Given the two-stage implementation of the amendments of Companies Act 2014, I am wondering whether do I still need to prepare financial statements for my clients who are small companies and/or dormant companies.
The new exemption from preparation attempts to reduce compliance costs for dormant companies which have lower public impact.
A dormant company is exempted from the statutory audit requirements but is still required to prepare financial statements.
New Law (expected to be effective Jan 2016)
A dormant non-listed company (other than a subsidiary of a listed company) is exempt from requirement to prepare financial statements, if:-
(a) the company fulfils the substantial assets test; and
(b) the company has been dormant from the time of formation or since the end of the previous financial year.
The substantial assets test is that the total assets of the company at any time within the financial year must not exceed $500,000. For a parent company, the consolidated total assets of group at any time within the financial year must not exceed $500,000.
Dormant listed companies and their subsidiaries, and dormant unlisted companies which do not fulfil the substantial asset test must prepare financial statements but are exempt from audit. This remains unchanged from the current position.