Accounting Framework - FRS 102 1A/102/105

For the majority of our corporate clients, we should prepare accounts under FRS 102 1A if they qualify (se below). For those that are larger than these limits, we should be using FRS102. Whist we are able to use FRS105 for our smallest corporate clients, there are a number of disadvantages to this. As such, if you do wish to use FRS105 (and qualify to do so), please confirm with the engagement principal that this is acceptable before you start the assignment.

The below is a summary of the guidance - for more detail see https://library.croneri.co.uk/cch_uk/fi/1-2. If you are not sure which framework applies or which one to use please contact the technical team. 

Introduction

There are 3 main accounting frameworks we use for preparing accounts:

  1. FRS 102 section 1A for small entities - the full accounting rules of FRS 102 apply but there are reduced disclosure requirements - most small entities will apply this framewoRK.
  2. FRS 102 for medium sized and large entities and those small entities that chose to apply it.
  3. FRS 105 for Micro Entities - this should only be used rarely for very simple companies that have applied it in the past. FRS 102 section 1A is our preferred option for small entities.

Charities, Pension Schemes and some other entities have additional guidance they must follow.

Small entity qualification criteria

For its first period, a company is small if it meets 2 of the below limits. Afterwards, a company starts or stops being small if it meets 2 of the below limits for 2 consecutive years (pro rata the turnover limit for long or short periods):

  • Turnover: £10.2m
  • Balance sheet total (fixed plus current assets): £5.1m
  • Average number of employees: 50 (actual number of people, not FTE)

Parent companies have to meet these limits plus the group they head must be small (including overseas subsidiaries).

A group is small if it meets the above criteria on a net basis (after consolidation adjustments) or these limits plus 20% for turnover and balance sheet total on a gross basis (pre consolidation adjustments).

The following cannot be small entities -

  •        Plcs, insurance companies, banking companies, e-money issuers, a MiFID investment firm or a UCITS management or companies that are a scheme funder of a Master Trust scheme.

plus entities in a group with any of the above, except plcs, or with traded companies.

Micro entities

You must qualify as a small company.

For its first period, a company is micro if it meets 2 of the below limits. Afterwards, a company starts or stops being micro if it meets 2 of the below limits for 2 consecutive years (pro rata the turnover limit for long or short periods):
  • Turnover: £632,000
  • Balance sheet total (fixed plus current assets): £316,000
  • Average number of employees: 10 (actual number of people, not FTE)

You cannot be a micro entity if you are a charity, a parent company that prepares group accounts or you are a subsidiary that is included in consolidated accounts.