FRS 102: Section 1A Small Entities

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members understand the reporting requirements applicable to small entities in the UK reporting under FRS 102 Section 1A. Small entities choosing to prepare accounts in accordance with the small entities regime will apply the recognition and measurement requirements of FRS 102, but apply the presentation and disclosure requirements of Section 1A.

This helpsheet includes references to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (September 2024) (‘new FRS 102’) which is effective for accounting periods beginning on or after 1 January 2026 (except for paragraphs 7.20B and 7.20C which are effective for accounting periods beginning on or after 1 January 2025). This helpsheet also includes references to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (January 2022) (‘old FRS 102’) which was effective for accounting periods beginning on or after 1 January 2019, or 1 January 2017 for small entities applying Section 1A, following the Triennial review 2017.

Members may also wish to refer to the following helpsheet:

• FRS 102 Amendments – Section 1A

Old and new FRS 102 Section 1A details the presentation and disclosure requirements that are specific to small entities choosing to apply the small entities regime.

The main body of old and new FRS 102 Section 1A sets out the general requirements that apply to small entities. In particular, the financial statements of a small entity:

• Are required to give a true and fair view (old and new FRS 102.1A.5); and
• Must contain a balance sheet, a profit and loss account and notes to the financial statements (and are encouraged to contain a statement of total comprehensive income and a statement of changes in equity, or a statement of income and retained earnings, where necessary to give a true and fair view) (old and new FRS 102.1A.8).

The balance sheet and profit and loss account may be prepared in accordance with the Regulations (including the option to prepare abridged accounts) or the formats may be adapted to suit the circumstances of the small entity. Appendices A and B to old and new FRS 102 Section 1A provide details on how the formats may be adapted.

Appendix C of old and new FRS 102 sets out the mandatory minimum disclosure requirements for small entities in the UK (see below for further details). Appendix D of old and new FRS 102 sets out the mandatory minimum disclosure requirements for small entities in the Republic of Ireland – these disclosure requirements are not considered any further in this helpsheet.

Appendix E to Section 1A in old FRS 102 contains the additional disclosures encouraged for small entities in the UK (see below for further details). However, note that Appendix E to Section 1A in new FRS 102 contains the additional disclosures encouraged for small entities in the Republic of Ireland, rather than for small entities in the UK. This is as a result of the UK leaving the European Union. The encouraged requirements under new FRS 102 are not considered any further in this helpsheet.

Mandatory disclosures required for UK small entities

As mentioned above, Appendix C to Section 1A of old and new FRS 102 sets out the specific disclosures required to be given by way of note for small entities in the UK and is based on company law.

Appendix C of new FRS 102 Section 1A includes certain clarifications and new disclosure requirements. In summary, these are:

• A specific disclosure set out in Appendix C need not be provided if the information resulting from that disclosure is not material, except when required by the Act regardless of materiality (FRS 102.1AC.1). It should be noted that the extent of the disclosures to be included in a small entity set of accounts is ultimately a decision for the directors and professional judgement should be applied in determining which disclosures are material and which are necessary in order to give a true and fair view. If the prescribed disclosures of Section 1A are not considered to be sufficient in this regard, the broader disclosure requirements of other sections of FRS 102 may merit consideration.
• An explicit and unreserved statement of compliance with Section 1A to be included within the notes to the financial statements (FRS 102.1AC.2A)
• Disclosures in relation to going concern as set out in FRS 102.3.8A and 3.9 (FRS 102.1AC.2C)
• Disclosures relating to deferred tax set out in FRS 102.29.27(e) (FRS 102.1AC.11A)
• FRS 102.1AC.13 and 1AC.14 confirm that the disclosures required by those paragraphs in respect of fixed assets are also required for right-of-use assets recognised under Section 20 Leases of new FRS 102
• A lessee shall provide a general description of its significant leasing arrangements (FRS 102.1A.31A)
• If necessary to enable users to understand significant leasing arrangements, a lessee shall provide additional qualitative and quantitative information (FRS 102.1AC.31B)
• Disclosures relating to provisions and contingencies (FRS 102.1AC.31C)
• Disclosures relating to share-based payment transactions (FRS 102.1AC.31D)
• Disclosures relating to short-term leases, leases of low-value assets and variable lease payments (FRS 102.1AC.32A)
• Disclosures relating to the performance obligations in contracts with customers (FRS 102.1AC.32B)
• Disclosures relating to current tax and deferred tax (FRS 102.1AC.32C)
• Paragraph 1AC.35 contains a different disclosure requirement for related party transactions than old FRS 102.1AC.35. This is covered in more detail in our helpsheet FRS 102 amendments – section 1A
• Disclosure of dividends declared and paid or payable during the period (FRS 102.1AC.40)
• On first-time adoption of new FRS 102 a small entity shall provide an explanation of how the transition has affected its financial position and financial performance (FRS 102.1AC.41)

In summary, in addition to the above noted for new FRS 102 1A preparers, Appendix C to Section 1A of old and new FRS 102 requires the notes to include:

• The accounting policies adopted (including changes therein and correction of prior period errors);
• An explanation of any use of the true and fair override;
• A fixed assets note, including a reconciliation and revaluation table and details of any impairments to such assets;
• Fair value disclosures;
• Disclosure of amounts due or payable after more than 5 years and debts covered by valuable security;
• Disclosure of financial commitments, guarantees or contingencies not included in the balance sheet;
• The nature and business purpose of arrangements not included in the balance sheet;
• The amount and nature of individual income or expense items that are exceptional in size or incidence;
• The average number of employees during the financial year;
• The name and registered office of the undertaking drawing up the consolidated financial statements of the smallest body of undertakings of which the undertaking forms part (only applicable where the small entity is a subsidiary and is included in consolidated accounts);
• Details of certain related party transactions (as noted above, there are significant differences between old and new FRS 102 Section 1A in this regard and these are explained in our separate helpsheet: FRS 102 amendments – section 1A;
• The amount of advances and credits granted to directors and guarantees of any kind entered into by the small entity on behalf of its directors; and
• The nature and effect of post balance sheet events.

The accounts must also state:

• The part of the UK where the entity is registered;
• Its registered number;
• That it is a private company and whether it is limited by shares or guarantee;
• The address of its registered office; and
• If appropriate, the fact that the entity is being wound up.

In addition, where items to which Arabic numbers are given in any of the formats have been combined (e.g. if abridged accounts are prepared), unless they are not material, the individual amounts of any items which have been combined must be disclosed in a note to the financial statements.

Encouraged disclosures

Where relevant to its transactions, other events and conditions, a small entity in the UK is encouraged to provide the disclosures set out in Appendix E to Section 1A of old FRS 102. Such disclosures may be necessary to give a true and fair view.

The encouraged disclosures are (where relevant):

• A statement of compliance with FRS 102, adapted to refer to Section 1A;
• A statement that the entity in question is a public benefit entity;
• A disclosure relating to material uncertainties related to going concern;
• Any dividends declared and paid or payable during the relevant accounting period; and
• On first time adoption of FRS 102, an explanation of how the transition has affected the financial position and performance of the entity.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.