Interpretation and Application of UK GAAP: For Accounting Periods Commencing On or After 1 January 2015

Chapter 4Financial Reporting for Smaller Companies

1. Introduction
2. Financial Reporting Standard for Smaller Entities versus FRS 102
3. Consequential Amendments to the FRSSE (effective April 2008) Due to FRS 102
4. Micro-Entities
5. Changes to the Small Companies Regime

Introduction

Financial reporting has to be proportionate to the needs of users of the financial statements. To require a company at the smaller end of the scale to report the same level of detail as that of a blue-chip PLC would clearly be unreasonable and would result in financial information that is not relevant or appropriate to the company in question.

Companies (and groups) are classed as small or medium depending on the levels of turnover, gross assets and number of employees and these current levels (which are set for change in 2015) are summarised as follows:

Turnover	Balance sheet total	No. of employees
Small company	£6.5m	£3.26m	50
Small group	£6.5m net£7.8m gross	£3.26m net£3.9m gross	50
Medium-sized company	£25.9m	£12.9m	250
Medium-sized group	£25.9m net£31.1m gross	£12.9m net£15.5m gross	250

The size limits above determine whether a business is deemed as ‘small’ in the eyes of the Companies Act 2006 and thus eligible to take advantage of reduced disclosure requirements in its financial statements. A company must satisfy two out of the three criteria above for two consecutive years before they can be classed as small. Financial statement preparers must keep in mind that in the event that the ...