White logo - Duncan & Toplis

Brown's Briefing - March

Stuart Brown | 28 March 2019

FRS 105

The micro-entity regime may be applicable for some smaller entities.

It allows for a reduction in the amount of information to be disclosed at Companies House and (as compliance with FRS 105 is deemed to give a true and fair view) a reduction in the decision-making process, a there are no choices relating to accounting policies.

Size Criteria

FRS 105 is applicable to entities that meet two of the following three criteria for two consecutive years:

  • Turnover not exceeding £632,000 (adjusted for periods longer or shorter than 12 months).
  • Balance sheet not exceeding £316,000; and
  • Average number of employees not exceeding 10.

Please note that some entities may be excluded from following FRS 105. Please enquire for further details.

Technical Highlights

No notes to the accounts are required, instead details of any advances, credits and guarantees with directors, any financial commitments, guarantees and contingencies, any off-balance sheet arrangements and the average number of employees should be disclosed at the foot of the balance sheet.

Additionally, the treatment of investment property is simplified and required to be carried at cost less depreciation. There is also no requirement to disclose deferred tax, no option to capitalise development costs, no recognition of equity-settled share-based payments and the only primary statements that are required are the balance sheet and profit and loss account.


In addition to a reduction in the level of information held at Companies House, the balance sheet and profit and loss account are simplified compared to FRS 102 (section 1A). There is also no requirement to include a directors' report.


Some credit reporting agencies may give lower credit ratings to entities using a reduced disclosure framework and simplified rules do mean that there are no accounting policy options, which reducing the choices of company directors.

Filing Options for Small Companies

Small companies can file filleted financial statements at Companies House.

Small companies can choose to use several different primary financial statements. Filleting the financial statements fillets removes the directors' report and profit and loss account-related primary statements.

One of the more sensitive disclosures in financial statements is the disclosure of dividends.

FRS 102 section 1A encourages small entities to produce either a statement of changes in equity (SOCE), or a statement of income and retained earnings (SOIRE) to ensure that the accounts give a true and fair view, where there are items that are disclosed through these statements, such as dividends.

Section 444 of the Companies Act 2006 is silent on whether companies electing to file filleted accounts are or are not required to also file these additional primary statements.

It is the view of the ICAEW that as these primary statements are not specifically mentioned in the Act, they are not required to be filed.

However, some groups believe that if a SOCE has been prepared in the full accounts to give a true and fair view it should be included in the filed accounts being that it is not specifically excluded and doesn't relate to the profit and loss account.

It is less debateable / controversial to remove a SOIRE on delivery to Companies House as this is primarily a profit and loss related statement and therefore removing the disclosure of dividends from the public record.


Share on LinkedIn Share on Facebook Share on X Share via Email