RSS feedsMy client a small private company, has always filed abbreviated annual accounts with Companies House. But the managing director has now asked whether there would be any benefits in filing a full set of financial statements on the public record.
The Companies Act offers some exemptions to small companies, in relation to the financial information which such entities are required to file with Companies House.
Small companies can file abbreviated accounts, but they must also prepare a full set of accounts for the shareholders of the company. Abbreviated accounts are, therefore, an additional set of accounts prepared purely for public filing, so directors generally choose to file abbreviated accounts as these contain less information.
Companies using this option are not required to file a profit and loss account from which competitors may be able to elicit information such as trading margins. The plus point here is confidentiality.
Some argue that credit agencies are more likely to look more favourably on those companies who are more transparent and who file a full set of accounts.
However, a company which is performing well may be given a lower credit rating than it should if it files abbreviated accounts, as the success of its performance is unlikely to be fully apparent from the abbreviated accounts. If a business is not performing well, being more transparent is unlikely to assist the company to achieve a higher credit rating.
James Barbour is director of accounting and auditing at ICAS
