We all often hear talk of "SMEs" and "small" and "medium" sized businesses, but what's the definition of small or medium sized company, and how do you actually define the size of a company and why does it matter?
In terms of accounting, the classification is vital as it impacts on the type of accounts you need to produce and whether you need to have an audit or not.
Companies that qualify as small for a financial year can use reduced disclosures, being Section 1A of FRS102, or even FRS105 if they qualify as micro. They are also eligible to claim audit exemption potentially.
There are various circumstances which can complicate the above and where advice would be taken, such as companies that form part of a group or involved in certain activities. It should also be remembered that shareholders can in some cases insist on an audit even if a company does qualify for exemption.
The implications of not having an audit when one is required can be significant so it is always best to take advice if you have any doubts. Please get in touch if you would like to discuss this with us.
