Which accounting standard applies to my company?

FRS 105, Overview (ii): FRS 105 applies to the financial statements of companies, LLPs and qualifying partnerships that qualify for, and choose to apply, the micro-entities regime. FRS 105, Appendix III, paragraph A3.10: FRS 105 is an accounting standard, and all accounting standards issued by the Financial Reporting Council apply to financial statements intended to give a true and fair view. GOV.UK: statutory accounts must meet either International Financial Reporting Standards or New UK Generally Accepted Accounting Practice.

SourcesGOV.UK·FRC

FRS 105, Overview (iv): the application of the micro-entities regime is optional; however, a micro-entity that chooses to prepare its financial statements in accordance with the regime is required to apply FRS 105. A company that qualifies for the regime but chooses not to apply it must apply another accounting standard, with the options set out in FRS 100. FRS 105's glossary defines a micro-entity by reference to the Companies Act 2006, sections 384A and 384B.

Section 384A: the qualifying conditions are met in a year in which the company meets two or more of: turnover not more than £1 million; balance sheet total not more than £500,000; not more than 10 employees. Meeting them is enough in the first financial year; after that, a change in status needs two consecutive financial years. These figures apply to financial years beginning on or after 6 April 2025. Section 384B excludes, among others, companies excluded from the small companies regime by section 384, charities, and companies included in consolidated group accounts.

FRS 100, paragraph 4: a company that is eligible for FRS 105 but chooses not to apply it must prepare its financial statements under FRS 102, adopted IFRS or, for a qualifying entity's individual financial statements, FRS 101. FRS 102 applies to entities not applying adopted IFRS, FRS 101 or FRS 105. FRS 105, Overview (iii): it is based on FRS 102, but its accounting requirements are adapted to satisfy the legal requirements applicable to micro-entities and to reflect their simpler nature and smaller size.

SourcesThe law·FRC

FRS 102, paragraph 1A.1: Section 1A sets out the information that shall be presented and disclosed in the financial statements of a small entity that chooses to apply the small entities regime. Unless excluded, all of the requirements of FRS 102 apply to a small entity, including the recognition and measurement requirements. Section 382 sets the small company limits at £15 million turnover, £7.5 million balance sheet total and 50 employees; section 384A sets the micro-entity limits at £1 million, £500,000 and 10.

SourcesThe law·FRC

FRS 105, paragraph 12.14: a micro-entity measures all items of property, plant and equipment and investment property after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses. Paragraph 2.35: at initial recognition, assets and liabilities are measured at cost. Appendix III, paragraph A3.8: micro-entities are not permitted to apply the Alternative Accounting Rules or the Fair Value Rules, so are only permitted to apply the Historical Cost Accounting Rules. Paragraph A3.9: using a fair value to estimate cost at initial recognition does not breach that prohibition. S.I. 2008/409, regulation 3(1A): Sections C (alternative accounting rules) and D (fair value accounting) of Part 2 of Schedule 1 do not apply to a micro-entity whose accounts use the micro-entity exemptions.

FRS 102, paragraph 17.15: an entity measures property, plant and equipment using the cost model or the revaluation model; the revaluation model, if chosen, applies to all items in the same class. Paragraph 17.15B: a revalued item is carried at its fair value at the date of revaluation less subsequent depreciation and impairment, with revaluations regular enough that the carrying amount does not differ materially from fair value. Paragraph 17.15E: an increase is recognised in other comprehensive income and accumulated in equity, except that it goes to profit or loss to the extent it reverses an earlier decrease recognised there. Paragraph 17.15 does not deal with investment property.

SourcesThe law·FRC

FRS 105, paragraph 24.2: Section 24 applies to income tax comprising only current tax, and prohibits the recognition of deferred tax, which represents the future tax consequences of transactions and events recognised in the financial statements of the current and previous periods. Paragraph 24.4: a micro-entity recognises a current tax liability for tax payable on taxable profit for the current and past periods. Paragraph 24.7: a micro-entity shall not recognise deferred tax.

FRS 102, paragraph 29.6: deferred tax is recognised on all timing differences at the reporting date, subject to listed exceptions. Timing differences are differences between taxable profits and total comprehensive income that arise from including income and expenses in tax assessments in periods different from those in which they are recognised in the financial statements. Paragraph 29.8: deferred tax is recognised when the tax allowances for the cost of a fixed asset are received before or after its depreciation is recognised in profit or loss.

SourcesFRC

FRS 105, paragraph 6.2: a UK micro-entity's notes are presented at the foot of the statement of financial position, covering off-balance sheet arrangements, employee numbers, advances, credit and guarantees to directors, and financial commitments, guarantees and contingencies. Paragraph 6.1: additional disclosure is permitted but not required. Section 396(2A): the micro-entity minimum accounting items are presumed to give a true and fair view. 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.

FRS 102, paragraphs 1A.5 and 1A.6: a small entity's accounts must give a true and fair view, and it may need disclosures beyond Section 1A. Paragraph 1A.16A: as a minimum, a UK small entity gives the Appendix C disclosures relevant to it. Paragraph 1A.17A: a specific disclosure need not be given if the information is not material, except when the Act requires it regardless of materiality. Appendix C includes average employee numbers (1AC.33), related party disclosures under paragraphs 33.9 and 33.14 (1AC.35), and director advances and guarantees (1AC.36).

FRS 105 requires the Section C formats (paragraphs 4.3 and 5.3). Section 1A points to the balance sheet and profit and loss requirements in Part 1 General Rules and Formats of Schedule 1. A small entity may need a statement of total comprehensive income or of changes in equity (paragraph 1A.9). FRS 105, paragraph 3.14: the statement above the signature says the accounts are prepared in accordance with the micro-entity provisions. FRS 102, paragraph 1A.6A: it says they are prepared in accordance with the provisions applicable to companies subject to the small companies regime.

SourcesThe law·FRC