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FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime

FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime is a new accounting standard applicable to the smallest entities.

Published: 16 July 2015. Effective for accounting periods beginning on or after 1 January 2016.

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FRS 105 is a single accounting standard for use by entities that are eligible for, and choose to apply the micro-entities regime. It is based on FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, although it has been adapted to accommodate the legal requirements of the micro-entities regime, for example, the prohibition on revaluing or subsequently measuring assets or liabilities at fair value. Further simplifications have also been made to reflect the nature and size of micro-entities. For example, no deferred tax or equity-settled share-based payment amounts are recognised and accounting choices set out in FRS 102 are removed.

The standard comprises 28 sections, each dealing with a specific area of accounting. FRS 105 requires that micro-entities prepare a balance sheet and profit and loss account, however other primary statements are not required. The standard requires only limited disclosures.

Who may apply the standard?

FRS 105 is applicable to entities that are eligible for, and choose to apply, the micro-entities regime.

An entity meets the size criteria for a micro-entity if it does not exceed at least two of the following three thresholds in relation to a financial year:

  • Turnover: £632,000 (adjusted for periods longer or shorter than 12 months)
  • Balance sheet: £316,000, and
  • Average number of employees: 10.

After the first financial year of the entity, the criteria must be met in two consecutive years for an entity to qualify as a micro-entity and must be exceeded in two consecutive years to cease to qualify.

Any entity that is excluded from the small companies regime (or small LLPs regime) may not apply FRS 105. In addition the following types of entity are excluded from being treated as a micro-entity: charitable companies, investment undertakings, financial institutions, subsidiaries that are fully consolidated in group accounts and parent companies that prepare group accounts.

Which version of the standard?

Annual period starts on or after 1 January 2016

In May 2016, the FRC issued amendments to FRS 105 to reflect the fact that the micro-entities regime has been extended to qualifying partnership and LLPs. An eligible qualifying partnership or LLP applying the micro-entities regime will need to refer to:


  1. Early adoption is permitted.
  2. For qualifying partnerships and LLPs - early adoption is permitted for accounting periods beginning on or after 1 January 2015.

Other resources

More information on the new financial reporting regime, including the full range of resources, is available on the new UK GAAP section of our website icaew.com/newukgaap

FRC Staff Education Notes

The FRC has issued a series of Staff Education Notes (SENs) for users of FRS 102. These illustrate some of the requirements of the standard but are not definitive statements on the application of the standard. For entities that apply FRS 105 some of the content of the SENs may be useful, but there are a number of significant differences between the recognition, measurement, presentation and disclosure requirements of FRS 102 and FRS 105.
If an entity applying FRS 105 wishes to use the SENs they need to do so by reference to FRS 105. The FRC has published a table which summarises where some of the content in the SENs may be useful for entities applying FRS 105.

This page was last updated on 12 June 2017.