In 2015 the Financial Reporting Council issued a new Financial Reporting Standard (FRS) for small businesses called FRS 105, which was designed to replace the previous Financial Reporting Standard for Smaller Entities (FRSSE).
The new standard applies to qualifying small businesses with financial periods commencing on or after 1st January 2016.
FRS 105 is a simplified way of reporting finances by reducing the amount of notes that needs to accompany your financial statements when filing. We take a look at what’s changed and what you’ll need to do.
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.
With less information to publish and file, FRS 105 is more streamlined than its predecessor.
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 (net 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 criterias, then you will 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 balance sheet with notes and HMRC need the same, plus your income statement.
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.