What are Abridged Accounts?
Abridged accounts are a streamlined version of annual accounts designed to simplify the financial reporting process for small companies. Introduced under the EU Accounting Directive (2014), these accounts allow certain detailed financial information to be excluded from both the balance sheet (statement of financial position) and the profit and loss (income statement) documents, but only with the unanimous agreement of shareholders. This form of accounting aims to reduce the administrative burden for smaller entities while still providing necessary financial transparency to company members and for publication purposes.
Examples
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Small Technology Start-Up: A tech start-up that qualifies as a small company under the EU Accounting Directive decides to file abridged accounts. They exclude certain detailed financial information, such as itemized expenses, from their income statement. This helps streamline their reporting process and keeps their financial submissions concise.
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Family-Owned Retail Business: A family-run retail business opts for abridged accounts for their annual reporting. By excluding detailed asset information from the balance sheet, they simplify their financial statements while still complying with their legal obligations.
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Local Construction Firm: A small construction firm that qualifies under the directive chooses to utilize abridged accounts, thus omitting granular financial data from their general purpose financial statements. This decision, agreed upon by all shareholders, eases their reporting duties.
Frequently Asked Questions
Q1: What qualifies a company as “small” under the EU Accounting Directive?
A: A company is typically considered small if it meets at least two of the following criteria: turnover not exceeding €10 million, balance sheet total not exceeding €10 million, and an average of 50 or fewer employees during the financial year.
Q2: Can any company file abridged accounts?
A: No, only entities qualifying as small companies under the EU Accounting Directive can file abridged accounts.
Q3: What financial information can be excluded in abridged accounts?
A: Certain detailed financial information can be excluded, such as granular asset details from the balance sheet and itemized expenses from the profit and loss statement, but this exclusion must be unanimously agreed upon by all shareholders.
Q4: Are abridged accounts sufficient for all stakeholders?
A: While abridged accounts meet legal reporting requirements for small companies, some stakeholders may require more detailed information for analysis and decision-making.
Q5: When did the new regime for abridged accounts apply in the UK?
A: The new regime for abridged accounts in the UK applies to financial periods beginning on or after January 1, 2016.
Related Terms
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Abbreviated Accounts: A simplified version of financial statements typically used before the introduction of abridged accounts, allowing certain smaller entities to exclude detailed income and expense information.
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Balance Sheet: Also known as the statement of financial position, this document provides an overview of a company’s assets, liabilities, and equity at a specific point in time.
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Profit and Loss Statement: Also known as the income statement, this document summarizes a company’s revenues, costs, and expenses over a particular period.
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General Purpose Financial Statements: Financial reports intended to meet the needs of multiple users, including shareholders, creditors, and regulatory agencies.
Online References to Resources
Suggested Books for Further Studies
- “Accounting: The Basics” by Kai Huang and Barrie Hoeffling
- “Financial Accounting for Dummies” by Maire Loughran
- “Accounting All-in-One For Dummies” by Kenneth Boyd
- “Wiley GAAP 2022: Interpretation and Application of Generally Accepted Accounting Principles” by Joanne M. Flood
Accounting Basics: Abridged Accounts Fundamentals Quiz
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