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Technical updates - Published 6th June 2016

Are you aware of the changes to small company financial reporting?

FRS105 vs. FRS102 (Section 1A) - which one is better for your business?

FRS105 vs. FRS102 (Section 1A)

Are you a small business incorporated/registered in England & Wales?
Are Annual Financial Statements for your entity currently prepared using FRSSE (Financial Reporting Standard for Smaller Entities 2008 or 2015)?

If your answer to both the above questions is yes then you need to start thinking seriously about the various options available to you in order to make a decision on which new regime should be applied for accounting periods commencing 1 January 2016.

Entities that are below the threshold for two out of the following three qualifying conditions are considered “Micro-Entities” and will have the choice of FRS105 or FRS102 (Section 1A):

  • Turnover <£632,000
  • Balance Sheet <£316,000
  • Average number of employees < 10

There are significant changes for businesses exceeding the above thresholds but choice for those businesses is very limited.

FRS105 vs. FRS102 (Section 1A)

As is often the case, the decision about which regime to apply will depend on the circumstances of the individual entity. Many micro-entities may prefer the simplicity and exemptions available with the use of FRS105. However, this may not be the best option for all eligible businesses. For example, an ambitious business looking to exceed the above criteria in the near future, or one whose current or potential lenders require more detailed information in the financial statements than is provided by micro-entity accounts, may prefer to use FRS 102 Section 1A.

Now is the time for business owners to set aside some time for detailed discussion to ensure a correct decision is made considering all relevant factors.

or further information on FRS105 and FRS102 (Section 1A), please contact James Hadfield at jhadfield@menzies.co.uk or call 01489 566700.

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James Hadfield


James Hadfield is a Menzies Partner and heads up the business audit and compliance advisory services team from our Solent office.