The required format for statutory accounts for small companies has changed. We consider the reporting requirements and their impact. At Attwoods, we can provide advice on the requirements.
The required format of statutory accounts that small companies have to prepare and send to Companies House has changed for accounting periods starting on or after 1 January 2016 (or 1 January 2015 if early adopted).
The extent of the change will vary on a company by company basis. It will depend upon the nature of the company's activities and the types of assets which it has.
This factsheet sets out the key changes and their impact and we would be happy to assist you in providing specific advice for your company.
In recent years many companies have been preparing and filing 'small company accounts' under the Financial Reporting Standard for Smaller Entities ('FRSSE'). However, for financial periods beginning on or after 1 January 2016, the FRSSE has been withdrawn and small companies, depending on size, have the following options:
Many more companies will qualify as small as a result of the substantially increased company size limits. The current size criteria below is mandatory for periods commencing on or after 1 January 2016, although earlier adoption is permitted for financial years beginning on or after 1 January 2015 (the audit exemption cannot be early adopted):
|Previous Limits||Current Limits|
The size limits to qualify as a micro-entity are set out below:
A company needs to meet two out of three of the above criteria for two consecutive years to qualify as a small or micro company, unless it is the first year of the company's existence, in which case only that year has to be considered. The turnover limit is adjusted if the financial year is longer or shorter than twelve months.
There are certain exclusions from the above small and micro-entity size limits which are set out in the Companies Act 2006. Certain types of entity are prohibited from preparing micro-entity accounts for example charities.
The previous option of filing abbreviated accounts has been withdrawn, however, small companies continue to have the option of not filing their profit and loss account and/or directors' report at Companies House.
Small companies have the option of preparing less detailed accounts (abridged accounts) for members, providing every member agrees annually, and will be able to choose to abridge the balance sheet, the profit and loss account or both. Charities are also prohibited from preparing abridged accounts.
The accounts of a micro-entity are considerably shorter and simpler than those otherwise required for a small company. Micro-companies are no longer required to prepare a Directors' report.
The profit and loss account and balance sheet include less detail. For example current assets are shown in aggregated total on the balance sheet rather than being analysed into stocks, debtors and cash.
No notes are required, instead where applicable, details of the following should be disclosed at the foot of the balance sheet:
Only the balance sheet and the footnotes need to be filed at Companies House. The profit and loss account does not need to be filed.
The company does not need to produce (nor file) typical small company notes such as:
Fair value accounting and alternative accounting rules cannot be applied in micro-entity accounts, meaning no revaluations or measurement at fair value is permitted.
The financial statements of a small entity must give a true and fair view of the assets, liabilities, financial position and profit or loss of the small entity for the reporting period.
A complete set of financial statements of a small entity must include all of the following:
As with the previous small company exemptions, a cash flow statement is not required.
The following may also be required:
In relation to the notes of the accounts one significant exemption is available in relation to related party transactions. Only material related party transactions which are not concluded under normal market conditions will need to be considered for disclosure.
The table below sets out the requirements including those encouraged for FRS 102 Section 1A and FRS 105:
|FRS 102 (Section 1A)||FRS 105|
|Profit and loss account||yes||yes|
|Statement of comprehensive income / Statement of total recognised gains/losses||Encouraged||no|
|Statement of changes in equity / Statement of income & retained earnings / shareholders' funds note||Encouraged||no|
|Statement of cash flows||no||no|
FRS 105 imposes simpler accounting treatment compared to FRS 102 Section 1A. There are numerous differences between FRS 102 Section 1A and FRS 105 but the most significant are as follows:
Fair value accounting is not permitted under FRS 105. By contrast, FRS 102 Section 1A permits (and in some cases requires) some assets to be measured at fair value annually.
The following assets and liabilities are most significantly impacted by fair value accounting under Section 1A:
FRS 105 does not allow companies to recognise deferred tax. By contrast, FRS 102 Section 1A requires deferred tax to be provided on fair value adjustments, and therefore likely to occur more frequently than before.
Please do contact us at Attwoods for guidance on the statutory requirements for small company accounts.