FRS 105 is the UK financial reporting standard for micro-entities, the smallest companies. It produces a simplified balance sheet and profit and loss account with very few notes.
Who can use it
A company that qualifies as a micro-entity and is not in an excluded category, such as a charity or an investment undertaking, can prepare its accounts under FRS 105. It is optional: a micro-entity can use FRS 102 Section 1A instead.
What is different
- Fixed formats. The balance sheet and profit and loss account follow a short prescribed layout.
- Cost only. Assets cannot be revalued or carried at fair value, so a property stays at what was paid for it.
- No deferred tax.
- Very few notes. The required disclosures, such as advances to directors and financial commitments, go at the foot of the balance sheet.
Accounts that follow FRS 105 are presumed in law to give a true and fair view.
When FRS 102 Section 1A may suit better
A company that wants to show a property at its current value, or whose lenders or investors expect fuller accounts, may prefer FRS 102 Section 1A. You can switch between the two in Tax Optimiser.
Read more: FRS 105 vs FRS 102 Section 1A, Notes under FRS 105 and Changing the accounts type.