UEAPME (the European Association of Crafts, Trades and Small and Medium-sized Enterprises), and the global accounting body ACCA, have criticised the European Parliament for giving the go-ahead to proposed accounting reporting exemptions for very small businesses in the EU. The EU Parliament’s proposals would mean that micro companies could be exempt from drawing up annual accounts altogether, subject to certain criteria relating to the size of the enterprise.

Whilst acknowledging that there was a need to cut red tape and simplify the reporting requirements for small businesses, UEAPME’s Secretary General Andrea Benassi argued that:

“Contrary to what the Parliament claims, the proposal as approved will not cut red tape or produce savings for micro-companies. Conversely, it will generate new constraints for them, both in countries where the exemption will be used and elsewhere. This is not better regulation. Despite the efforts of many MEPS, the Parliament failed to nip this proposal in the bud today."

The EU’s proposals include a right for member countries to allow the exemption or not, but UEAPME claims that this would produce an uneven playing field, with different EU countries either allowing or disallowing the exemption. The Association went on to suggest that micro-entities will be obliged to continue filing accounts anyway for national administrations, banks, suppliers and customers. Moreover, it argued, red tape will be displaced rather than reduced, "as MEPs allowed Member States to add further unspecified obligations to exempted micro-companies".

The Association of Chartered Certified Accountants (ACCA), the global body for professional accountants, with more than 130,000 members worldwide, has also attacked the proposed exemptions.

ACCA’s Head of Business Law, John Davies, commented: “While we agree that needless bureaucracy should be removed, this move will mean that millions of stakeholders, including potential investors, trading partners and creditors will no longer be guaranteed access to credible accounting information from these small companies. That would make it more difficult for them to protect their financial interests and, as a consequence, makes it less likely that potential investors will risk their capital”.

German MEP Klaus-Heiner Lehne, the author of the report that led to the EU passing the proposals in the European Parliament, has argued, however, that:

"The reach of micro-entities' business is generally confined to the regional and local market. To that extent they have no cross-border impact on the single European market, and the logical conclusion, therefore, is that they need not be bound by EU-wide internal market regulations".

He went on to add that the requirement for very small businesses to continue to maintain basic accounting records had been made clear by the EU Parliament.

The European Small Business Alliance (ESBA) gave the proposals a warmer reception calling them the “first real EU effort specifically aimed at micro-businesses”. ESBA’s President Tina Sommer claimed that by reducing red tape, the chances of micro-entities surviving the current global economic downturn would be enhanced.