Small and medium-sized enterprises (SMEs)

Accounting and SMEs

The importance of internal and external accounting as a source of information for owners and managers of small enterprises and their different stakeholders is steadily growing.
It is of crucial importance that the accounting systems applied by small enterprises meet their actual needs, providing necessary information yet avoiding unjustified administrative burden.

Accounting for small enterprises - Recommendations and good practices

It is recognised that appropriate accounting information is important for a successful management of a business whether it is large or small.

At EU level, accounting legislation is in place for listed companies, i.e. the International Accounting Standards/International Financial Reporting Standards and for non-listed limited liability companies, the Fourth and the Seventh Company Law Directives i.e. the Accounting Directives.
However, at EU level there is no accounting legislation applicable to those enterprises which are not listed or are not limited liability companies; in most cases we would be referring to small enterprises.

Because of the importance of appropriate accounting information for owners and managers of small enterprises and their different stakeholders, it is considered important to analyse the various accounting systems applied in Member States in the case of non-regulation at EU level.

The Project

A group of experts of national administrations from Member States and business organisations analysed various accounting systems applied by sole proprietorships/traders and partnerships with unlimited liability to identify how these accounting systems meet the actual needs of these small enterprises.

The objective of this project was to come forward with views on how to improve the accounting systems of small enterprises so that they can provide the owners, managers and other stakeholders with appropriate financial information. This was achieved through the identification and exchange of views in the area of accounting systems of small enterprises in Member States.
The purpose was in no way to add regulation or administrative burdens at EU or national level, which would be contrary to the aim of simplifying the business environment for small enterprises and reducing administrative burdens; therefore proposals to change the accounting legislation at EU level were beyond the scope of this project.

On the basis of collected data from Member States on applied accounting systems in small enterprises, the experts suggested a number of good practices for the accounting systems which may be considered appropriate for small enterprises according to their particular circumstances and needs.

The Report

Final Report "Accounting Systems for Small Enterprises" [235 KB] (2008)
(Members of the Expert Group listed in page 25 of the report)
Annexes [263 KB]

Study on "Accounting requirements for SMEs"

The importance of accounting as a source of information for owners and managers of small enterprises and their different stakeholders is obvious.

In the European Union (EU), there is accounting legislation in place for different kinds of companies.
As regards listed companies in the EU, we have the International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) as adopted by the EU ( IAS Regulation (EC) N° 1606/ 2002 ) .

Concerning limited liability companies, there are at EU level the Fourth Directive (78/660/EEC) and the Seventh Directive (83/349/EEC) , together named the Accounting Directives, which are transposed by Member States into their national accounting legislation to become local GAAP (General Accepted Accounting Principles). However, there is no accounting legislation in force at EU level for those enterprises which are not covered by the IAS Regulation and the Fourth and Seventh Directives.

In 2007 the European Commission set out a vision for simplifying EU rules on company law, accounting and auditing in a Communication . In 2009 some elements of the Communication were taken forward by the Commission in a Directive amending the Accounting Directives as regards certain disclosure requirements for medium-sized companies and the obligation to draw up consolidated accounts. In 2009 the European Commission announced that micro entities would be exempted from the Accounting Directives and that in addition a modernisation and simplification of the Accounting Directives would be carried out in the near future .

In 2008 the Directorate General for Enterprise and Industry in the European Commission published an expert group report on "Accounting systems for small enterprises - recommendations and good practices" . This report describes e.g. the accounting systems and accounting framework in place for small enterprises not regulated at EU-level and identifies some good practices for these enterprises. On this account, there was obviously a need to find out more about the accounting requirements for SMEs in Europe in the future.

The project

The overall aim of the Study was to produce a report which comprises both the existing accounting requirements for SME's, the users' perceived needs for accounting information from SME's in Europe as well as the SME's' own needs for accounting information in the non-financial business economy.

The final result of the Study was concrete proposals on possible future accounting requirements for SMEs in the non-financial business economy.

The tasks were to provide an overview of existing accounting requirements and the perceived needs for accounting information from SMEs in Europe in the non-financial business economy from both the users' and preparers' point of view.
For this purpose a Study was carried out in 20 ⁽¹⁾ countries selected among Member States and EEA countries to be representative for all these countries. The Study consists of three modules:

Desk research:
Factual information on accounting requirements for SMEs as in force in November 2009 for the 20 countries in the non-financial business economy was identified and analized. Especially good accounting practices were identified, recommendations were made and conclusions were drawn based on the identified and analysed information in the desk research. Also some statistical data on SMEs were collected and presented;
Survey:
The users' perceived needs for accounting information from SMEs in Europe as well as the SMEs' own needs for accounting information in the non-financial business economy for 19 countries were analized and identified. For this purpose the Survey was carried out through 1 560 interviews among users, preparers and accounting professionals in 19 countries. Recommendations on perceived accounting requirements were made and conclusions were drawn based on the analysed results of the Survey; and
Future policy initiatives:
Based on the results in the desk research and the Survey modules, possible future policy initiatives for accounting requirements for SMEs in the non-financial business economy were identified. This task has to be seen in the light of the European Commission's work to exempt micro entities from the Accounting Directives and the revision of the Accounting Directives .

⁽¹⁾Austria, Belgium, The Czech Republic, Denmark, Estonia, France, Germany, Greece, Italy, Lithuania, The Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and The United Kingdom.

Final report

Study on Accounting requirements for SMEs pdf - 10 MB [10 MB] (2011)

Annexes

1. The complete set of the reports on accounting requirements in force in November 2009 in the selected Countries:

Austria [105 KB]
Belgium [118 KB]
Czech Republic [58 KB]
Denmark [94 KB]
Estonia [74 KB]
France [121 KB]
Germany [109 KB]
Greece [93 KB]
Italy [82 KB]
Lithuania [112 KB]
Netherlands [90 KB]
Norway [179 KB]
Poland [91 KB]
Portugal [76 KB]
Romania [71 KB]
Slovakia [100 KB]
Slovenia [72 KB]
Spain [86 KB]
Sweden [100 KB]
United Kingdom [98 KB]

2. Tables reporting the data processing of the Survey’s results divided as follows

Annex 2. A Users’ data and results
Annex 2. B Preparers’ data and results
Annex 2. C Accounting Professionals’ data and results
Annex 2. D Users’, Preparers’ and Accounting Professionals’ data in aggregated form
Annex 2. E Users’, Preparers’ and Accounting Professionals’ results - Figures and Tables

>>> Download the 5 annexes zip - 10 MB [10 MB]