Having just filed your latest set of accounts at Companies House, this article’s title may have made you groan. With almost another year to file your accounts, considering this period’s financial statements may feel like overkill. However, allocating some time to this in the next few weeks could save a significant amount of time and stress for you and your finance team.
Your company’s size dictates the minimum level of disclosure within your financial statements as well as the need to have an audit. For a company that is not in its first year of trading, your company’s size is determined by the number of employees and the financial results in this and the prior period. Changing size leads to challenges when it has not been considered by the directors. Have you considered what size your business was last year, whether you were in the period of grace and what your projected company size will be this year?
The company size thresholds apply to most stand-alone companies. Your company’s size is based on meeting two of the three thresholds in this and the prior period. If your business met two of the small thresholds for the last financial period but will exceed two of the thresholds in this period, this is your period of grace, the business will still be classified as small. With continued growth in the next accounting period, it will be classified as medium-sized. Note, The two-year rule takes into account one-off transactions and events.
Company size thresholds
Are you prepared for the additional reporting requirements of becoming a medium-size or large business?
Being a medium-sized business means:
Narrative reporting requirements expand further when your business reclassifies from medium-sized to large.
As a large business you are required to:
Identifying the potential changes to your accounts in good time will help ensure that the chart of accounts within your accounting system captures the required additional supporting information. Obtaining additional assistance is easier and often less expensive if done several months before your filing deadline.
If you have any questions or would like to discuss the implications of changing size further, please contact us.