The required format of statutory accounts that small companies have to prepare and send to Companies House has changed. This factsheet sets out the choices that small companies now have. The nature of the company’s activities, the types of assets which it has and whether external scrutiny is required / desired will need to be considered.
We would be happy to assist you in providing specific advice for your company.
Small companies, depending on size, have the following options:
Many more companies now qualify as small as a result of the substantially increased company size limits:
The size limits to qualify as a micro-entity are set out below:
A company needs to meet two out of three of the above criteria for two consecutive years to qualify as a small or micro company, unless it is the first year of the company’s existence, in which case only that year has to be considered. The turnover limit is adjusted if the financial year is longer or shorter than twelve months.
There are certain exclusions from the above small and micro-entity size limits which are set out in the Companies Act 2006. Certain types of entity are prohibited from preparing micro-entity accounts for example charities.
The previous option of filing abbreviated accounts has been withdrawn, however, small companies continue to have the option of not filing their profit and loss account and/or directors’ report at Companies House.
Small companies have the option of preparing less detailed accounts (abridged accounts) for members, providing every member agrees annually, and will be able to choose to abridge the balance sheet, the profit and loss account or both. Charities are also prohibited from preparing abridged accounts.
Contents of micro-entity accounts
The accounts of a micro-entity are considerably shorter and simpler than those otherwise required for a small company. Micro-companies are no longer required to prepare a Directors’ report.
The profit and loss account and balance sheet include less detail. For example current assets are shown in aggregated total on the balance sheet rather than being analysed into stocks, debtors and cash.
Notes of the following should be disclosed at the foot of the balance sheet:
Only the balance sheet and the footnotes need to be filed at Companies House. The profit and loss account does not need to be filed.
The company does not need to produce (nor file) typical small company notes such as:
Fair value accounting and alternative accounting rules cannot be applied in micro-entity accounts, meaning no revaluations or measurement at fair value is permitted.
Contents of FRS 102 1A accounts
The financial statements of a small entity must give a true and fair view of the assets, liabilities, financial position and profit or loss of the small entity for the reporting period. A complete set of financial statements of a small entity must include all of the following:
A statement of cashflows is not required.
The following may however be required in order to show a true and fair view:
In relation to the notes of the accounts one significant exemption is available in relation to related party transactions. Only material related party transactions which are not concluded under normal market conditions will need to be considered for disclosure.
Comparison of FRS 102 1A accounts and FRS 105
The table below sets out the requirements including those encouraged for FRS 102 Section 1A and FRS 105:
|FRS 102 (Section 1A)
|Profit and loss account
|Statement of comprehensive income / Statement of total recognised gains/losses
|Statement of changes in equity / Statement of income & retained earnings / shareholders’ funds note
|Statement of cash flows
FRS 105 imposes simpler accounting treatment compared to FRS 102 Section 1A. There are numerous differences between FRS 102 Section 1A and FRS 105 but the most significant are as follows:
Revaluation / fair value of assets
Fair value accounting is not permitted under FRS 105. By contrast, FRS 102 Section 1A permits (and in some cases requires) some assets to be measured at fair value annually.
The following assets and liabilities are most significantly impacted by fair value accounting under Section 1A:
FRS 105 does not allow companies to recognise deferred tax. By contrast, FRS 102 Section 1A requires deferred tax to be provided on fair value adjustments, and therefore likely to occur more frequently than before.
How we can help
We will be very pleased to discuss the impact on your small company of which accounting standard is to be used. If you would like to discuss these issues in more detail, please contact us.