FRS 105 – a new reporting regime for micro-companies
FRS 105 is a simpler reporting regime which is being introduced for a new sub-category of small company: the micro-entity.
Micro-entities will have the greatest choice in reporting, where the choice will determine what is available to other users and different forms of reporting will impact on taxes. The first consideration is eligibility and what information will be published.
The Small Companies Accounting Regulations 2013 as amended by SI 2013/3008 introduced a simpler reporting regime for a new sub-category of small company: the micro-entity. The decision to apply the micro-company provision is for the directors to make, and does not require shareholders’ approval or other formalities. The new micro-entity limits are introduced in section 484A A of Companies Act (CA) 2006 and apply to companies which need to deliver accounts for financial years ending on or after 30 September 2013.
Companies qualifying as micro-entities FRS 105 may be applied by micro-entities. A company is a micro-entity if it does not exceed at least two of the following three thresholds in relation to a financial year:
turnover does not exceed £632,000 (adjusted for periods longer or shorter than 12 months)
the balance sheet total does not exceed £316,000
the average number of employees does not exceed 10.
The criteria must be met in two consecutive years for a company to qualify as a micro-entity and must be exceeded in two consecutive years for a company to cease to qualify.
Any entity that is excluded from the small companies’ regime may not apply FRS 105. In addition the following types of entity are excluded from being treated as a micro-entity:
a) LLPs (although this is currently under review) b) charitable companies c) investment undertakings d) financial institutions e) subsidiaries that are fully consolidated in group accounts and parent companies that prepare group accounts.
Statutory requirements – balance sheet format
Balance sheet format 1
Balance sheet format 2
A Called up share capital not paid
ASSETS
B Fixed assets
A Called up share capital not paid
C Current assets
B Fixed assets
D Prepayments and accrued income
C Current assets
E Creditors: amounts falling due within one year
D Prepayments and accrued income
F Net current assets (liabilities)
G Total assets less current liabilities
LIABILITIES *
A Capital and reserves
H Creditors: amounts falling due after more than one year
B Provisions for liabilities
I Provisions for liabilities
C Creditors: amounts falling due within one year
J Accruals and deferred income
Creditors: amounts falling due after more than one year
K Capital and reserves
D Accruals and deferred income
* For companies that have adopted the amendments made by SI 2015/980 this heading is amended to CAPITAL, RESERVES AND LIABILITIES
Profit and loss account format
Turnover
Other income
Cost of raw materials and consumables
Staff costs
Depreciation and other amounts written off assets
Other charges
Tax
Profit or loss
Micro company formats are highly prescriptive. You cannot use a different description or change the order of the items; however, the addition of further lines is permitted.
‘Prepayment and accrued income’ main heading can be included within ‘other debtor’
Other debtor is a component of ‘Current assets’
‘Accrual and deferred income’ heading can be included within ‘creditors’
A micro-entity is required to prepare a profit and loss account to its members but there is no requirement to file it at Companies House.
Other information No notes to the accounts are required.
The disclosures required by CA and Small Accounting Registration Regulation (Reg) should be included at the foot of the balance sheet rather than a note. These are:
Details of any advances, credit and guarantees with directors (s413 CA2006)
Particulars of any charge of the assets to secure a liability (Reg Sch 1.57(1))
Information about contingent liability not provided for (Reg Sch 1.57(2))
The aggregate amount of contracts for capital expenditure not provided (Reg Sch 1.57(3))
Pension commitments (Reg Sch 1.57(4))
Any other financial commitment (Reg Sch 1.57(5)).
There should be a statement on the balance sheet, in a prominent place above the signature, to the effect that the accounts have been prepared in accordance with the micro-entity provisions (CA 2006 s414(3)).
No accounting policy options are available and as a result the accounts are prepared under historical cost convention with no revaluation option being available.
A micro company is not required to prepare a director’s report (SI 2015/980).
FRS 105 model accounts will be available in May 2016. If you would like to request a copy please email advisory@accaglobal.com with the subject line FRS105 accounts.
