Wider audit exemptions and more flexibility over accounting frameworks?

The Department for Business Innovation and Skills (BIS) has issued a consultation paper ‘ Audit exemptions and change of accounting framework , which proposes changes to audit exemptions and relaxation on when an entity may change its accounting framework. It proposes removing much of the ‘gold plating’ over and above the requirements in the EU Directives in these areas.

BIS proposes increasing the number of small entities that would be exempt from mandatory audit by aligning thresholds with the small company criteria. The proposals would also exempt any unquoted subsidiary company that is not in the banking or finance sector from mandatory audit where it fulfils certain conditions, including that its debts are guaranteed by the parent.

Supporting the ASB’s proposals for the future of UK GAAP (see previous article), the proposals would allow companies more, but not complete, flexibility in changing their accounting framework from EU IFRS to UK GAAP; BIS intends to restrict this to once every five years. This change will permit subsidiaries to move back to UK GAAP or take advantage of the planned reduced disclosure framework. The consultation closes 29 December 2011.