What must a micro-entity's balance sheet, profit and loss account and notes contain?

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 requires comparative information for all amounts, so paragraph 3.10 means at least two of each statement and related notes. Paragraph 4.3 requires one of the Section C formats; paragraph 4.2 permits, but does not require, extra information. SI 2008/409, Schedule 1, paragraph 1(1A): the only items a micro-entity must show are those in the Section C formats. Paragraph 2A: the directors must use the same Section C format in later years unless in their opinion there are special reasons for a change. Paragraph 5: the directors must not include a heading for an item with no amount for the year, unless an amount can be shown for the preceding year.

Format 2 lists called up share capital not paid, fixed assets, current assets, and prepayments and accrued income under "Assets"; and capital and reserves, provisions for liabilities, creditors (amounts within one year and after one year shown separately), and accruals and deferred income under "Capital, reserves and liabilities".

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. Paragraph 3.5: presentation and classification are kept from one period to the next unless a significant change in operations or a review shows another would be more appropriate, or the standard requires a change. Paragraph 3.6: comparatives are then reclassified unless impracticable.

SourcesThe law·FRC

FRS 105 paragraph 5.3: a micro-entity presents its profit or loss in the Section C format: turnover, other income, cost of raw materials and consumables, staff costs, depreciation and other amounts written off assets, other charges, tax, and profit or loss. SI 2008/409, Schedule 1, paragraph 6: every profit and loss account, other than one prepared by reference to the Section C format, must show profit or loss before taxation. Section C gives the line headings only. Paragraph 9: in determining how amounts are presented within items, the directors must have regard to the substance of the reported transaction or arrangement.

SourcesThe law·FRC

FRS 105 paragraph 6.2: the notes are presented at the foot of the statement of financial position and include information about (a) off-balance sheet arrangements (section 410A); (b) employee numbers (section 411); (c) advances, credit and guarantees granted to directors (section 413); and (d) financial commitments, guarantees and contingencies (regulation 5A and Schedule 1 paragraph 57). Appendix A, paragraphs 6A.1 to 6A.5, sets out the detail. Paragraph 6.1: extra notes are permitted but not required. SI 2008/409, regulation 5A: the Schedules require no notes from a micro-entity except the paragraph 57 information.

Companies Act 2006, section 410A(1): applies if in any financial year a company "is or has been party to arrangements that are not reflected in its balance sheet" and "at the balance sheet date the risks or benefits arising from those arrangements are material". Section 410A(2): "the nature and business purpose of the arrangements" and "the financial impact of the arrangements on the company". Section 410A(3): the information "need only be given to the extent necessary for enabling the financial position of the company to be assessed". Section 410A(4): a company "subject to the small companies regime in relation to the financial year" need not give the financial impact.

Section 411(1): the notes "must disclose the average number of persons employed by the company in the financial year". Section 411(3) and (4): the average is the relevant annual number divided by the number of months in the financial year; the relevant annual number is found by ascertaining for each month "the number of persons employed under contracts of service by the company in that month (whether throughout the month or not)" and "adding together all the monthly numbers".

Section 413(1), (3) to (5): details of advances and credits granted to directors, and guarantees entered into on their behalf, must be shown in the notes: for an advance or credit, its amount, an indication of the interest rate, its main conditions, and any amounts repaid, written off or waived; for a guarantee, its main terms, the maximum liability, and any amount paid or liability incurred; with totals. Section 413(6) and (7): directors means persons who were directors at any time in the year, and the section applies to "every advance, credit or guarantee subsisting at any time" in the year, whenever entered into. Schedule 1, paragraph 57: the total of financial commitments, guarantees and contingencies not in the balance sheet; the nature and form of any valuable security given; pension commitments separately; and commitments for group undertakings and participating interests 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". Sections 411(1) and 413 set no materiality condition. It follows from those passages that the employee numbers note and the section 413 note cannot be left out as immaterial.

SourcesThe law·FRC

Companies Act 2006, section 414(1) to (3): the accounts must be approved by the board and signed on its behalf by a director, on the balance sheet, with the micro-entity statement in a prominent position above the signature. FRS 105 paragraph 3.14 requires the same statement. Paragraph 3.13A, following section 396(A1), requires the part of the UK in which the company is registered, its registered number, whether it is public or private and limited by shares or by guarantee, its registered office address and, where appropriate, the fact that it is being wound up. FRS 105 paragraph 1.1 and section 396(2A): the micro-entity minimum accounting items are presumed to give a true and fair view. Section 415(1A): no directors' report if the company qualifies as a micro-entity.

SourcesThe law·FRC