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Companies (Accounting) Bill 2016 - New Audit Exemption Thresholds - Part 2

This is the second article in a four-part series which aims to address some of the changes which the Bill will introduce to Irish law.

One of the most significant changes which the Bill will introduce is an overhaul of the current audit exemption thresholds.

The Bill will introduce a new audit exemption category for “Micro” companies.  In addition, the qualifying criteria for both small and medium companies will be increased.  However, medium companies will no longer be entitled to avail of an audit exemption.  Any company which exceeds two or more of the qualifying criteria of a medium company will automatically be deemed to be a large company.

The Bill will also introduce the concept of an "Ineligible Entity".  An ineligible entity is a certain type of company who may not avail of audit exemption regardless of whether it meets audit exemption thresholds or not.  Schedule 5 of the Act currently lists a number of companies which are not entitled to avail of audit exemption, by virtue of the nature of the businesses they are involved in (i.e. investment companies, credit institutions, authorised market operators, etc.).  However, the ineligible entities concept also includes companies which are of significant interest to the public.

The table below presents a general comparison of the existing audit exemption qualifying criteria and the qualifying criteria which the Bill will ratify once it is enacted.  The table sets out each size category, the qualifying criteria associated with each category under the Act (and some of the main exemptions associated with the category) and the qualifying criteria under the Bill (and some of the main exemptions granted by the Bill).  Where a size category appears in the Act, but not in the Bill (i.e. large company categories) or vice versa (i.e. micro company category) the relevant cells will be populated with the letters "N/A".

 

AUDIT EXEMPTION THRESHOLDS
Category (Size) Qualifying Criteria (Act) Exemption Qualifying Criteria (Bill) Exemption
Dormant No “significant accounting transactions” Abridged financial statements extracts of Directors’ report basic notes to financial statements As in the Act As in the Act
Micro N/A N/A
  • Balance Sheet: €300k
  • Turnover: €700k
  • 10 employees or less

    (2 out of 3)
Small
  • Balance Sheet: €4.4m
  • Turnover: €8.8m
  • 50 employees or less

    (2 out of 3)
Abridged financial statements Reduced disclosures in directors’ report no auditor’s report required
  • Balance Sheet: €6m
  • Turnover: €12m
  • 50 employees or less

    (2 out of 3)
Governed by Small Company Regime*
Medium
  • Balance Sheet: €10m
  • Turnover: €20m 250 employees or less

    (2 out of 3)
Abridged financial statements
  • Balance Sheet: €20m
  • Turnover: €40m
  • 250 employees or less

    (2 out of 3)
  • No audit exemption
  • No audit committee
  • No corporate governance statement
Large
  • Balance Sheet: €12.5m
  • Turnover: €25m
No Audit Committee required Any company which exceeds two or more of the qualifying criteria of a medium company N/A
  • Balance Sheet: €25m
  • Turnover: €50m
None N/A N/A

* The Micro Company Regime and Small Company Regime will both be examined in the next article.

**The “XL” category is not referred to in the Act and is included here for illustrative purposes only.

Where this article makes reference to “companies” in respect of audit exemption thresholds and qualifying criteria for audit exemption, it should be noted that the same thresholds and criteria apply to groups of companies as well.

It is important to note that the Bill has not yet been enacted and may be subject to change. Some of the changes mentioned above will be examined in greater detail in future articles.

For further information regarding the Companies (Accounting) Bill 2016 please contact Paige Keating at cosec@reddycharlton.ie.


Keywords: Publication, Company Secretarial, Paige Keating

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