Once the micro company definition has been met, then that company qualifies for the micro companies regime. Once the company applies the micro companies regime, it must then apply the financial reporting standard ‘FRS 105’. FRS 105 cannot be applied currently as the micro companies regime is not included in existing company law. FRS 105 does not require any further disclosures in addition to those required by Company Law.
Under FRS 105:
- assets are not permitted to be carried at fair value or revalued amounts;
- all amounts on the balance sheet must be recognised at historic cost;
- development expenditure must be expensed;
- investment property must be depreciated;
- no deferred tax is required to be recognised.
This is a very simple standard and the financial statements will just include:
- a profit and loss account (format to be in accordance with Schedule 3B of the proposed Bill),
- a balance sheet (format to be in accordance with Schedule 3B of the proposed Bill); and
- limited notes to comply with the micro companies regime, the main ones being the disclosure of:
- the accounting policies note;
- movement and details of loans given to the directors;
- details of contingencies, guarantees and commitments;
- pension scheme accruals;
- the write off period for goodwill and the reasons for choosing it;
- dividend declared, not paid but accrued;
- a note detailing any departure from company law in order to show a true and fair view;
- a change in classification in the profit and loss or balance sheet from the prior year;
- a change of accounting estimate; and
- movement on the profit and loss reserve in the current and prior period.
Companies that apply the micro companies regime in the preparation of financial statements are deemed to show a true and fair view. No further disclosures are required.
Regarding the introduction of new schedules dealing with the format requirements for companies applying the small and micro entities regime, Schedule 3B is applicable to micro-companies.