UK's smallest companies liberated from FRSSE shackles
The changes are primarily driven by the implementation of the new EU Accounting Directive in the UK
THE FRC has abolished FRSSE, the financial reporting standard for Britain’s smallest companies, and introduced a new suite of standards for micro-entities.
The historic move was formally mooted in a consultation by the accounting watchdog in February, where it announced plans to withdraw FRSSE for accounting periods beginning on or after 1 January 2016 and issue a new accounting standard for micro-entities offering “some simplifications in accounting”.
The changes have primarily been driven by the implementation of the new EU Accounting Directive in the UK and include new recognition and measurement requirements for other small companies aligned with new UK GAAP, and disclosure requirements based on the new legal framework; set to be enshrined in company law by July.
Other key changes include making the format of the profit and loss account and balance sheet in FRS 101 more flexible and allowing the use of IFRS-based presentation requirements similar to those used for group accounts.
Melanie McLaren, the FRC’s executive director of codes and standards said: “These new accounting standards support the implementation of the micro-entities regime, further simplifying accounting requirements for up to 1.5 million of the UK’s smallest entities.
“They also respond to the new legal framework for disclosure in small company reporting, providing guidance for applying it and improving transparency relating to financial instruments, and they further improve the cost-effective reduced disclosure framework for listed groups by permitting IFRS-based presentation requirements in subsidiaries’ financial statements.”
The core changes will become fully effective for accounting periods beginning on or after 1 January 2016, with early application permitted for accounting periods beginning on or after 1 January 2015.