Large accounting entity

What it means

A large accounting entity is the top of the three classes into which businesses keeping double-entry books are sorted. The class is not a badge: it sets the scope of the statements, the content of the notes and duties smaller companies do not carry.

A company becomes large once it exceeds at least two of the three size criteria in two consecutive periods. The figures themselves sit in the Accounting Act and have been raised in recent years, so they are checked against the current wording.

The class under the Accounting Act is not the same as the enterprise category for state aid and EU funds. Those use the European definition of small and medium-sized enterprises, with different thresholds and with linked companies counted in, so an entity that is large for accounting may be a medium-sized enterprise for a grant, and vice versa.

How it works in practice

The statements are drawn up in full and the notes run far wider than for a small entity. A public-interest entity such as a bank or an insurer is classed as large in every case, whatever its figures say.

For the bookkeeper this means work spread across the year: the auditor asks for interim data, balance confirmations from banks and counterparties and a documented stocktake at the balance sheet date, not a box of papers in March.

The notes of a large entity also include a cash flow statement and a statement of changes in equity. For a client moving into the class we therefore first prepare them as a trial from last year’s data, so it is clear in advance what account breakdown and inputs will be needed from January.

What to watch out for

A company crosses the criteria and nobody notices until the statements are being drawn up. Changing class widens the notes and usually triggers an audit that cannot be caught up without a cost: the auditor could not attend the year-end count, so a qualification lands in the report. Both the accounts and the auditor’s report reach the register late, and a penalty follows.

The opposite mistake: after one weaker year the company assumes it is no longer large and does not commission the audit. The class changes only after two consecutive periods, so accounts without an audit do not comply with the law, and the audit is then commissioned late, at higher cost and with limitations that end up in the auditor’s report.