When members ask me ‘What is the relevance of the European Union to us?’ I draw their attention to topical issues such as the reform of the accounting directives and the proposal to lift EU reporting requirements on micro-entities.
These initiatives could potentially result in 5.4m micro companies having reduced – or no – EU reporting obligations and 1.8m other private companies having a revised EU financial reporting regime, which is yet to be determined. These are positive steps towards a simplified regulatory environment.
The proposal on micros will allow national authorities to debate the shape of a new financial reporting regime for the very smallest businesses. This is why members’ views are important and why we should lead on this debate in the UK and EU more broadly. In doing so, we must also be aware of the public interest implications of taking 5.4m businesses out of the internal market financial reporting regime.
A recent roundtable on the proposals organised by the ICAEW in Brussels included regulators, the professional bodies, firms and business groups. My main question concerned the potential systemic risk if this freedom from EU requirements is not exercised appropriately by all 27 national governments. In very broad estimates, companies with a combined turnover of €270bn (£241bn) and employing millions could fall under the radar where systemic risk is concerned. There is also the question of the link between limited liability and public reporting.
Organisations like the institute are proactively engaging with the European Commission to ensure genuine simplification is achieved. The proposals carry strong political backing from the EU parliament and Commission president Barroso himself.
I agree that strong political commitment is necessary to achieve the right outcomes. But it is surely the role of professional accountants to examine every policy angle to ensure cost-saving proposals do not result in a much higher cost to the economy in terms of reduced business confidence,
Using our experience and know-how, we should be able to help shape the future in a way that is better for all concerned.