Q: Why is ACCA opposing an initiative to reduce red tape for small businesses?

A. ACCA actively supports the reduction of the administrative and other burdens that regulation imposes on small businesses. Through our SME Unit and ACCA’s SME Committee, we have constantly sought to give voice to the cause of reducing burdens on small businesses.  Through our publications, our events, our research and our networks we have consistently urged opinion formers and policy makers to Think Small First.  

However, the specific initiative of exempting micro enterprises from annual filing requirements in only the most trivial of senses reduces red tape. The process of filing accounts is in itself insignificant in terms of costs, whereas the process of recording transactions and book-keeping, which produces the relevant information and accounts for most of the cost of preparing financial reports, is an essential discipline for all businesses, large or small, and is outside the scope of the administrative burdens reduction programme.

In this specific case, the Commission has employed its new Impact Assessment Guidelines which allows it to overlook the distinction it used to draw  between administrative costs (which arise from normal business practice as well as compliance with regulation) and administrative burdens (which arise from compliance alone).  Therefore, because the Commission has identified a false “burden”, the exemption will deliver equally false “savings”. Additionally, in employing the Standard Cost Model (SCM) approach, with its insufficient emphasis on robust and representative samples, we feel that the Commission’s measurement of administrative costs is itself open to much criticism. 

This is supported by Belgium as indicated in its answer to the European Commission Consultation Paper on the revision of the Accounting Directives , which clearly states that “exempting small enterprises from the requirement of publication would even increase their administrative burden and cost to answer multiple information requests from stakeholders (insurance companies, credit institutions, creditors, administrators, investors, …) and to provide the necessary assurance that financial information has been properly established. It has to be noted that in Belgium the number of accounts consulted or downloaded from the Belgian Central Balance Sheet Office is between 10.000 and 12.000/day. 60 % of the consulted accounts are accounts from small companies”. It also adds that  “the preparation of a decent balance sheet, profit and loss statement and even an abridged format for the notes always has to be the minimal requirement for all companies, inc micro-entities”.