An entity, which is entitled to and that chooses to apply the Micro-entities Regime must apply FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime. FRS 105 is based on FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland adapted to accommodate the legal requirements of the micro-entities regime. In addition, there are simplifications to reflect the smaller size and nature of micro-entities.

• To find out whether an entity is eligible for the Micro-entities Regime visit Entitlement to the micro-entities regime.
• More information on FRS 105

Form and contents of accounts

A complete set of accounts includes:

• A statement of financial position (balance sheet), with any notes included at the foot of this statement.
• An income statement (profit and loss account).

The accounts must follow the formats set out in the micro-entity regulations.

Notes to the accounts

The following information must be disclosed, when applicable, at the foot of the balance sheet:

• Details of off-balance sheet arrangements;
• Average number of employees;
• Details of directors’ advances, credits and guarantees; and
• Additional details of any guarantees and other financial commitments.

Recognition and measurement

There are no accounting policy options under FRS 105 and accounting for deferred tax is not permitted.

Fair value accounting and the alternative accounting rules are not permitted under FRS 105 because the legal framework for micro-entity accounts prohibits the application of these rules. This means there can be no revaluations or subsequent measurement at fair value.

FRS 105 includes restrictions on capitalising certain expenses, such as borrowing or development costs. It does not permit the recognition of a surplus or deficit in a defined benefit scheme, except that agreed deficit funding must be recognised as a liability.

The Periodic Review 2024 amendments to UK Accounting Standards were issued in March 2024, with most amendments being effective for accounting periods beginning on or after 1 January 2026 (early adoption is permitted). 

Under the amendments, a five-step revenue recognition model is being introduced to FRS 102. While the same model is being introduced to FRS 105, simplifications have been made to reflect the size and nature of micro-entities. 

For further information about changes to UK GAAP, visit

• Changes to UK GAAP hub

For a summary of key differences between FRS 102 and FRS 105 visit Small and micro-entity reporting compared.

Filing requirements

A micro-entity need only file the balance sheet, including the information disclosed at the foot of the balance sheet, with the Registrar of Companies. It is not necessary to file the profit and loss account, or where applicable, the directors’ report.

Further ICAEW resources

For more in-depth analysis of the simplifications and options available to a micro entity when preparing and filing UK GAAP accounts, read the factsheet:

• Preparing and filing Micro-Entity accounts