Abbreviated accounts

Abbreviated accounts
See also
Abridged accounts Creative accounting Objectivity principle Reporting entity Nonadmitted insurer Disclosure requirements Limitation of liability Limited power of attorney Special power of attorney

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.

Requirements where abbreviated accounts delivered

Special auditor's report where abbreviated accounts delivered:

1. 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).
2. 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.
3. 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
4. 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:

1. Abbreviated accounts must be approved by the board of directors and signed on behalf of the board by a director of the company.
2. The signature must be on the balance sheet.
3. 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.
4. 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.
5. A person guilty of an offence under subsection (4) is liable-
   • on conviction on indictment, to a fine
   • on summary conviction, to a fine not exceeding the statutory maximum.

Examples of Abbreviated accounts

• Profit and Loss Account: This is an abbreviated version of the Profit and Loss Account which typically includes only the net turnover, cost of sales, gross profit, operating expenses, and the net profit or loss for the period.
• Balance Sheet: This is an abbreviated version of the Balance Sheet which typically includes only the total of the current assets and current liabilities, long-term assets, long-term liabilities, and the net assets of the company.
• Cash Flow Statement: This is an abbreviated version of the Cash Flow Statement which typically includes only the changes in the cash balance, cash inflows and outflows, and the ending cash balance.
• Statement of Changes in Equity: This is an abbreviated version of the Statement of Changes in Equity which typically includes only the opening and closing equity balances, the contribution of owners, and the net income or loss for the period.

Other approaches related to Abbreviated accounts

Introduction: Other approaches related to abbreviated accounts include:

• Using a simplified balance sheet. This is a more streamlined version of the traditional balance sheet, and it omits certain items such as receivables, payables, and inventory. The simplified balance sheet is easier to read and understand than the traditional one.
• Applying a different format or structure to the financial statements. This approach is often used to make the financial statements easier to read, as well as to focus the attention of readers on the most important information.
• Omitting certain information from the financial statements. This approach is often used to reduce the amount of information presented in the financial statements.
• Presenting the financial information in a more user-friendly way. This approach is often used to make the financial information more accessible to non-financial readers. It may involve presenting the information in a more graphical or visual way.

In summary, abbreviated accounts are a simplified version of a company's annual accounts and can be used to make the financial statements easier to read and understand. Other approaches related to abbreviated accounts include using a simplified balance sheet, applying a different format or structure to the financial statements, omitting certain information, and presenting the financial information in a more user-friendly way.

References

• Birds J., Boardman N., (2010). Annotated Companies Legislation , Oxford University Press, Oxford.
• Collis J., Holt A., Hussey R., (2017). Business Accounting, Macmillan Education UK, London.
• Ervine C., (2014). Core Statutes on Company Law, Macmillan International Higher Education, London.

Author: Dominika Grzyb