Audit and annual report obligatory for fewer companies

The government has made a proposal to oblige fewer companies to have their annual report audited and to draw up an annual report. This reduces the burden on companies and the pressure on auditors’ audit capacity.

The proposal implements a European Commission directive that incorporates inflation over the past 10 years into the criteria used to classify companies. This classification determines the degree of accountability companies have to provide for their finances.

Companies are classified based on their balance sheet total and net turnover. The categories of companies are micro, small, medium and large. The threshold amounts of this classification will be increased by 25%, so that some companies will fall into a lower category. In this lower category, they have to include less information in their annual reporting and in some cases, they no longer have to have it audited by an auditor. The estimated savings for the business community from this increase is approximately EUR 45 million. The proposal is that companies may also apply the increased threshold amounts for the 2023 financial year. This was the express wish of the business community and audit firms.

European Directive

The proposal implements the directive published by the European Commission on 19 October 2023 to increase the threshold amounts for micro, small, medium and large legal entities. Minister Weerwind for Legal Protection implements the increase by a general order in council. The government has agreed to submit this draft decision to the Council of State for advice. The final decision is expected to be published in the first quarter of 2024.