FRS 105 is the UK GAAP financial reporting standard applicable to micro-entities. If a company is a micro-entity, then more simplified accounts can be prepared which meet the statutory minimum requirements.
Qualifying conditions are met in a year in which two or more of the following criteria are not exceeded:
|2)||Balance sheet total||£316,000|
|3)||Number of employees||10|
For a company to qualify as a micro-entity, except for a newly incorporated company, the qualifying conditions must be met for two consecutive years. A company will no longer qualify as a micro-entity if it does not meet the qualifying conditions for two consecutive years.
Limited liability partnerships (LLPs) and qualifying partnerships may also prepare accounts under FRS 105, subject to qualifying criteria.
Certain companies are excluded from being treated as micro-entities, including:
- Those that are excluded from the small companies regime
- Investment undertakings
A full list of excluded companies can be found in the Companies Act 2006.
Key differences between FRS 102 and FRS 105
|FRS 102||FRS 105|
|Property, plant and equipment||Measured at cost less depreciation and impairment, or, if adopted, the revaluation accounting policy can be used for fixed assets of the same class.||Measured at cost less depreciation and impairment. No option to use the revaluation accounting policy.|
|Intangible assets||Measured at cost less amortisation and impairment, or, if adopted, the revaluation accounting policy can be used for intangible assets of the same class.||Measured at cost less amortisation and impairment. No option to use the revaluation accounting policy.|
|Development costs and borrowing costs||Dependent on certain conditions, these costs may be capitalised.||No option to capitalise.|
|Deferred tax||Deferred tax is recognised.||No deferred tax.|
|Government grants||A choice is allowed between the performance model and the accrual model.||Only the accrual model may be used.|
|Financial instruments||Split into ‘basic’ and ‘other’ instruments.||No differentiation is made between ‘basic’ and ‘other’ instruments.|
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