What’s the difference between FRS 102 and FRS 105?

You may hear us, as accountants, mention FRS 105 or FRS 102 when we discuss your accounts, but what does this actually mean to you as a business owner and the end user of the accounts?

The accounting standards were simplified and came into effect for periods beginning on or after 1 January 2015. Out with the multiple accounting standards and in with two new condensed standards – FRS 105 and FRS 102. So, what is the difference?

FRS 105

FRS 105 is a more simplified version of FRS 102 and is intended for smaller and simpler setups. Currently, you can apply FRS 105 if you meet the following criteria:

• Annual turnover not more than £632,000
• Balance sheet total not more than £316,000
• 10 employees or fewer

FRS 105 is designed for micro entities who wish to disclose minimal information. A set of FRS 105 accounts only needs to include a simplified profit and loss statement and a balance sheet. The only disclosures included within a set of FRS 105 accounts are:

• Advances, credit, and guarantees granted to directors
• Average number of employees
• Off-balance sheet arrangements
• Financial commitments, guarantees, and contingencies

The profit and loss statement does not get filed at Companies House.

FRS 102

FRS 102 has two versions – FRS 102 1A. and FRS 102.

FRS 102 1A is intended for small entities that fall under the small companies criteria in accordance with the Companies Act. FRS 102 1A is an adaptation of the full standard. It applies the basic principles of FRS 102 with reduced disclosure requirements.

The accounts include a profit and loss statement, balance sheet, and disclosures to the financial statements (Although fewer than if applying full FRS 102).

Full FRS 102 relates to medium and large entities in accordance with the Companies Act thresholds, although a company can choose to adopt the full FRS 102. When applying the standard, a company has more disclosures to include in the financial statements. A cashflow statement is also included in the accounts (unless the entity is a small entity) along with profit and loss and balance sheet.

In summary, FRS 102 is suitable for larger and more complex entities that need detailed guidance, while FRS 105 is aimed at the smallest entities that benefit from simplicity and reduced compliance burdens. Due to the limited disclosures and information in a set of FRS 105 accounts, when obtaining finance, providers may require more detailed information. Our systems allow us to provide greater detail of the numbers included in the accounts and can provide a summary of results.

If you have any questions regarding your accounts and what basis they are prepared, please do not hesitate to contact us.