Changes to company size thresholds and amendments to accounting standards mean that some businesses may wish to take a fresh look at how they prepare their financial statements and whether their current reporting framework remains the right fit. One of the key factors behind this is the Financial Reporting Council’s (FRC) September 2024 update to FRS 102, which has important implications for small company reporting.
For accounting periods beginning on or after 1 January 2026, small companies reporting under FRS 102 will face expanded disclosure requirements. These include:
- Related party transactions, including dividends and directors’ remuneration;
- Current and deferred tax;
- Leases; and
- Revenue recognition.
The updated standard aims to improve consistency and transparency in financial reporting, but it may also necessitate updates to internal processes, systems and accounting policies.
As a result, some businesses may start to consider whether their current reporting framework remains the most appropriate, with the micro-entities regime (FRS 105) emerging as a potential alternative worth considering.
Micro vs small comparison
The decision is not simply about reducing disclosures. While micro-entity accounts offer minimal disclosures on public record and a focus on historical cost, small company accounts can provide more detailed financial information that may be valuable to lenders, investors and other stakeholders.
There is no one-size-fits-all answer. Factors such as future growth plans, financing requirements, group structures and the level of information needed from the accounts should all form part of the decision-making process.
A detailed comparison of micro v small accounting and disclosure requirements can be found here.
Guiding you through the changes
Over the coming months, our Attleborough office team will be discussing these changes with clients and helping them understand the advantages and disadvantages of each reporting framework. For some businesses, the micro-entities regime could offer a suitable alternative, while for others, remaining under FRS 102 will continue to be the most appropriate option.
If you would like to discuss what these changes mean for your business, please get in touch with one of our experts below.