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COVID-19 and micro-entity accounts

1 June 2020: ICAEW’s Financial Reporting Faculty has produced a checklist to help you determine how the spread of COVID-19 might affect financial statements prepared in accordance with FRS 105.

Micro-entity accounts prepared in accordance with FRS 105 may be simpler than those prepared under FRS 102, but the implications of COVID-19 should not be underestimated. Although FRS 105 requires only very limited disclosures, the effect on the numbers can be significant and all companies are required to assess whether the going concern assumption is appropriate to the accounts.

The specific adjustments will depend on the facts and circumstances of the company, the timing of events and the availability of information at the time the accounts are finalised. There can be a lot to think about, even in a small business. The aim of the Checklist: implications of COVID-19 for the preparation of micro-entity accounts (FRS 105) is to provide an overview of the factors to consider when measuring and classifying the assets and liabilities of the business, and whether more than the minimum disclosures might be useful. 

Going concern assessments, for example, may be more challenging for management at present, given the level of economic and social uncertainty. Management will need to assess whether the business is a going concern, taking account of all information available up to the date the accounts are authorised for issue. In those circumstances that the going concern assumption is not considered appropriate, adjustments may be necessary to the carrying amounts of assets and liabilities in the financial statements. 

ICAEW has also produced a number of more specific resources which complement the checklist: