New standards for turnovers under £10.2m

Changes are proposed for three financial reporting exposure drafts

The Financial Reporting Council (FRC) has launched a consultation on three financial reporting exposure drafts (FREDs) that make amendments to UK GAAP and base them on the FRS 102 framework:

  • FRED 58: Draft FRS 105, The Financial Reporting Standard applicable to the Micro-entities Regime
  • FRED 59: Draft amendments to FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland – Small entities and other minor amendments
  • FRED 60: Draft amendments to FRS 100, Application of Financial Reporting Requirements and FRS 101, Reduced Disclosure Framework.

The key changes proposed in the three FREDs include:

  • the withdrawal of the FRSSE for accounting periods beginning on or after 1 January 2016
  • a new accounting standard for micro-entities (FRS 105) based on FRS 102
  • new recognition and measurement requirements for other small entities, outlined in a new section of FRS 102, but with reduced presentation and disclosure requirements compared to the full standard
  • greater flexibility in relation to the format of the profit and loss account and balance sheet in FRS 101, allowing the use of IFRS-based presentation requirements similar to those used for group accounts.

The proposals are intended to be effective for accounting periods beginning on or after 1 January 2016, with early application permitted for accounting periods beginning on or after 1 January 2015.

Companies qualifying as small under the increased Companies Act thresholds (turnover £10.2m, balance sheet total £5.1m, employees 50) will therefore be able to apply FRS 102 for small entities from 1 January 2015 rather than apply full FRS 102.

Each FRED includes a number of consultation questions relating to specific issues on which the FRC is particularly interested in receiving comments from stakeholders.

Some of the most significant questions are:

  • Should the small entities section of FRS 102 include different recognition and measurement criteria from those applicable to larger entities?
  • Should FRS 105 for micro-entities use the same language and terminology as FRS 102?
  • Is the level of simplification in FRS 105 compared with FRS 102 appropriate?
  • Is it appropriate to mandate the expensing of borrowing and development costs in FRS 105?

The consultation on the three FREDs runs up to 30 April 2015; ACCA would like its members to send in their comments to the FRC and also provide their comments to ACCA at  supportingpractitioners@accaglobal.com  

To access the consultations, visit the 'Related links' section on this page.