Changes that have an impact on UK small entities that choose to apply Section 1A Small Entities of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland take effect for accounting periods beginning on or after 1 January 2026. 

As part of amendments aimed at improving clarity on which disclosures are expected to be necessary in order to present a true and fair view, changes to the requirements for disclosure of related party transactions (paragraph 1AC.35) are being introduced that seek to reduce the level of judgement involved and thereby simplify application. The changes, however, have raised questions relating specifically to the disclosure of directors’ remuneration, which the Financial Reporting Council (FRC) has sought to clarify with an update to its FRS 102 webpage.

What’s changing?

Prior to the Periodic Review 2024 amendments, small entities applying FRS 102 Section 1A were only specifically required to disclose material-related party transactions if they were not conducted under normal market conditions. The amendments broaden these requirements, however, by requiring disclosure of most related party transactions, thus intending to reduce the amount of judgement needed.

Under the revised FRS 102, UK small entities must apply paragraphs 33.9 (disclosure requirements) and 33.14 (aggregation and separate disclosure) when disclosing related party transactions. Notably though, the clarification confirms that UK small entities are not specifically required to apply paragraph 33.7, which requires disclosure of key management personnel compensation. This reflects the FRC’s intention that paragraphs 33.7 and 33.9 are complementary rather than duplicative.

Transactions with directors that fall outside the definition of key management personnel compensation (and thus outside the scope of paragraph 33.7) are expected to be disclosed under paragraph 33.9. This includes loans, purchases, sales, leases, or other arrangements that may not ordinarily fall within scope of compensation disclosures.

However, while there is no explicit requirement within FRS 102 for UK small entities to disclose directors’ remuneration, this does not mean such disclosures can be overlooked.

Legal and regulatory considerations

Even in the absence of a specific requirement within FRS 102, directors’ remuneration may still need to be disclosed under UK company law.

Specifically, Paragraph 66, Schedule 1, The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008, SI 2008/409, requires disclosure of directors’ remuneration not concluded under normal market conditions. In addition, section 393, Companies Act 2006, mandates that the financial statements of a company must give a true and fair view. To meet this requirement, entities may in certain cases need to provide additional disclosures beyond the mandatory disclosures in FRS 102. Where material, this may include directors’ remuneration.

Further ICAEW resources

To find out more about Periodic Review 2024 amendments impacting FRS 102 Section 1A small entities, explore:

• Factsheet: FRS 102 Periodic Review 2024 Amendments
• Helpsheet: FRS 102 amendments – Section 1A
• Webinar: Small and micro entities: topical reporting issues

To confirm whether an entity is eligible for the small companies regime visit:

• Entitlement to the small companies regime

To find out more about FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, visit:

• FRS 102 ICAEW standards tracker page