Accounting changes for small companies in their 2016 accounts
New accounting regime
For accounting years ending on or after 31 December 2016, small companies will no longer be able to use the FRSSE (Financial Reporting Standard for Smaller Entities) to prepare their accounts. Instead, two new sets of accounting rules will be introduced:
- FRS 105 – The Financial Reporting Standard applicable to the Micro-Entities’ Regime
- FRS 102 – The Financial Reporting Standard Applicable in the UK and Republic of Ireland
A micro-entity will have the choice of adopting either FRS 105 or FRS 102. A small company that is not a micro-entity must adopt FRS 102.
Micro-entity and small company size limits
Size limits for the new micro-entities have been set and the small company size limits have been increased for accounting periods ending on or after 31 December 2016:
|Condition (meet two out of three conditions to qualify)||Micro-entity||Small company|
|Gross assets (fixed assets plus current assets) (£)||316,000||5,100,000|
|Number of employees||10||50|
FRS 102 was introduced in 2015 for large and medium sized companies. A cut-down version of FRS 102 has now been written for small companies. There are many differences between accounting under the FRSSE and FRS 102. For example, an accrual may be required under FRS 102 for holiday-pay; there was no similar requirement in the FRSSE. There are also opportunities to revalue assets prior to transitioning to FRS 102 without the need to keep the valuation up to date subsequently. A full set of accounts for a small company under FRS 102 is broadly similar to that under the FRSSE.
Under FRS 105, a full set of micro-entity accounts consists of a simplified profit and loss account and balance sheet and notes to the accounts disclosing advances to directors, financial commitments, guarantees and contingencies. Other accounting principles broadly follow FRS 102, with some significant exceptions: deferred tax and assets at a valuation are not allowed.
Abbreviated accounts abolished
Under more new rules, small companies will no longer be able to file abbreviated accounts at Companies House. Abbreviated accounts for a small company currently consist of a balance sheet, a list of accounting policies and a few notes.
For years ending on or after 31 December 2016 abbreviated accounts are abolished. Instead, the “full” accounts prepared for shareholders have to be filed instead. A micro-entity and a small company will, however, be able to remove the profit and loss account and the directors’ report from their submission.
If you have any concerns regarding the introduction of the changes, or need help putting systems in place or complying with your statutory responsibilities please contact Chris Moss, on the details below:
Audit & General Practice Partner
direct dial: 01942 292587
mobile: 07973 129273