New accounting standard released for SMEs by FSR - Danish auditors to improve financial reporting

The Accounting Technical Committee of FSR – Danish Auditors has released a new accounting standard for small and medium-sized companies (SMEs) to update their financial reporting and create more informative financial statements. Previously, the FSR had two sets of non-mandatory guidelines for class B and class C companies, which were based on outdated Danish Accounting Standards from 2002 and a standard for small companies based on those guidelines.

Following a certain accounting standard was not mandatory for B and C class companies, but the new single standard issued in mid-April combines the previous guidelines for class B companies with updates that also apply to class C companies. The new standard reflects current accounting practices for smaller entities, including those found in the International Financial Reporting Standards (IFRS) for SMEs.

The new standard is intended to provide guidance for SMEs in areas not covered by the Danish Financial Statements Act and to inspire the preparation of high-quality financial statements.

In the future, class B and C companies have a few options for their financial reporting. They can use the Danish Financial Statements Act alone, or they can use the act along with the new accounting standard for class B and C companies. Another option is to follow full IFRSs. The old accounting standard for small companies from 2007 and the Danish Accounting Standards 1-22 have been replaced and are no longer in use.

Listed companies (class D companies) are not affected by these changes and must continue to use full IFRSs, which are required for all listed companies in Europe.

The new accounting standard will come into effect for reporting periods beginning on or after 1 January 2013, but companies are allowed to apply it earlier.

There have been recent changes in the accounting requirements for SMEs in Europe. For example, the UK FRC has issued FRS 102, which replaces local GAAP with a new standard based on the IFRS for SMEs. The European Union is also revising the Accounting Directives to simplify and unify accounting requirements for SMEs and micro-entities. However, the IFRS for SMEs cannot be applied in member states that follow certain provisions of the 7th Accounting Directive.