Balance sheet statements for small companies and LLPs

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to understand the balance sheet statements required where small companies and LLPs take advantage of the small companies or LLPs regime in the preparation of their accounts and when taking advantage of audit exemption.

Members may also wish to refer to the following related helpsheets and guidance:

• Is an audit required for a company?
• Is a company or group small?
• Is a company micro?
• Small company filing options FAQs
• Small LLPs filing options FAQs
• Micro-entities filing options FAQs

If the accounts of a company are being prepared in accordance with either the micro-entity provisions or the provisions applicable to companies subject to the small companies regime, section 414(3) of the Companies Act 2006 requires a statement to this effect.

If the accounts of an LLP are being prepared in accordance with either the micro-entity provisions or the provisions applicable to LLPs subject to the small LLPs regime, section 414(3) of the Companies Act 2006 as applied to LLPs by SI 2008/1911, the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008, requires a statement to this effect.

There is no explicit requirement under either FRS 102 Section 1A or FRS 105 to state that the accounts have been prepared in accordance with the relevant accounting standard, but it may aid users’ understanding to do so.

Example 1 - Small company preparing accounts under FRS 102 Section 1A

The accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies regime [and FRS 102 ‘The Financial Reporting Standard Applicable in the UK and Republic of Ireland’].

Example 2 - Micro company preparing accounts under FRS 105

The accounts have been prepared in accordance with the provisions applicable to companies subject to the micro-entities regime [and FRS 105 ‘The Financial Reporting Standard Applicable to the Micro-entities Regime].

Example 3 - Small LLP preparing accounts under FRS 102 Section 1A

The accounts have been prepared in accordance with the provisions applicable to LLPs subject to the small LLPs regime [and FRS 102 ‘The Financial Reporting Standard Applicable in the UK and Republic of Ireland’].

Example 4 - Micro LLP preparing accounts under FRS 105

The accounts have been prepared in accordance with the provisions applicable to LLPs subject to the micro-entities regime [and FRS 105 ‘The Financial Reporting Standard Applicable to the Micro-entities Regime].

Eligibility for audit exemption is outside the scope of this helpsheet. Guidance can be found in the helpsheet Is an audit required for a company?

When claiming an audit exemption, the Companies Act 2006 section 475 requires a statement referring to section 477 (small companies audit exemption), section 479A (audit exemption available for subsidiary companies with UK or EEA parent guarantee or, for periods commencing after the end of the transition period (31 December 2020), a UK parent guarantee), or section 480 (dormant companies audit exemption). Additionally, a statement that the directors or members, as appropriate, acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and preparation of accounts is required. These requirements apply equally to both companies and LLPs.

In addition, for companies only (not LLPs), a statement is required to confirm that the members have not required an audit under section 476.

Example 5 - Small company taking audit exemption

For the year ended [dd Month yyyy] the company was entitled to exemption from audit under section [477/479A/480] of the Companies Act 2006.

The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476 of the Companies Act 2006.

The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of accounts.

Example 6 - Small LLP taking audit exemption

For the year ended [dd Month yyyy] the LLP was entitled to exemption from audit under section [477/479A/480] of the Companies Act 2006 (as applied by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008).

The members acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 as applied to LLPs with respect to accounting records and the preparation of accounts.

If a company is subject to the small companies regime, section 444 of the Companies Act 2006 gives the option not to file a copy of the profit and loss account or a copy of the director’s report for that year. Where the exemption from filing the profit and loss account is taken, section 444(5A(a)) requires disclosure on the balance sheet of this fact.

Section 444(5C) of the Companies Act 2006 provides an exemption from this disclosure for companies that qualify as micro-entities and prepare their accounts in accordance with the micro-entity provisions.

If an LLP is subject to the small LLPs regime, section 444 of the Companies Act 2006 as applied to LLPs by SI 2008/1911, the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 gives the option not to file a copy of the profit and loss account for that year. Where the exemption from filing the profit and loss account is taken, section 444(5A(a)) requires disclosure on the balance sheet of this fact.

Section 444(5C) of the Companies Act 2006 as applied to LLPs by SI 2008/1911, the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008, provides an exemption from this disclosure for LLPs that qualify as micro-entities and prepare their accounts in accordance with the micro-entity provisions.

Please note: where a small company or small LLP is audited, the notes to the balance sheet must also satisfy the requirements of section 444(5B). This requires disclosure of information regarding the auditor and audit report but these are not covered in detail here.

Example 7 - Small company taking exemption from filing profit & loss account

The directors of [company name] have elected not to include a copy of the profit and loss account within the financial statements, in accordance with the special provisions relating to companies subject to the small companies regime within the Companies Act 2006, s444

Example 8 - Small LLPs taking exemption from filing profit & loss account

The designated members of [LLP name] have elected not to include a copy of the profit and loss account within the financial statements, in accordance with the special provisions relating to LLPs subject to the small LLPs regime within the Companies Act 2006 (as applied by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008), Pt. 7.

The above examples are illustrative examples only. Companies and LLPs may present the above statements in a different order or with slightly different wording as appropriate.

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.