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What is Financial Reporting Standard (FRS) 105?

The Financial Reporting Council has issued a new Financial Reporting Standard (FRS) for micro-entities called FRS 105. This replaces the previous Financial Reporting Standard for Smaller Entities (FRSSE). The new standard applies to qualifying micro-entities with financial periods commencing on or after 1st January 2016.

This new standard involves simplified financial reporting and a reduction of notes accompanying the financial statements (collectively known as accounts).

What’s changed?

FRS 105 requires all micro-entities to publish:
  • An Income Statement (replacing the previous Profit and Loss Account)

  • A Statement of Financial Position (replacing the previous Balance Sheet)

The notes you need to provide with the financial statements have also been reduced. You now only need to provide basic information on transactions involving the company’s directors.

With less information to publish and file, FRS 105 is more streamlined than its predecessor.  

What exactly is a ‘micro-entity’?

Micro-entities are defined in sections 384A and 384B of the Companies Act 2006. To qualify as a micro-entity, your business must not exceed two or more of the following criteria in a financial year. Unless you’re a newly formed company, you also need to have met these conditions for two consecutive years.   


For periods commencing on or after 1st January 2016



Balance Sheet Total


Average number of employees



A company will cease to qualify as a micro-entity if it exceeds the qualifying conditions for two consecutive years.

Please note: the turnover limit is adjusted proportionately if the financial year is longer or shorter than twelve months.

What needs to be filed with Companies House and HMRC?

Micro-entities must submit their FRS 105 accounts to Companies House and HMRC annually.  
  • Companies House requires the submission of the balance sheet and notes.

  • HMRC requires submission of the income statement, balance sheet, and notes.


Are there circumstances where FRS 105 is not appropriate for a micro-entity?

Yes. A good example of this would be if third parties have an interest in the company’s financial affairs and annual accounts. Accounts prepared under FRS 105 may not provide the level of detail that the third parties require. In these situations, companies may decide to prepare accounts under a different Financial Reporting Standard called FRS 102. This requires more detailed information to be published in the accounts, and the application of specific accounting principles that aren’t required under FRS 105. If you want to prepare your accounts under FRS 102, please contact your Client Manager.

Last Updated: 03 Aug 2018 09:25AM BST

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