The Financial Reporting Council (FRC) has issued amendments to UK accounting standards, ushering in a new financial reporting regime for small and micro entities. The changes will come into effect for accounting periods beginning on or after 1 January 2016. Early adoption is generally permitted.
Under the new framework, most small entities that currently apply the Financial Reporting Standard for Smaller Entities (FRSSE) will switch to FRS 102 The Financial Reporting Standard for the UK and Republic of Ireland. The FRSSE will be withdrawn. All entities (excluding IFRS reporters and those that opt-in to the micros regime) will now apply a single up-to-date, internationally-aligned standard.
The Financial Reporting Faculty has published a new FAQ document covering the recent changes to UK company law. Including the option for small companies to file an abbreviated version of their full accounts with Company House for period beginning on or after the 1 January 2016.
The Financial Reporting Faculty has published a special one-off publication designed to help small businesses and their advisors plan for the changes that lie ahead.
Financial Reporting Faculty members can find out more about the options under the new regime with the following ‘exploring the options’ online guidance.
The new EU Accounting Directive restricts the information that can be required in small company accounts. Therefore a new section (Section 1A Small Entities) has been added to FRS 102, setting out the different presentation and disclosure requirements applicable to such companies.
Despite the legal restriction on the information that can be mandated in small company accounts, those accounts must still give a true and fair view. Directors will need to apply their judgement when considering whether further disclosures, over and above those specifically required by the standard, may also be needed in order for the accounts to show a true and fair view. There is some guidance in the standard on this issue.
Recent changes to UK company law removed the option for small companies to file an abbreviated version of their full accounts with Companies House for periods beginning on or after 1 January 2016. Small companies are, however, still able to take advantage of certain filing options. The Financial Reporting Faculty answers frequently asked questions about the filing options available under the new small companies regime.
The new standard is based on the recognition and measurement requirements of FRS 102, amended to comply with the legal framework for micro-entities. For example, amendments have been made to accommodate the fact that the micro-entities’ regime does not permit the revaluation or subsequent measurement of assets or liabilities at fair value. FRS 105 also reflects the fact that very limited disclosures are required in micro-entity accounts.
Further simplifications have been made by the FRC that go beyond those required to comply with the law. These are significant. For example, there is no requirement to account for deferred tax or for equity-settled share-based payments prior to the issue of shares, and there are no accounting policy options.