To qualify as a small company for the purpose of filing abbreviated accounts, the conditions are as follows:

• Aggregate turnover - £6,500,000 net or £7,800,000 gross
• Aggregate balance sheet total - £3,260,000 net or £3,900,000 gross
• Aggregate number of employees - 50

The gross figures shown above are only relevant for group accounts. It is the net figures you need to go by for companies that are not part of a group. The balance sheet total refers to fixed and current assets before deduction of liabilities. It does not refer to the net asset total.

The above criteria must be met for 2 consecutive years (apart from companies in their first year). If a company qualifies as small in one year but does not in the next, it may continue to file abbreviated accounts provided that it is eligible in the following year. If a company ceases to be eligible for the abbreviated accounts, it must qualify as small for 2 consecutive years before it once again becomes eligible.

Sharp-eyed observers will note that these conditions are exactly the same as for adopting the FRSSE to prepare your accounts, so there is only one set of criteria to remember. As with the FRSSE, they only apply to financial periods beginning on or after 6th April 2008, so if you are filing accounts for an earlier period they need to fall below lower thresholds; ie turnover of £5,600,000 and a balance sheet total of £2,800,000. For Limited Liability Partnerships the higher thresholds only apply to financial periods beginning on or after 1st October 2008.

The only notes required for abbreviated accounts are as follows:

• Accounting policies
• Fixed assets (both tangible and intangible)
• Investments (if stated at more than fair value)
• Debtors due after more than 12 months
• Creditors due after more than 5 years (or for which security has been given)
• Share capital (including amounts not yet paid up)
• Transactions with directors (in accordance with FRS 8)

The balance sheet must include a statement that the accounts have been prepared in accordance with the provisions applicable to small companies subject to the small companies regime. Also, both the balance sheet and the notes must refer to the fact that the accounts are abbreviated.

If the accounts have been audited, you must file a special audit report confirming that the company is eligible to file abbreviated accounts. Your auditor will normally give you this report at the same time as the main audit report for the full set of accounts.

It is important to note that abbreviated accounts are only for Companies House. You are still required to prepare a full set of accounts for your shareholders in accordance with the Companies Act 2006, and HM Revenue & Customs will require a full set of accounts with your corporation tax return. However, the reduced disclosure requirements mean that you can keep the most sensitive information in your accounts confidential. Without seeing a profit & loss account or knowing how much has been declared as dividends, it would be impossible for anyone to know how much profit a company has made during the financial year just by looking at the balance sheet. The movement in shareholders funds would merely reveal how much profit the company has retained.

Medium sized companies are also entitled to file a form of abbreviated accounts but the benefits are very much reduced as there are not so many disclosure exemptions. For instance, it must still file a profit and loss account but is permitted to combine turnover, cost of sales and other operating income, so the first line would normally be gross profit or loss. The notes to the financial statements are almost the same as those required for a full set of accounts except that they do not have to analyse turnover by class of business or geographical market. The directors report does not need to include non-financial key performance indicators in its review of activities. The balance sheet must also include a statement that the accounts have been prepared in accordance with the provisions relating to medium sized companies.