Small Company Reporting: What are my choices?

Tuesday, May 7, 2019

Since the demise of the FRSSE there has been a change in the options available to small entities.

For accounting periods commencing on or after 1 January 2016 we have had a number of options for micro and small companies.

All companies are able to produce accounts under EU endorsed IFRS although it is uncommon for smaller entities unless they are a part of a group that itself prepares accounts under IFRS.

Those companies that are not required to adopt EU endorsed IFRS will fall under the FRS 102 regime. Where they qualify as small they will be able to take advantage of reduced disclosures included under FRS 102 1A.

Companies that qualify as micro entities have a further choice to prepare accounts under FRS 105.

The qualifying criteria for small and micro entities is as follows:
Small companies
Turnover: £10.2m
Gross assets: £5.1m
Employees: <50
Micro entities
Turnover: £632k
Gross assets: £312k
Employees: <10

To qualify as either small or micro the entity needs to be under 2 out of 3 limits for two consecutive years (unless it is the first year of operation). Similarly to become ineligible they have to be above two out of three criteria for two consecutive years.

There are also several types of entity that by its nature will not qualify as a small or a micro entity.

For small entities this is:

  • a public company
  • a member of an ineligible group (see below)
  • an authorised insurance company, a banking company, an e-money issuer, a MiFID (i.e. Markets in Financial Instruments Directive) investment firm or a UCITS (ie Undertakings for Collective Investment in Transferable Securities) management company or carried on insurance market activity

A group is ineligible if any of its members is:

  • a public company
  • a body corporate (other than a company) whose shares are admitted to trading on a regulated market in an EEA State
  • a person (other than a small company) who has permission under Part IV of the Financial Services and Markets Act 2000 to carry on a regulated activity
  • a small company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company
  • a person who carries on insurance market activity

For micro entities this is:

  • a limited partnership
  • a qualifying partnership as defined under the Partnership (Accounts) Regulations 2008
  • a public limited company
  • an overseas company
  • an unregistered company
  • a company authorised to register under section 1040 Companies Act 2006
  • a charitable company
  • a company that is excluded from the small company’s regime under section 384 Companies Act 2006, or is excluded from being treated as a micro-entity under section 384B Companies Act 2006.

Where small company accounts are prepared the company will also have the choice to abridge the accounts. This allows them to provide further reduced disclosure in respect of the profit and loss account and analysis of certain balance sheet information.

It should be noted that Companies must now prepare and file the same set of accounts for its members as for the public record. This means that a company will decide at the point they are preparing their accounts whether or not to abridge them (or to prepare micro entity accounts). Previously a company would prepare full accounts for its members and would then decide whether or not to abbreviate them for the public record.

If a company opts to file an abridged balance sheet and/or profit & loss account then they must include a statement on the balance sheet confirming that all the members have agreed to the preparation of abridged accounts for this accounting period in accordance with section 444(2A).

Companies preparing accounts under FRS 102 1A will as well as preparing a director’s report, profit and loss account and balance sheet need to include notes to the accounts including the following:

- Accounting policies

  • Details of all material policies adopted – these will be in accordance with the requirements of FRS 102, any relaxations are in respect of disclosures and not accounting treatments
  • Specific details when development costs are capitalised
  • Amortisation period (and reason) for intangibles when life cannot be reliably measured
  • Details of presentation changes and prior period adjustments
  • Details of use of true and fair override

- Notes to the balance sheet

  • Fixed assets:
    • Basic table
    • Details re revalued assets
    • Amounts of capitalised borrowing costs
    • Impairments of assets
  • Information about financial instruments and/or other assets measured at fair value
  • Indebtedness, guarantees and financial commitments

- Notes to the income statement

  • Exceptional items
  • Average number of employees (still required in filleted)

- Related party disclosures:

  • For subsidiaries: details re parent of the smallest group for which consolidated financial statements are drawn up of which the small entity is a member
  • Particulars of material transactions the small entity has entered into that have not been concluded under normal market conditions with:
    • 1 - owners holding a participating interest in the small entity;
    • 2 - companies in which the small entity itself has a participating interest;
    • 3 - the small entity’s directors [or members of its governing body]
  • Details of advances and credits granted by the small entity to its directors and guarantees of any kind entered into by the small entity on behalf of its directors

- Basic company information

- Material post-balance sheet events


In addition to the above the directors need to consider whether any additional disclosure is needed for the accounts to show a true and fair view. FRS 102 1A contains details of certain encouraged disclosures that it feels, where relevant, should be included in order for these accounts to show a true and fair review. This includes the following:

  • A statement of compliance with FRS 102 (1A)
  • A statement that it is a Public Benefit Entity (where applicable)
  • Going concern disclosures as per main FRS 102
  • Dividends declared and paid or payable during the period
  • On first time adoption: effects on position and performance

Although the disclosure requirements for small entities is significantly reduced the abolition of abbreviated accounts means that even where abridged accounts are prepared the information placed on the public record is more than had been presented in the past.

The take up of micro entity accounts has not been as high as might have been expected. However, if a company qualifies (see above) then this is a way to ensure that the information available to non-members is reduced.

As well as a very limited profit and loss account and balance sheet the following notes to the accounts need to be prepared:

  • Financial commitments, guarantees and contingencies
  • Details of advances and credits granted by the small entity to its directors and guarantees of any kind entered into by the small entity on behalf of its directors
  • Average number of employees
  • Basic company information

Whereas companies adopting FRS 102 1A need to consider whether the accounts show a true and fair view. When micro entity accounts are prepared there is no need to consider whether additional information should be disclosed but where it is the disclosure should be in accordance with FRS 102 1A.

When producing accounts on behalf of a company you need to ensure that you have discussed the options available and that the client (with your help) decides on which option is most suitable.

Article provided by Valerie Steward.
VS Consultancy