What do micro-entity accounts have to contain?

Companies Act 2006, section 396(1): Companies Act individual accounts must comprise a balance sheet as at the last day of the financial year and a profit and loss account. Section 396(A1): the accounts must state the part of the UK in which the company is registered, its registered number, whether it is a public or a private company and whether it is limited by shares or by guarantee, its registered office address, and, where appropriate, the fact that it is being wound up.

FRS 105, Overview (iv): a micro-entity that chooses the micro-entities regime must apply FRS 105. Paragraph 3.9: a complete set of financial statements is a statement of financial position with notes at its foot, and an income statement. Paragraph 3.7: comparative information for the preceding period is given for all amounts presented. Paragraph 3.10: so, as a minimum, two of each statement and related notes. Paragraph 4.1: the statement of financial position is the balance sheet in the Act. Paragraph 5.1: the income statement is the profit and loss account in the Act.

SourcesThe law·FRC

S.I. 2008/409, Schedule 1, paragraph 1(1A): for a micro-entity, the only items that must be shown on the balance sheet are those in either balance sheet format in Section C. Section C, Format 1 lists items A to K as above. Format 2 lists, as assets, called up share capital not paid, fixed assets, current assets, and prepayments and accrued income; and, as capital, reserves and liabilities, capital and reserves, provisions for liabilities, creditors (amounts falling due within one year and after one year shown separately), and accruals and deferred income. Paragraph 2A: once a Section C format is used, the directors must use the same format in later years unless, in their opinion, there are special reasons for a change. FRS 105, paragraph 4.3, requires one of these formats.

Schedule 8, paragraph 3: fixed assets are assets intended for use on a continuing basis in the company's activities, and current assets are assets not intended for such use. Paragraph 6: a loan is treated as falling due for repayment on the earliest date on which the lender could require repayment, if the lender exercised all options and rights available. FRS 105, paragraph 4.4: a creditor is due within one year when the micro-entity does not have an unconditional right, at the end of the reporting period, to defer settlement for at least 12 months after the reporting date.

SourcesThe law·FRC

Section C profit and loss account format: A turnover; B other income; C cost of raw materials and consumables; D staff costs; E depreciation and other amounts written off assets; F other charges; G tax; H profit or loss. FRS 105, paragraph 5.3, requires this format. Schedule 1, paragraph 6: every profit and loss account other than one prepared using the Section C format must show profit or loss before taxation. FRS 105, paragraph 1.3: a micro-entity may include information additional to the minimum items.

FRS 105, paragraph 24.11: turnover excludes VAT and other similar sales taxes on taxable outputs, and VAT imputed under the flat rate VAT scheme. Paragraph 24.2 applies Section 24 to current tax only and prohibits deferred tax; paragraph 24.7: a micro-entity shall not recognise deferred tax.

SourcesThe law·FRC

S.I. 2008/409, regulation 5A: nothing in Schedules 1 to 3 requires a micro-entity's accounts to contain notes, except the information required by Schedule 1, paragraph 57. FRS 105, paragraph 6.2: a UK micro-entity's notes are presented at the foot of the statement of financial position and include information about off-balance sheet arrangements (section 410A), employee numbers (section 411), advances, credit and guarantees granted to directors (section 413), and financial commitments, guarantees and contingencies (regulation 5A and paragraph 57). Paragraph 6A.1: off-balance sheet arrangements are disclosed if the risks or benefits arising from them are material at the reporting date. Paragraph 6.1: additional disclosure is permitted but not required.

Section 413(3) and (7): the details of an advance or credit are its amount, an indication of the interest rate, its main conditions, and any amounts repaid, written off or waived. Section 413(4): the details of a guarantee are its main terms, the maximum liability the company may incur, and any amount paid or liability incurred to fulfil it. Section 413(5): the notes must also state the totals of the amounts advanced, repaid, written off and waived, and of the guarantee maximum liabilities and amounts paid or incurred. The requirements apply to every advance, credit or guarantee subsisting at any time in the financial year, whenever it was entered into. Paragraph 57: the total of financial commitments, guarantees and contingencies not included in the balance sheet, an indication of any valuable security given, and pension and group commitments stated separately.

FRS 105, paragraph 3.8: a micro-entity need not provide a specific disclosure if the information is not material, except when required by the Act regardless of materiality. Section 411(4)(a): the average counts, for each month, the persons employed under contracts of service by the company in that month. FRS 105 adds nothing on who counts. Paragraph 3.8, Section 6 and Appendix A do not say whether a nil note is needed.

SourcesThe law·FRC

Section 414(1) to (3): the annual accounts must be approved by the board and signed on its behalf by a director, on the balance sheet. For individual accounts prepared under the micro-entity provisions, the balance sheet must contain, in a prominent position above the signature, a statement to that effect. FRS 105, paragraph 3.14, says the same. Section 475(2) to (4): a company claiming audit exemption must put the required statements on the balance sheet above the signature.

Companies House's model wording: "The accounts have been prepared in accordance with the micro-entity provisions and have been delivered in accordance with the provisions applicable to companies subject to the small companies regime."

SourcesThe law·Companies House·FRC

Section 444, as it currently operates: the directors of a company subject to the small companies regime must deliver a copy of the balance sheet, and may also deliver the profit and loss account and the directors' report (section 444(1)). If either is not delivered, the filed balance sheet must contain, in a prominent position, a statement that the company's annual accounts and reports have been delivered in accordance with the provisions applicable to companies subject to the small companies regime (section 444(5)). Section 444(6): the filed balance sheet must state the name of the person who signed it on behalf of the board.

Section 415(1A): the duty to prepare a directors' report does not apply if the company qualifies as a micro-entity. GOV.UK: statutory accounts must be sent to members, Companies House and HMRC as part of the Company Tax Return, and include a directors' report unless the company is a micro-entity.

SourcesThe law·GOV.UK

Section 396(2A): the micro-entity minimum accounting items in a micro-entity's accounts are presumed to give the true and fair view required by section 396(2). Section 393(1A): where the accounts contain only those items, the directors must disregard any provision of an accounting standard that would require additional information; where they contain an additional item, the directors must have regard to any provision of an accounting standard that relates to it. FRS 105, paragraph 1.3: a micro-entity that includes additional information must have regard to any related requirement of FRS 102 Section 1A.

SourcesThe law·FRC