EU Size Classification Thresholds for Companies — 2024 Update

· 2 minute read

What is this about?

The EU has raised the monetary thresholds for determining company size classifications by approximately 25% via Delegated Directive (EU) 2023/2775. Affected companies face reduced disclosure, audit, and reporting obligations. Every company should check whether it now falls into a lower size category.

Background

The size classification thresholds for corporations (§§ 267, 267a HGB in Germany) had not been adjusted since 2013. They were updated into German law through the Second Act Amending the DWD Act and Amending Commercial Law Provisions, which entered into force on 17 April 2024.12

Under Art. 3(13) of the Accounting Directive 2013/34/EU, the European Commission is required to review the thresholds at least every five years. Cumulative inflation in the Eurozone since 2013 reached approximately 24.3%, justifying an increase of around 25%.3

New thresholds (§ 267 HGB)

ClassificationBalance Sheet TotalRevenueEmployees
Micro entity (§ 267a)≤ EUR 450,000≤ EUR 900,000≤ 10
Small company≤ EUR 7,500,000≤ EUR 15,000,000≤ 50
Medium-sized company≤ EUR 25,000,000≤ EUR 50,000,000≤ 250
Large company> EUR 25,000,000> EUR 50,000,000> 250

The employee thresholds remain unchanged. A company is classified into a given category when at least two of the three criteria are exceeded (or not exceeded) in two consecutive financial years.4

When it applies

  • Mandatory for financial years beginning on or after 1 January 2024.
  • Optional retroactive application for financial years beginning after 31 December 2022.25

On first-time application, the new thresholds must also be applied retrospectively to all prior reporting dates, meaning an immediate change in size classification can occur.6

Consequences

Large → medium-sized: sustainability reporting

Starting in 2025, sustainability reporting under the CSRD becomes mandatory for large companies. Companies reclassified from “large” to “medium-sized” under the raised thresholds are initially exempt. CSRD reporting takes significant preparation, which makes this the most consequential of the three boundaries.7

Medium-sized → small: the statutory audit

Medium-sized and large companies must have their accounts audited (§ 316 HGB). Companies now classified as “small” under the new thresholds are exempt, which immediately cuts costs and administrative work.68

Small → micro: disclosure relief

Micro entities are exempt from preparing notes to the financial statements and get simplified disclosure requirements. The direct savings are smaller, but publishing less can be attractive in itself.9

What to do

Check whether the raised thresholds put your company into a lower size class, especially if you operate near the boundary values. Retroactive application to the 2023 financial year can bring the relief forward.

Sources

Footnotes

  1. Delegated Directive (EU) 2023/2775 of 17 October 2023 amending Directive 2013/34/EU — Rödl & Partner ↩

  2. Second Act Amending the DWD Act, BGBl. 2024 I No. 120 of 16 April 2024 — Haufe Finance ↩ ↩2

  3. Cumulative inflation rate of 24.3% per WPK notice of 24 October 2023 — NWB Datenbank ↩

  4. § 267 HGB — gesetze-im-internet.de ↩

  5. First-time application rules and optional early adoption — BDO ↩

  6. Impact on audit obligations and sustainability reporting — Deloitte Legal ↩ ↩2

  7. CSRD and size classification interaction — GKK Partners ↩

  8. Overview of relief measures by size class — IHK München ↩

  9. Micro entity exemptions, § 267a HGB — Forum Verlag ↩

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