In a nutshell: a guide to financial reporting standards changes

Modern city businessman
By Carol Hislop CA

7 July 2017

Many firms are assisting clients with the preparation of their first statutory accounts under new UK GAAP. Carol Hislop CA outlines the key points from the ICAS guide for small and micro-entities.

While the new financial reporting standards have been available for some time, during 2015 there were further changes to company law and accounting standards, mainly affecting small and micro-entities. 

These changes (under new UK GAAP (i.e. in accordance with Financial Reporting Standard (FRS) 101, FRS 102, FRS 102 Section 1A or FRS 105)) came into effect from 1 January 2016, with early adoption available for accounting periods beginning on or after 1 January 2015.

ICAS has prepared a guide to the standards and the key points you should be aware of. 

Below you can read more on key points for micro-entities but you can find out about how these key points relate to small entities in the May edition of CA Magazine.


1. Withdrawal of Financial Reporting Standard for Smaller Entities (FRSSE)

Entities choosing to adopt the micro-entities regime previously had the option of using the FRSSE (2015), including the micro-entity amendments, or to adopt FRS 105. For accounting periods beginning on or after 1 January 2016, the FRSSE is withdrawn so all micro-entities wishing to take advantage of the reporting concessions available will have to use FRS 105.

2. Micro-entity thresholds

This section applies to all entities applying the micro-entities regime, whether or not they report under the Companies Act 2006. Under legislation a micro-entity is a company, limited liability partnership or qualifying partnership that satisfies two of the following criteria in a year:

  • Turnover: not more than £632,000.
  • Balance sheet total: not more than £316,000.
  • Average number of employees: not more than 10.
  • The usual two-year rule applies except in an entity’s first financial year and the entity must not be ineligible.

3. Key features of FRS 105

  • All assets must be measured at cost.
  • There are fewer required disclosures although the micro-entity may choose to provide additional disclosures.
  • Accounts that comply with the minimum legal requirements are presumed to give a true and fair view.
  • There is no requirement to account for deferred tax and equity-settled share-based payments.
  • All accounting policy choices have been removed, including the options to capitalise development costs and borrowing costs.

4. FRS 105 or FRS 102?

Eligible entities should assess whether adopting the micro-entities regime and FRS 105 is the most appropriate option or whether a more comprehensive standard should be used. Consideration should be given to the following:

  • Users of the accounts – accounts prepared under FRS 105 may contain insufficient detail if there are external parties interested in the financial statements and it may be more appropriate to report under FRS 102 Section 1A.
  • Nature of the business – FRS 102 may be more appropriate to the entity’s business model.
  • Future plans – a company intending to expand beyond ‘micro’ size may choose to adopt FRS 102 (or FRS 102 Section 1A).

5. Format of financial statements

A set of financial statements comprises a statement of financial position with notes and an income statement.

The full version of this article can be found in the May 2017 edition of CA magazine


  • CA Magazine

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