Abbreviated accounts is a shortened version of a company’s an annual accounts that a small or medium-sized company can file with the registrar of companies, instead of a full version. Sections permit companies subject to the small companies regime, or those able to take advantage of provisions for medium-sized companies, to file abbreviated accounts. These are a version of the full annual accounts but with certain specified omissions. Those sections provide that the auditor’s report (if any) on the full annual accounts is not filed with them it would be in appropriate to require the filling of a report in association with a different set of accounts from those on which the auditor reported. Instead a special auditor’s report under this section is required in cases where the full annual accounts were subject to audit. The auditor reports that it is his opinion that the company is entitled to deliver abbreviated accounts under the appropriate section (entitlement being based on measures taken from, or apparent in, annual and that the abbreviated accounts comply with the relevant regulations. Thus if the auditor is unable so to report, the company is not entitled to file abbreviated accounts.
Abbreviated accounts is a shorter form of annual accounts that may be filed by a company qualifying as a small or medium-sized company under the Companies Act. The use of abbreviated accounts can cut costs and save time. It can also minimize the information made available to others, especially business rivals.
Requirements where abbreviated accounts delivered
At the end of the financial year, companies need to submit a statutory account. But many small companies choose to submit abbreviated accounts in place of the full accounts. It shows the company balance sheet, but it does not include the profit and loss account.
Small companies typically prefer the concept of abbreviated accounts. Mainly due to the reason that it does not include the detailed information of the account. Hence there is no fear of their competitors to look into their accounting details.
A company can be deemed small if it satisfies any two of the following criteria:
- The annual turnover of the company should not be more than €6.5 million.
- The maximum total of the balance sheet should be €3.26 million.
- The company should have not more than 50 employees.
Small companies do not go through a full audit. Hence, submitting a summarized account is convenient for them. The primary balance sheet shows the assets and liabilities of the company. The asset side includes bank balances, current & fixed assets, and debtors. In comparison, the liabilities side includes overdrafts, loans, and creditors.
Special auditor’s report where abbreviated accounts delivered:
- This section applies where-
- the directors of a company deliver abbreviated accounts to the registrar, and
- the company is not exempt from audit (or the directors have not taken advantage of any such exemption).
- The directors must also deliver to the registrar a copy of a special report of the company’s auditor stating that in his opinion-
- the company is entitled to deliver abbreviated accounts in accordance with the section in question, and
- the abbreviated accounts to be delivered are properly prepared in accordance with regulations under that section.
- The auditor’s report on the company’s annual accounts need not be delivered, but-
- if that report was qualified, the special report must set out that report in full together with any further material necessary to understand, and
- If abbreviated accounts are delivered to the registrar (requirements in connection with publication of accounts) to the auditor’s report on the company’s annual accounts shall be read a references to the special auditor’s report required by this section.
Main advantage and disadvantages of abbreviated accounts
The main advantage is:
- Abbreviated accounts reduce the disclosure of financial information about the company that might be useful to competitors. This helps the company if it has activities in competitive markets rather than a niche market.
The main disadvantages are:
- Users of the financial statements may think the company has something to hide.
- Users will find inter-company comparison is difficult, as fewer figures are available for analysis.
Approval and signing of abbreviated accounts
By whom and where abbreviated accounts are singed and approved:
- Abbreviated accounts must be approved by the board of directors and signed on behalf of the board by a director of the company.
- The signature must be on the balance sheet.
- The balance sheet must contain in a prominent position above the signature a statement to the effect that it is prepared in accordance with the special provisions of this Act relating(as the case may be) to companies subject to the small companies regime or to medium-sized companies.
- If abbreviated accounts are approved that do not comply with the requirements of regulations under the relevant section, every director of the company who-
- knew that they did not comply, or was reckless as to whether they complied, and
- failed to take reasonable steps to prevent them from being approved, commits an offence.
- A person guilty of an offence under subsection is liable –
- on conviction on indictment, to a fine
- on summary conviction, to a fine not exceeding the statutory maximum.
Necessary Information included in the Abridged Accounts
Abridged accounts contain less information than the information in the full-fledged account. Abridged accounts should at least include the balance sheet total and the related notes to the account. In addition to this, a simplified version of the profit and loss account is also added to the account.
1. The items on the assets side
Fixed, current, and other assets, cash, prepaid expenses, inventory, marketable securities, and accounts receivable.
2. The items on the liabilities side
Current and accrued liabilities, tax payable, long-term and short-term debts, and accounts payable.
3. Shareholder’s equity
This is another heading under the liabilities side. It includes common stock, retained earnings, and treasury stock.