FRS 105: Simplified Financial Reporting for UK’s Micro-Entities

Are you a small business owner in the UK struggling with complex financial reporting requirements? If your business qualifies as a micro-entity, then FRS 105 might be the key to simplifying your financial reporting process.

What is FRS 105?

FRS 105 is a financial reporting standard specifically designed for micro-entities in the UK. Issued by the Financial Reporting Council (FRC), it offers a simplified approach compared to the full UK Generally Accepted Accounting Practice (UK GAAP).

Who qualifies for FRS 105?

Your business qualifies as a micro-entity if it meets two or more of the following criteria:

• Annual turnover of £632,000 or less
• Balance sheet total of £316,000 or less
• 10 employees or fewer

Benefits of Using FRS 105

• Reduced workload: FRS 105 streamlines financial reporting by allowing for less complex accounting methods. This translates to less time and resources spent on bookkeeping and filing.
• Simplified disclosures: The standard requires minimal disclosures in your financial statements, making them easier to understand for both you and external stakeholders.
• Cost-effective: By simplifying the process, FRS 105 can help you save money on accounting fees.

What does FRS 105 require?

Under FRS 105, micro-entities are required to prepare:

• Balance Sheet: This provides a snapshot of your company’s financial position at a specific point in time, showing assets, liabilities, and shareholder equity.
• Profit and Loss Account (Income Statement): This summarizes your company’s income and expenses over a specific period, highlighting your profitability.
• Footnotes: These provide explanations for any director transactions or other relevant information not readily apparent in the main statements.

Important points to remember:

• FRS 105 applies to accounting periods beginning on or after January 1, 2016.
• It’s crucial to check your eligibility for the micro-entities regime before adopting FRS 105.
• An accountant can help you ensure you’re complying with FRS 105 and maximizing its benefits for your business.