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[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off”][et_pb_row admin_label=”Row”][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”http://www.frs102.com/members/premium-toolkit/” type=”big” color=”red”] Return to Main Index[/button] [/et_pb_text][/et_pb_column][et_pb_column type=”1_2″][et_pb_text admin_label=”Text” background_layout=”light” text_orientation=”center” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid”] [button link=”https://uk.frs102.com/members/premium-toolkit/section-1/” type=”big” color=”red”] Return to Section 1 Home[/button] [/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section admin_label=”Section” fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″][et_pb_row admin_label=”Row”][et_pb_column type=”4_4″][et_pb_text admin_label=”Main Body Text” background_layout=”light” text_orientation=”justified” use_border_color=”off” border_color=”#ffffff” border_style=”solid”]Section 1A: Small Entities
Scope of this section
Extract from FRS102: Section 1A.1-1A.4
1A.1 This section sets out the information that shall be presented and disclosed in the financial statements of a small entity that chooses to apply the small entities regime. Unless excluded below, all of the requirements of this FRS apply to a small entity, including the recognition and measurement requirements.
1A.2 Unless a small entity chooses to apply EU-adopted IFRS, or if eligible, FRS 101, a small entity that chooses not to apply the small entities regime shall apply FRS 102 excluding Section 1A.
1A.3 References to a small entity in paragraphs 1A.4 to 1A.22 and the Appendices to Section 1A are to a small entity that chooses to apply the small entities regime.
1A.4 This section applies to all small entities applying the small entities regime, whether or not they report under the Act. Small entities that do not report under the Act shall comply with the requirements of this section, and with the Small Companies Regulations (or, where applicable, the Small LLP Regulations) where referred to in this section, except to the extent that these requirements are not permitted by any statutory framework under which such entities report.
OmniPro comment
Section 382 and 383 of the Companies Act 2006 (UK Companies Act) defines a company as a small company if it meets two out of the three of the following criteria:
Turnover- not more than £10.2 million
Balance sheet total – not more than £5.1 million
Average number of employees – not more than 50
(note these thresholds take effect from 1 January 2016 however early adoption is possible under FRS 102)
NOTE: This cannot be chosen by Republic of Ireland companies at this time as the EU Directive 2013/34 has not been enacted and therefore the small company thresholds have not been set.
NOTE: certain companies under Section 384 are excluded from using the small entities regime.
A company that meets the small company definition does not have to apply Section 1A however they can choose to do so.
True and fair view
Extract from FRS102: Section 1A.5-.1A.6
1A.5 The financial statements of a small entity shall give a true and fair view of the assets, liabilities, financial position and profit or loss of the small entity for the reporting period (Section 393 of the Act).
1A.6 A small entity may need to provide disclosures in addition to those set out in this section in order to comply with the requirement of paragraph 1A.5 (see also paragraphs 1A.16 and 1A.17).
OmniPro comment
Careful judgement will have to be applied when determining whether additional disclosures are required and should be determined on a case by case basis. Consideration should be given to the readers of the financial statements and an assessment given as to whether additional disclosures are required to give a better understanding.
Complete set of financial statements of a small entity
Extract from FRS102: Section 1A.7-1A.11, Section 1AD.1 and Section 1A.16-1A.20
1A.7 A small entity is not required to comply with the requirements of paragraphs 3.3, PBE3.3A, 3.9, 3.17, 3.18, 3.19 and 3.24(b) which relate to presentation and disclosure requirements that are not required of small companies in company law, Section 4 Statement of Financial Position, Section 5 Statement of Comprehensive Income and Income Statement, Section 6 Statement of Changes in Equity and Statement of Income and Retained Earnings and Section 7 Statement of Cash Flows.
1A.8 Instead a complete set of financial statements of a small entity shall include all of the following:
(a) a statement of financial position as at the reporting date in accordance with paragraph 1A.12;
(b) an income statement for the reporting period in accordance with paragraph 1A.14; and
(c) notes in accordance with paragraphs 1A.16 to 1A.20.
1A.9 In addition to the statements required by company law and set out in paragraph 1A.8:
(a) when a small entity recognises gains or losses in other comprehensive income it is encouraged to present a statement of total comprehensive income (see Section 5); and
(b) when a small entity has transactions with equity holders it is encouraged to present a statement of changes in equity, or a statement of income and retained earnings, (see Section 6), in order to meet the requirements of paragraph 1A.5.
1A.10 In accordance with paragraph 3.14 a small entity shall present comparative information in respect of the preceding period for all amounts presented in the current period’s financial statements, except when this FRS permits or requires otherwise.
1A.11 In accordance with paragraph 3.22 a small entity may use titles for the financial statements other than those used in this FRS as long as they are not misleading.
Notes to the financial statements
1A.16 A small entity shall present sufficient information in the notes to the financial statements to meet the requirement for the financial statements to give a true and fair view of the assets, liabilities, financial position and profit or loss of the small entity for the reporting period.
1A.17 A small entity is not required to comply with the disclosure requirements of Section 3 (to the extent set out in paragraph 1A.7) and Sections 8 to 35 of this FRS. However, because those disclosures are usually considered relevant to giving a true and fair view, a small entity is encouraged to consider and provide any of those disclosures that are relevant to material transactions, other events or conditions of the small entity in order to meet the requirement set out in paragraphs 1A.5 and 1A.16. In accordance with paragraph 3.16A a small entity need not provide a specific disclosure (including those set out in paragraph 1A.18 and Appendix C to this section) if the information is not material.
1A.18 As a minimum, where relevant to its transactions, other events and conditions, a small entity shall provide the disclosures set out in Appendix C to this section.
1A.19 The paragraphs of this FRS that are cross-referenced in Appendix C are also highlighted in those sections by including an * in the left-hand margin.
1A.20 In addition, a small entity is encouraged to make the disclosures set out in 1AD.1 to this section, which may nevertheless be necessary to give a true and fair view.
Optional
1AD.1 Where relevant to its transactions, other events and conditions, a small entity is encouraged to provide the following disclosures:
(a) a statement of compliance with this FRS as set out in paragraph 3.3, adapted to refer to Section 1A;
(b) a statement that it is a public benefit entity as set out in paragraph PBE3.3A;
(c) the disclosures relating to going concern set out in paragraph 3.9;
(d) dividends declared and paid or payable during the period (for example, as set out in paragraph 6.5(b)); and
(e) on first-time adoption of this FRS an explanation of how the transition has affected its financial position and financial performance as set out in paragraph 35.13.
OmniPro comment
The small entity regime merely provides disclosure exemptions to entities, all 35 Sections of the standard with regard to recognition and measurement must be complied with.
For entities that meet the small company criteria the following must be included in the financial statements at a minimum and additional items should be provided where it is necessary to show a true and fair view:
- profit and loss account (income statement)
- balance sheet (statement of financial position)
- Notes to the financial statements detailing (as summarised from Appendix C):
- Accounting policies (the same as full FRS 102) including the basis of preparation.
- Registered office address, number, status i.e. limited public or private company limited by shares or guarantee, and disclosure if it is being wound up where appropriate
- Details of true and fair overrides invoked
- Details of prior period adjustments as a result of prior period errors or changes in accounting policies or classifications from the prior year (disclosed on the face of the profit and loss where considered material).
- Tangible fixed assets detailing movements, depreciation, impairments, transfers etc. including details of revaluations where applicable specifying the basis of the revaluation, the year it was performed, and the qualification of the persons that valued it.
- Intangibles and goodwill detailing movements, amortisation, impairments, and details of useful economic life (stating if a default rate was used) etc.
- Investment in subsidiaries, associates and joint ventures in individual financial statements detailing additions, impairments, provisions. Where revaluations (where fair value through OCI used) performed state the basis of the valuation, the year it was performed, and the qualification of the persons that valued it and the assumptions utilised.
- Any restrictions placed on assets
- Investment property detailing movements, fair value movement, transfers etc. including details specifying the basis of the valuation, the year it was performed, and the qualification of the persons that valued it.
- Investment in other financial assets carried at cost (i.e. investments of less than 20% which cannot be valued reliably)
- Heritage assets detailing movements, amortisation, impairments etc
- Disclosure of NBV of fixed assets revalued detailing the historical cost and NBV for both periods (for intangibles and tangible fixed assets)
- Amounts of borrowing costs capitalised in an asset where a policy of capitalisaton is applied
- Fair value movements posted to the profit and loss
- Treatment for taxation purposes of amounts posted to the revaluation reserve
- Intangible assets detailing movements, amortisation, impairments etc.
- Financial instruments and other assets measured at fair value detailing the terms and conditions that may affect timing etc. – e.g. investments which have less than a significant influence, forward contracts, interest rate swaps etc,
- Cash flow hedge/fair value hedge reserve detailing amounts at the beginning and end of the period and the taxation effect of the postings (movement into and out of the reserve in the period)
- Financial commitments, guarantees and contingencies
- Advance, credits and guarantees to directors including the amount, conditions, amounts written off, waived and repaid
- Related party transactions (other than those with 100% companies in the group)
- Name and registered office of the undertaking drawing up the lowest level of consolidated financial statements in which the entity is included if applicable including the place of business
- Disclosure of exceptional items in line with Section 5 (See section 5 for further details).
- Off balance sheet arrangements
- Post balance sheet events (Section 32 disclosures)
- Impairment of all types of fixed assets or any reversals
- Average number of employees employed during the year
- Auditors remuneration for audit of company only
In appendix C, OmniPro has provided examples of disclosures which will meet the above requirements.
NOTE: the above are the minimum requirements. A small entity is encouraged to provide the disclosures stated in Section 1AD.1 as detailed above in order to allow financial statements to show a true and fair view, these are:
- Statement of compliance with FRS 102 for small entities
- Going concern disclosures
- Details of dividends paid/payable
- Details of adjustments posted on transition to FRS 102.
Further disclosure should be provided where they are material.
Information to be presented in the statement of financial position
Extract from FRS102: Section 1A.12-1A.13
1A.12 A small entity shall present a statement of financial position in accordance with the requirements for a balance sheet set out in either Part 1 General Rules and Formats of Schedule 1 to the Small Companies Regulations or Part 1 General Rules and Formats of Schedule 1 to the Small LLP Regulations.
1A.13 Guidance on applying these requirements is set out in Appendix A to this section, which shall be applied by a small entity.
OmniPro comment
See appendix A for our comments in relation to same. See example of the formats below on the face of the balance sheet. Note a small company can continue to apply the rules for medium and large entities in CA 2006 if it wishes.
Extract from the Balance Sheet
At 31 December 2015
|
|
CU |
CU |
|
Fixed assets |
|
|
|
Tangible assets |
XXXX |
XXXX |
|
Intangible assets |
XXXX |
XXXX |
|
Investments |
XXXX
|
XXXX
|
|
|
XXXX
|
XXXXX
|
|
Current assets |
|
|
|
Stocks |
XXXXX |
XXXXX |
|
Debtors |
XXXXX |
XXXXX |
|
Cash at bank and in hand |
XXXXX
|
XXXXX
|
|
|
XXXXX
|
XXXXX
|
|
Creditors – amounts falling due within one year |
(XXXXX)
|
(XXXXX)
|
|
Net current assets |
XXXXX
|
XXXXX
|
|
Total assets less current liabilities |
XXXXX
|
XXXXX
|
|
Creditors – amounts falling due after more than one year |
(XXXX) |
(XXXX) |
|
|
|
|
|
Provisions for liabilities |
|
|
|
Capital grants |
(XXXX) |
(XXXX) |
|
Deferred taxation |
(XXXX)
|
(XXXX)
|
|
Net assets excluding pension liability |
XXXXX |
XXXXX |
|
|
|
|
|
Defined benefit pension liability |
(XXXXX)
|
(XXXXX)
|
|
Net assets including pension liability |
XXXXXX |
XXXXXX |
|
|
|
|
|
Capital and reserves |
|
|
|
Called up share capital |
XXXXX |
XXXXX |
|
Share premium account |
XXXXX |
XXXXX |
|
Capital redemption reserve |
XXXXX |
XXXXX |
|
Revaluation reserve |
XXXXX |
XXXXX |
|
Non-distributable reserve |
XXXXX |
XXXXX |
|
Profit and loss account |
XXXXX
|
XXXXX
|
|
Equity attributable to owners of the parent company |
XXXXX |
XXXXX |
|
|
|
|
|
Non-controlling interest |
XXXXX
|
XXXXX
|
|
Total equity |
XXXXX |
XXXXX |
Information to be presented in the income statement
Extract from FRS102: Section 1A.14-1A.15
1A.14 A small entity shall present its profit or loss for a period in an income statement in accordance with the requirements for a profit and loss account set out in either Part 1 General Rules and Formats of Schedule 1 to the Small Companies Regulations or Part 1 General Rules and Formats of Schedule 1 to the Small LLP Regulations.
1A.15 Guidance on applying these requirements is set out in in Appendix B to this section, which shall be applied by a small entity.
OmniPro comment
The FRC amendments in July 2015 allows entities to layout the income statement in line with IFRS’s format. Entities can choose whichever layout it likes.
Voluntary preparation of consolidated financial statements
Extract from FRS102: Section 1A.21-1A.22
1A.21 A small entity that is a parent entity is not required to prepare consolidated financial statements.
1A.22 If a small entity that is a parent voluntarily chooses to prepare consolidated financial statements it:
(a) shall apply the consolidation procedures set out in Section 9 Consolidated and Separate Financial Statements;
(b) is encouraged to provide the disclosures set out in paragraph 9.23;
(c) shall comply so far as practicable with the requirements of Section 1A as if it were a single entity (Schedule 6 of the Small Companies Regulations, paragraph 1(1)), subject to any restrictions or exemptions set out in legislation; and
(d) shall provide any disclosures required by Schedule 6 of the Small Companies Regulations.
OmniPro comment
It is clear the consolidated financial statements can be prepared where the group meets the threshold requirements for a small company. The accounting to be adopted is that stated in Section 9-Individual and Separate Financial Statements which would also incorporate Section 19-Business combinations and Goodwill, Section 14-Investment in Associates and Section 15-Investment in Joint Ventures.
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