statements
- File an abridged balance sheet with the notes only being required if the company has borrowings or guarantees.
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Micro company accounting
- FRS 105 and Micro Companies Regime in Schedule 3B of the Companies (Accounting) Act, 2017 is not available for the YE 31/12/2016.
- Must disclose in the shareholders’ and abridged financial statements the directors remuneration and debit and credit loans as set out in Sections 305-309 of the CA 2014.
- Exempt from producing a Directors Report but must produce a Statement of Cash Flows in both the shareholders’ and abridged financial statements.
- File the abridged financial statements under the unamended CA 2014 which requires more extensive notes than under FRS 105.
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‘Small’ entity Abridged financial statements
- Include all the notes from the Shareholders’ Accounts plus the ‘Statement of Changes in Equity’, and including P&L notes, even though the P&L itself does not get published.
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‘Small’ entity Abridged financial statements
- Retain the old rules for one last financial year so that you don’t have to include all the notes including the P&L notes in the abridged accounts.
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Employee numbers
- There is no longer any need to include the note about employee numbers broken into appropriate categories – this is a new exemption for ‘small’ entities introduced by the Companies (Accounting) Act, 2017.
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Employee numbers
- Need to include the note about employee numbers broken into appropriate categories.
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Adopt new rules for accounting period commencing from
1 January 2016
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Keep old rules for accounting period commencing
1 January 2016
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Fixed assets and reserves
- Drop the comparative expanded note for fixed assets and reserves and similar items in the shareholders’ and abridged accounts.
Statement of Cash Flows
- May exclude the Statement of Cash Flows under Section 1A of FRS 102 due to early adopting the Companies (Accounting) Act, 2017 and use Section 1A of FRS 102.
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Fixed assets and reserves
- Repeat the comparative expanded note for fixed assets, reserves and similar items in the shareholders’ and abridged accounts.
Statement of Cash Flows
- Include the Statement of Cash Flows under FRS 102 (excluding Section 1A) due to not early adopting the Companies (Accounting) Act, 2017.
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Medium companies
- Medium sized companies that early adopt the provisions of the Companies (Accounting) Act, 2017 will no longer be able to abridge their financial statements nor avail of audit exemption. They will also have to disclose their full profit and loss account with profit margins and turnover.
- Medium companies will now also be required to prepare group accounts as the exemption from preparing consolidated financial statements on the basis of size for Irish parent companies has been restricted to the ‘small’ company threshold.
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Medium companies
- Medium companies will retain the old size thresholds.
- Medium sized companies that do not early adopt the provisions of the Companies (Accounting) Act, 2017 will continue to abridge their financial statements and avail of audit exemption for the 2016 financial year.
- This may be of little benefit as when they file their financial statements for the YE 31/12/2017, the 2016 comparative numbers will get disclosed under the new rules.
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For a more detailed analysis of the effects, please call us for a specific consultation.
To hear more about the latest Company Law developments, come to our next CPD course on the topic on Wednesday 29 November 2017.
We also have other CPD courses in November 2017.
Click here for details and booking on all courses.
by John McCarthy Consulting Ltd. | Jul 26, 2017 | News
The Companies (Accounting) Act, 2017 (CAA 2017) came into effect from 9 June 2017. Among other matters, it allows certain types of company called ‘micro companies’ use FRS 105, the Financial Reporting Standard applicable to the Micro-Entities Regime as well as allowing use of Section 1A of FRS 102 for certain types of ‘small’ entity. Similar legislation was adopted in the UK in July 2015.
The new law will have a significant impact for many private Irish companies in relation to audit exemption, financial reporting and disclosure of financial information. The new law may be early adopted by companies for accounting periods commencing from 1 January 2017 but may also be back-dated to accounting periods commencing as early as 1 January 2015. In a later post, we will look at some of the advantages and pitfalls of early adopting certain provisions in the CAA 2017.
Implementation of FRS 105 will mean that certain qualifying micro companies will not have to disclose details of directors’ remuneration, profit and loss account or include a director’s report in their filed financial accounts. Importantly the standard is not available to charities and not for profit entities, regulated entities and groups. It could be used by a ‘micro’ subsidiary within a group, that was being consolidated under FRS 102.
The new company size criteria under the Companies (Accounting) Act, 2017 are:
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‘Micro’
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‘Small’
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‘Medium’
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‘Large’
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Turnover
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Less than €700,000
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Less than €12m
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Less than €40m
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€40m or greater
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Balance sheet total (total assets, ignore liabilities)
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Less than €350,000
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Less than €6m
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Less than €20m
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€20m or greater
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Number of employees
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Less than 10
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Less than 50
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Less than 250
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250 or greater
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To file accounts under FRS 105 companies must satisfy two out of three criteria in the table above for two consecutive years, unless it is the first financial year of the entity.
Meanwhile in the UK, the HMRC have just published a paper on the tax impact of FRS 105. The document confirms that although FRS 105 itself is intended for companies and certain other entities, HMRC (and no doubt likewise the Irish Revenue) will generally accept calculations of profit for unincorporated businesses prepared under FRS 105, if they meet the size criteria to apply FRS 105.
To hear more about FRS 105, come to our next CPD course on the topic as part of the Update for the Busy Accountant on Monday 27 November 2017.
We also have other CPD courses in November 2017. Click here for details and booking on all courses.
