A surge in rejections of company accounts prepared under the new UK GAAP rules, identified by ICAEW, has been refuted by Companies House, which reports that only 2.5% of accounts have been returned, despite hitting the peak reporting period
However, a spike in calls to ICAEW helplines have been related to rejection of accounts filed under the new FRS 102 Financial Reporting Standard, although this may be a sign of first-year adoption teething issues.
According to Companies House, the most recently available figures for August show that 206,923 sets of accounts were filed and out of these 5,237 sets were rejected (2.5%).
However, this is the peak filing period so it is too early to say whether this number will increase over the September/October reporting period.
The rejection process is largely a manual process; the electronic system flags potential errors to document examiners at Companies House, who then make a decision on whether the accounts are acceptable or not. If the accounts are rejected they are sent back to the company along with a letter giving full details of the reason that they were rejected and what they need to do to correct this.
Despite criticism of the complexity of the new accounting rules and transition arrangements, as highlighted in a recent ICAEW FAQ on filing tips, Companies House said it has ‘not actually detected an increased “failure rate” due to recent changes to accounting legislation and standards’.
In August the main reasons for rejecting accounts were:
|Reason||Number of rejections|
|Made up date duplicate||1,977|
|Accounting reference date/made up date absent/incorrect||695|
|Balance sheet signature missing||629|
|Invalid company name||336|
|Company name/number mismatch||311|
|Company name mismatch||241|
Source: Companies House
A number of significant changes to old UK GAAP with the introduction of FRS 102 has resulted in an overhaul of current accoumting practice. In addition, the number of companies eligible to file abridged accounts is far higher than the estimated 11,000, set out by government in the original impact statement. Roughly 1.9m companies filed accounts of this type in 2015/16.
Abbreviated accounts abolished
The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 abolished abbreviated accounts. This means that abbreviated accounts cannot be filed for accounting periods beginning on or after 1 January 2016.
Introducing abridged accounts
The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 also introduced the concept of abridged accounts. Abridged accounts contain a balance sheet that contains a sub-set of the information that is included in a full balance sheet. Likewise, the profit and loss account may also contain a sub-set of the information that is included in a full profit and loss account. Only small companies and LLPs may prepare abridged accounts.
Abridged accounts will be identified by a statement containing wording to the effect of the “members have consented to the abridgement”.
‘We have no way of knowing how many companies will opt to take advantage of abridgement but the number of companies that are eligible is roughly comparable with the number of companies that can claim audit exemption as a small company,’ stated Companies House.
Small companies can choose to not file the profit and loss account and/or the directors’ report. This watered down version is known as ‘filleted accounts’. Under this set-up, if a small company chooses not to file the P&L account or the directors’ report, the balance sheet submitted to Companies House must reflect this.
Companies House guidance to be updated
Although Companies House has not reported a significant change in reporting rejection numbers, it is currently working to improve the electronic filing options for accounts, which assist the user and provide built-in validation. This helps ensure that accounts are accepted first time.
It will also issue new guidance for company preparers to help customers meet their filing requirements. In response to questions about the new system of accounts, it also published a blog on 6 October to provide further advice to small companies.
The ICAEW Financial Reporting Faculty Filing Options under the new Small Companies Regime is available here http://www.icaew.com/-/media/corporate/files/technical/financial-reporting/factsheets/uk-gaap/small-company-filing-options-faqs-final.ashx
The Companies House blog on Accounts advice for small companies is available here https://companieshouse.blog.gov.uk/2016/10/06/accounts-advice-for-small-companies