On 29 April 2014 the Financial Reporting Council (FRC) published amendments to the Financial Reporting Standard for Smaller Entities (FRSSE) to take account of the recently implemented Small Companies (Micro-Entities' Accounts) Regulations 2013 (SI 2013/3008) (Regulations).
The Regulations permit micro-entities (the UK's smallest companies) to prepare 'abridged' financial statements with limited accompanying notes. Qualifying companies can therefore use simplified formats for their balance sheet and profit and loss account. The Regulations also introduce a presumption that the accounts give a true and fair view of the company's financial position if they comply with the minimum requirements.
The principal amendments to the FRSSE relate to the presentation and disclosure requirements for financial statements of micro-entities. The FRC took the view that without amendments to the FRSSE, micro-entities would not be able to benefit from the exemptions under the Regulations while complying with the FRSSE reporting requirements. The amendments therefore bring the FRSSE into line with the Regulations and allow micro-entities to take advantage of the new legal provisions while beingFRSSE compliant.
Following the amendments, the information that must be disclosed in the notes to the financial statements is limited to that concerning guarantees and other commitments and certain transactions with directors. In addition, the FRSSE states that micro-entities may no longer revalue any fixed assets or measure any current asset investments at current cost, which is a result of the Regulations having simplified the measurement bases available for fixed assets and certain current assets.
To benefit from the legal exemption, a micro-entity must not fall within one of the excluded categories (e.g. charities) and must meet two of the following criteria:
- turnover must not exceed £632,000;
- the balance sheet total must not exceed £316,000; and
- the average number of employees must not be more than 10.
The FRC anticipates a more comprehensive review of the FRSSE once the remainder of the EU Accounting Directive has been implemented into UK law, and accordingly notes that these amendments represent an "interim solution."
The amended version of the FRSSE is effective for companies with financial years ending on or after 30 September 2013 and which file their accounts on or after 1 December 2013.