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.
Study on 'Accounting guide for SMEs'
In 2011 Directorate General for Enterprise and Industry published a study named 'Accounting requirements for SMEs' which comprised both the existing accounting requirements for SMEs, the users’ perceived needs for accounting information from SMEs as well as the SMEs’ own needs for accounting information in the non-financial business economy in twenty selected European countries. All legal forms and sizes of enterprises (which had not been listed nor had been large enterprises) were in the scope of the study. As a result of the study, it could be seen that the accounting requirements for those SMEs which are not regulated at EU-level are very different ranging from almost non-existent to quite rigorous requirements. In many cases Member States’ legislation is very demanding concerning accounting requirements for these SMEs which add to their regulatory burden.
The objective of the study is to present an 'Accounting guide for SMEs' which
- Contributes to the development of good accounting practices for those European SMEs which are not covered by harmonised EU accounting rules and thereby might be subject to an unnecessary high administrative burden at a national level.
- Provides Member States and stakeholders with information about current good accounting practices in Europe for those European SMEs which are not covered by harmonised EU accounting rules.
- Presents recommendations on good accounting practices in specified accounting areas for those European SMEs which are not covered by harmonised EU accounting rules in the form of an Accounting Guide and encourage Member States and other stakeholders to follow up on it. The Accounting Guide should also indicate areas within the accounting field where the administrative burden could be reduced without having a material impact on the quality of the financial information that is published by these SMEs.
Description of tasks
The study consists of three modules
1. Desk research
Identifying and analysing the accounting requirements (both legally binding and recommendations) in the specified accounting areas for those European SMEs which are not covered by harmonised EU accounting rules as in force on the signature of the service contract in the non-financial business economy for the minimum 25 countries selected. Especially good accounting practices in the specified accounting areas will be identified and well substantiated recommendations on the good accounting practices will be made based on the identified and analysed information in the Desk research.
Analysing and identifying the users’ and preparers’ needs in the specified accounting areas for those European SMEs which are not covered by harmonised EU accounting rules in the non-financial business economy for the minimum 25 countries selected. For this purpose a survey on good accounting practices in the specified accounting areas will be carried out among users and preparers of accounting information. Well substantiated recommendations on the good accounting practices in the specified accounting areas will be made based on the identified and analysed results of the survey at an aggregate European level.
3. Accounting Guide
Based on the results in the desk research and the survey modules, the study will identify and provide well substantiated recommendations on the good accounting practices in the specified accounting areas in sub accounting guides for those European SMEs which are not covered by harmonised EU accounting rules. Special attention will be given to recommendations that could reduce the administrative burden of SMEs for producing financial statements without having an impact on the quality of financial reporting. A cost-benefit model will be used when providing the recommendations.
|1st quarter 2013||
Kick-off meeting with the Commission experts group
Draft questionnaires and work programme
|3rd quarter 2013||
First workshop with the Commission experts group
|Material to be presented by the Contractor|
|4th quarter 2013||Draft of the first interim report|
|2nd quarter 2014||Second workshop with the Commission experts group||Material to be presented by the Contractor|
|3rd quarter 2014||Draft of the second interim report|
|4th quarter 2014||Draft of the final report|
|1st quarter 2015||Seminar with the Commission experts group||Presentations by the Contractor|
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 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:
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;
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.
The Final Report
Study on Accounting requirements for SMEs [10 MB] (2011)
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 [10 MB]
3. List of used abbreviations and definitions – glossary [172 KB]
5. People interviewed
6. Key findings [12 KB]
7. Executive Summary [45 KB] (available in French and German).
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.
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.
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]
For further information, please contact:
Enterprise and Industry Directorate-General
Unit D.3 'SME Access to Finance'
B - 1049 Brussels Fax: +32 229-98025