Let’s begin by discussing what qualifies as micro-entity and a small company.
Micro entity:
If your company has any of the 2 following, it will be classed as a micro-entity, and will be expected to file under the Financial Reporting Standard (FRS) 105, applicable in the UK and Republic of Ireland.
• a turnover of £632,000 or less
• £316,000 of less on the balance sheet
• 10 employees or less
Small company:
A small company is required to report under FRS 102, if any 2 of the following conditions are met:
• a turnover of £10.2 million or less
• £5.1 million or less on the balance sheet
• 50 employees or less
Your company size is important to note and this can be determined by the annual turnover, balance sheet total and the number of employees, as displayed above.
So, what are FRS 105 and FRS 102?
FRS 105 and FRS 102 are different reporting standards for company accounts. For the smallest company size- micro entities, FRS 105 accounting standard is used and it allows for simplified financial statements to be prepared, saving time.
This difference in requirements across the FRS 105 and FRS 102 lies in the accounting treatments and policies, including disclosure requirements.
Disclosures are additional information regarding the entity, added to the company’s financial statements. Users of the financial statements such as investors, creditors, stakeholders etc. can find such disclosures informative. If such third parties require greater detail from the accounts, FRS 102 would be advisable.
The following are few examples of companies that are unable to file as a micro entity, under FRS 105.
-limited partnership
-public limited company
-overseas company
-unregistered company
-charitable company
-qualifying partnership
The statutory accounts are known as annual accounts that companies are legally required to prepare and file at the end of the company’s financial year. You can either submit the full accounts or the abridged accounts, which are more simplified.
With abridged accounts, there is the added benefit of not having full year’ end information regarding the limited company being publicly accessible if that if what you prefer. A breakdown of the company’s debtors, creditors and fixed assets are not expected and so just the outstanding value at the end of the period is sufficient. Filleted accounts are also an option and allows companies to exclude the profit and loss statement, when submitted accounts to Companies House.
For FRS 105, the following are to be included as part of the statutory accounts:
-the profit and loss statement
-the balance sheet
The director’s report is not required and also, the accounts are exempt from audit.
For FRS 102, the following are to be included as part of the statutory accounts:
-the profit and loss statement
-the balance sheet with any notes to the accounts
-director’s report
-auditors report (unless the company has claimed exemption from audit)
My company qualifies as a micro-entity, which FRS can I file under?
If the company qualify as a micro- entity, you can file under FRS 102 or FRS 105. But if you wish to report certain accounting treatments and require greater disclosures, FRS 102 would be advisable. For example, if you would like to revalue assets, like a property, this is not allowed for under FRS 105. Instead, the properties are to be measured at cost less accumulated depreciation and impairment losses-if you wish to file under FRS 105.
How can I file as micro-entity or small company through the software?
If your company size has changed across the periods, you can easily file to accommodate for the new company size through Easy Digital. You can select the filings you require through the QuickStart option. If for the period, your company qualifies as a small company, please select small. It is always good to double check that the period auto populated is correct. As you can see, both HMRC and Companies House filing have been selected, and so you can expect all the relevant filings to be present in your account- this is once you have selected ‘get started’.
In your account, you will see the following filings:
If your entity is a micro-entity, but now qualifies as a small company, there is an exception. You can file as continue filing as a micro-entity for the period. If, for the year after, the company reverts back to being micro, you can file as a micro-entity. But, if the company continues to qualify as a small company, you will be expected to file under FRS 102 (small company accounts). It is important to note the change in company size, so that you are aware of the reporting requirements.
If you have filed under the incorrect financial reporting standard, you can file an amendment. Submitting amended filings means you replace the statutory accounts and return as required. Please note that the amended filings are to be posted to the relevant bodies, as the change in FRS cannot be filed digitally. You can download and print the relevant filings by clicking on the ‘view doc’ icon. Please remember to verify your account, so that you can view the documents. You can learn how you can submit amended filings with Companies House and HMRC through our knowledge base articles.
This article outlines the key differences between the different financial reporting standards. Filing amendments, if necessary, can be straightforward but we are always happy to help if you have any questions about this.
