FEE supports the reduction of excessive and unnecessary administrative burdens and the simplification of the financial reporting requirements for micro and small companies within the scope of the Directive. This should be achieved by the recast of this Directive which the European Commission announced and noted as a priority in the Single Market Act approved on 13 April 2011.
 

However, in terms of the current proposals, FEE would like to stress the importance of accrual accounting which FEE believes is essential and contributes to sound business management and to the transparency and reliability of all financial information. The current proposal to allow micro-entities to apply cash based accounting is in FEE's opinion a backwards step in terms of these attributes and represents an ill-informed view of the impact this will have for those eligible businesses if implemented. Such a rudimentary system of accounting cannot meet the needs of enterprises (whatever their size), creditors, business partners or other stakeholders such as tax authorities. For example, there is evidence that tax receipts would decline as a result of a move to cash accounting.
 

The legislator would not help micro-entities in allowing totally or partially cash-based accounting. An adequate and proportionate system based on accrual accounting remains a necessity in companies of all sizes and most likely will still be required to obtain credit and funding. In addition, due to the requirements of the Second Council Directive (77/91/EEC), accrual based accounting is necessary in order to assess whether the capital maintenance requirements are met.

Press release