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FRS105 – The new Financial Reporting Standard for Small Entities (in draft) – (aka – FRED58 at present)
The Financial Reporting Council (FRC) has recently published FRED 58, being the Exposure Draft for FRS105, which in turn will become the new FRSSE (or replace the existing FRSSE, we believe).
Comments on the Exposure Draft was due by 30 April 2015, so if you missed it, we are afraid the the train has already left the station.
In a nutshell, we have some serious conceptual and philosophical concerns the FRED 58 does not address (and staff at the FRC at a recent event in London, prior to the General Election, could not provide assurances on).
Effectively FRS 105 (as it will be know), once it is ratified and adopted in parliament, will not be IFRS ‘Lite-lite‘, although it will have some of the overall principles of Fair Value Accounting contained within it.
At a fundamental level micro-entities (* as defined below) can choose to adopt either FRS 105 or FRS 102. However, be very careful in which one you choose, as the two standards have some fundamental differences contained within them, which, later down the line (as the proverbial can is kicked up the road), might cost you additional compliance fees and time and effort, if you need to convert from FRS 105 reporting to FRS 102 (New UK GAAP).
Our concern is this:
“The overall objective of all the initiatives (driven from Brussels) is HARMONISATION. The differences in approach between FRS 105 and FRS 102 do not underscore this fundamental principle!”
Hence, our health warning:
Think and consult carefully, before adopting either standard (FRS 102 or FRS 105) if you are a micro-entity caught in the compliance reporting net.
If you have any questions or concerns, please contact any Business Accountant in our network for more details.
*Definition of a micro-entity:
Micro-entities – HMRC guidance – May 2015 (as per the HMRC web site at the post’s publishing date)
Micro-entities are very small companies. Your company will be a micro-entity if it has any 2 of the following:
a turnover of £632,000 or less
£316,000 or less on its balance sheet
10 employees or less
If your company is a micro-entity, you can:
prepare simpler accounts that meet statutory minimum requirements
send only your balance sheet with less information to Companies House
benefit from the same exemptions available to small companies