Section 5 – Income Statement

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Section 5 – Income Statement

Section 5 deals with the presentation of the income statement/profit and loss account. It applies to all entities that are eligible as a micro entity and that choose to apply the micro companies/entities regime.

Scope of this section

Extract from FRS 105 – Section 5.1 – 5.2

5.1 This section requires a micro-entity to present its proﬁt or loss for a period, i.e. its ﬁnancial performance for the period. It sets out the information that is to be presented in the income statement (which is referred to as the proﬁt and loss account in the Act) and how to present it.

5.2 A micro-entity is permitted, but not required, to present information additional to that required by this section. Paragraph 1.3 applies to any additional information presented.

OmniPro comment

This details how the Income Statement should be laid out. This can be called a Profit and Loss Account or an Income Statement.

Section 5 provides the minimum that needs to be included on the face of the profit and loss account. Additional items can be included in the notes to the profit and loss account however where this is done it must follow the disclosure requirements set out in the small companies regime in Section 1A of FRS 102.

Presentation of profit and loss

Extract From FRS 105 – Section 5.3 – 5.4

5.3 A micro-entity shall present its proﬁt or loss for a period in an income statement in accordance with Section C of Part 1 of Schedule 1 to the Small Companies Regulations, as follows:

5.4 Under this FRS, the effects of corrections of material errors and changes in accounting policies are presented as retrospective adjustments of prior periods rather than as part of proﬁt or loss in the period in which they arise (see Section 8 Accounting Policies, Estimates and Errors).

OmniPro comment

The layouts above are self-explanatory. The above refers to the UK Companies Act, the layout detailed above is also replicated in the micro Companies Regime Legislation in the Republic of Ireland more specifically Schedule 3B. The layout under ROI legislation is as per below:

Where there is a prior period adjustment, this must be corrected retrospectively, see section 8 for further discussion with regard to prior period adjustments and how these should be disclosed, if any.

Once the above format has been applied no further notes are required other than those stated in Section 6. Section 6 requires the notes to the financial statements to be shown on the foot of the balance sheet above the signature of the directors. See Section 6 for the specific disclosures required.

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