In September 2014 the FRC consulted on the future of accounting standards for micro-entities, small entities and other amendments to accounting standards necessary as result of the UK implementation of the EU Accounting Directive (“the Directive”). This followed a consultation issued by the Department for Business, Innovation and Skills (BIS) on the implementation of the Directive, which sought to consolidate existing legislation on financial reporting and reduce the regulatory burden on smaller companies. 

Following the recent government response on the UK implementation of the Directive, the FRC has now issued the following FREDs, for public comment:

FRED 58 - Draft FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime.  This introduces a single financial reporting standard for entities that qualify as micro-entities as defined by the Companies Act 2006 and choose to apply the micro-entities regime ("the regime"), introduced into UK company law in November 2013.  The draft FRS includes the presentation and disclosure requirements of the regime as set out in law.  Micro-entities will only need to provide the disclosures required by law.  The recognition and measurement requirements are based on FRS 102 with a number of significant simplifications including exempting micro–entities from having to account for complex transactions such as equity-settled share-based payments, defined benefit pension schemes and deferred tax. 

FRED 59 - Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – Small entities and other minor amendments.  This sets out the revised presentation and disclosure requirements for financial reporting by small entities in a new section of FRS 102, Section 1A Small Entities.  It is proposed that small entities will apply the recognition and measurement requirements of FRS 102 with different presentation and disclosure requirements and that this section, within FRS 102, will replace the existing Financial Reporting Standard for Smaller Entities (FRSSE).  A number of other necessary amendments are proposed to maintain consistency between FRS 102 and company law.

FRED 60 - Draft amendments to FRS 100 Application of Financial Reporting Requirements and FRS 101 Reduced Disclosure Framework.  This proposes amendments to FRS 100 to reflect the revised framework of accounting standards, including the proposed replacement of the FRSSE with a new section in FRS 102 and the proposed introduction of micro-entity accounting standard, draft FRS 105.  The FRED also proposes minor amendments to FRS 101 to maintain consistency between FRS 101 and company law.   

The FREDs take into account the feedback from the previous consultation and are consistent with the requirements outlined in the draft Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (link to draft regulations), which implement the Accounting Directive in the UK. These Regulations are expected to be debated and approved in due course, coming into force on 6 April 2015.

Finalised standards and amendments are expected to be issued in July 2015.  Once finalised, they will be effective for accounting periods beginning on or after 1 January 2016 with earlier application permitted subject to some restrictions.

Click for (all links to FRC website):

• Press release (link to FRC website)
• FRED 58: Draft FRS 105 - The Financial Reporting Standard applicable to the Micro-entities Regime
• FRED 59: Draft Amendments to FRS 102 - Small entities and other minor amendments
• FRED 60: Draft Amendments to FRS 100 and FRS 101
• Consultation Overview: FREDs 58, 59 and 60
• Deloitte's Need to know newsletter on the FREDs.