FRS 105 is the Financial Reporting Standard applicable to micro-entities in the UK (issued by the Financial Reporting Council ). The accounting standard applies to the financial statements of small limited companies who choose to apply the micro-entities regime. It applies to accounting periods beginning on or after 1 January 2016.
What are the FRS 105 requirements?
The FRS 105 requires all small businesses to publish their:
You don’t need to provide as many notes with these documents anymore, just the basic information on your company director’s transactions.
What exactly is a ‘micro-entity’?
A small business qualifies as a micro entity as long as it doesn’t exceed two or more of the following criteria in a financial year:
- Turnover of over £632,000 (this is adjusted if the financial year is longer or shorter than twelve months)
- Balance sheet total of £316,000 (Fixed Assets + Current Assets)
- You should have no more than ten employees
Unless you’re a newly formed company, you also need to have met these conditions for two consecutive years. If you tick off more than two of these criteria, then you’ll no longer be considered to be a micro-entity.
What needs to be filed with Companies House and HMRC?
You’ll need to submit your FRS 105 accounts to Companies House and HMRC every year. Companies House need you to submit your statement of financial position; HMRC need the same, plus your income statement. We’ve got a helpful article that gives more information on what you need to file to Companies House and HMRC as a Director of a limited company.
Are there circumstances where FRS 105 is not appropriate for a micro-entity?
Yes. A good example of this would be if third parties have an interest in the company’s financial affairs and annual accounts. Accounts prepared under FRS 105 may not provide the level of detail that the third parties require.
In these situations, companies may decide to prepare accounts under a different Financial Reporting Standard called FRS 102. This requires more detailed information to be published in the accounts, and the application of specific accounting principles that aren’t required under FRS 105. If you’re a Crunch client and you want to prepare your accounts under FRS 102, please contact your client manager. Our Small Business limited accounting package may meet your needs.
As always, our guidance is just guidance and nothing beats getting expert individual advice. If you need help with FRS 105, you might benefit from a comprehensive accountancy service, like ours. Get in touch today.