The financial reporting framework that applies to UK entities preparing financial statements is set out in FRS 100 Application of Financial Reporting Requirements. FRS 100 sets out five options for preparing financial statements:
Financial Reporting frameworks
- Any entity can report under EU adopted IFRS, except charities, and it is unlikely to be suitable for small entities.
- FRS 101 may only be applied by qualifying entities which are members of a group where the parent of that group prepares publicly available consolidated financial statements.
- All entities can choose to report under FRS 102 except those required to apply EU adopted IFRS.
- Only small or micro entities can apply FRS 102 Section 1A.
- Only micro entities can apply FRS 105.
Small and micro entities
Small and micro entities are those that meet the size conditions set out below and are not excluded from the definition as dictated by the s384 and s384B of the Companies Act 2006.
Thresholds from 1 January 2016
|Small entities||Micro entities|
|Annual turnover||£10.2m or less||£632k or less|
|Gross assets||£5.1m or less||£316k or less|
|Average number of employees||50 or less||10 or less|
An entity will qualify as a small or micro entity if:
- two or more of the thresholds are met in the current financial year; and
- two or more of the thresholds were met in the previous financial year (only applicable if the company is not a newly incorporated company)
An entity will cease to qualify as a small or micro entity if:
- two or more of the thresholds are not met in the current financial year; and
- two or more of the thresholds are not met in the prior year
A parent company will only qualify as a small entity if the group headed by it qualifies as a small group. Group limits are the same as the entity limits above if the group is looked at on a net basis ie after the elimination of group transactions. However, the gross limits are £12.2m and £6.1m for annual turnover and gross assets respectively from 1 January 2016.
A parent company will only qualify as a micro entity if the company qualifies as a micro entity and the group headed by it qualifies as a small group.