Wednesday, 8 March 2017

Factsheet: FRS 105 for UK Companies

Factsheet: FRS 105 for UK Companies



The title of FRS 105 is “The Financial Reporting Standard applicable to the Micro-entities Regime”. Based on the title, one can deduce that the standard is applicable to micro-entities. Whether an entity is micro or not depends on it meeting the definition of a micro-entity under UK company law.

The entire standard is 122 pages and comprise of 28 sections or accounting topics. It is based on FRS 102 and “stripped down” to reflect the simple nature and smaller size of micro-entities.

FRS 105 is applicable for accounting periods beginning on or after 1 January 2016. Early adoption is permitted.

Definition of a Micro-Entity

According to UK company law, a micro-entity is one which does not exceed two or more of the following criteria for two consecutive years or for the current year if it is newly incorporated:

  Micro entities
Turnover (prorated if less or more than one year) £632k
Balance sheet total i.e. total assets £316k
Average number of employees 10

There are certain entities which are not eligible to apply FRS 105 despite meeting the above threshold requirements, for example public interest entities, certain financial institutions, those voluntarily preparing group accounts and those included in group accounts and charities.


Main Features of FRS 105

The key features of FRS 105 in terms of presentation and disclosure requirements are:

  • Directors’ report are not required
  • The only primary statements required are the balance sheet and the profit and loss account
  • Very limited disclosures are required in the notes presuming that the accounts still give a true and fair view by doing so. However, an entity is permitted to include additional information although it has to be consistent with the requirements of Section 1A of FRS 102.

The key features of FRS 105 in terms of recognition and measurement requirements are:

  • Assets are measured at cost
  • Deferred tax are not recognised
  • There are no accounting policy choices (which are available in FRS 102)



FRS 105 is a welcomed framework for most stand-alone “small” trading or service companies that meet the definition of a micro-entity. It simplifies the preparation of the year-end accounts which should ultimately reduce the compliance costs for companies.

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