FRS102A: Changes to the way company and LLP accounts will look – a quick reference guide
30/11/2016
For limited companies and LLPs with an accounting period beginning on or after 1 January changes to FRS102A mean that their annual statutory accounts will look different in future.
Additional information is needed in the new style accounts so they are likely to be longer. New formats will be introduced over the course of a transitional year and will initially involve some extra work for small businesses.
There will be various options available for presenting accounts. Company directors and LLP partners can choose which format to use. We are happy to explain the options in more detail if required.
Further details on the changes can be found below.
What has changed?
The main change for small companies and LLPs is to the appearance of their accounts information. How they maintain their books will remain mostly unchanged, although there may be some additional disclosures required in their annual statutory accounts.
Why has the layout changed?
UK company law was changed in March 2015 to take into account the EU Accounting Directive. Brexit will not change this.
Does it affect all company accounts?
Yes. This article focuses on the changes that apply to small companies and LLPs.
When does this come into effect?
It takes effect for accounting periods beginning on or after 1 January 2016. For most businesses this means accounts’ years ending 31 December 2016 or after.
Who decides which layout is used?
The decision is made by the company directors or LLP partners after considering the options and taking professional advice – please see our views below.
What options are available for the small company accounts prepared by the directors for the shareholders and partners?
There are four main options under the new rules:
- Full accounts – prepare accounts using the rules for medium/large companies. For most small businesses this will not be beneficial due to the additional information disclosed and cost of preparation.
- Simplified full accounts – these accounts look more similar to those you are used to, although there are some extra rules and disclosures required. This will probably be the choice for most eligible companies.
- Abridged accounts – these show less information than the current full accounts but the preparation process is similar. In addition, the shareholders/partners must agree to this format each year and lodge confirmation of this at Companies House.
- Micro entity accounts – the process of preparing these accounts is similar to that for simplified full accounts but they contain much less information. This has raised concerns that they will not be acceptable to suppliers, customers, banks and mortgage lenders.
Our view – For most companies, taking advantage of the simplified full accounts format will be more acceptable to suppliers, banks and customers as the accounts look similar to the previous format.
What accounts do HM Revenue and Customs need?
HM Revenue and Customs (HMRC) do not prescribe the format of company or LLP accounts but require them to be prepared in accordance with the Companies Act rules and appropriate accounting standards. All of the new accounts formats are acceptable to HMRC.
What are the filing options for Companies House?
Small companies and LLPs previously had the option to file abbreviated accounts which did not include profit & loss, but this option has been removed.
The new principal is that you ‘file what you prepare’ for shareholders and partners. This means disclosing the profit & loss account which most businesses do not want to do.
There is however a new filing option that small companies and LLPs can take advantage of. This involves reduced disclosure accounts (also known informally as filleted accounts). These mostly consist of the balance sheet and some related notes and are very similar to the abbreviated accounts which were previously filed.
Our view – it is the directors’ decision which format to file at Companies House, but for most businesses the reduced disclosure (filleted) accounts will best meet their needs.
How will this affect your accounts preparation?
There will be some additional information required to prepare the accounts. The complexity of this will vary from business to business but some examples are:
- Average number of employees in the year
- Details of any holiday not taken by employees at the year end
- Details about the repayment terms of any Directors or Related Party loans
- Operating leases such as rent or vehicle/equipment
- Deferred tax on property revaluation gains and losses
The transition year is likely to require some extra work. Future years are likely to be more of a ‘refresh’ process which should involve less work. We will discuss this with you before we prepare your accounts.
Size criteria for ‘small companies’
The following size criteria apply in deciding if a business is medium, small or micro. A business needs to exceed two out of three criteria for two consecutive years before it moves into the next band. Businesses that exceed the medium criteria are large.
| Medium | Small | Micro | |
| Annual Turnover | £36m | £10.2m | £0.632m |
| Gross Assets | £18m | £5.1m | £0.316m |
| Average number of employees | 250 | 50 | 10 |
For further information on the changes please contact Jane Spraggs.
