FRED 52: ‘Draft amendments to the Financial Reporting Standard for Smaller Entities (effective April 2008) - Micro-entities


In December 2013, new regulations were introduced into UK Company Law to allow 'micro-companies' to prepare and file ‘abridged’ accounts in place of full financial statements. This legislation incorporates into UK Company Law the European Union's (EU)  “Micro-entities Directive” (link to EU website), published in March 2012, which provides scope for member states to apply a number of reduced disclosures and certain recognition exemptions for ‘micro companies’.

Following the approval of these regulations, the Financial Reporting Council (FRC) issued Financial Reporting Exposure Draft (FRED) 52, which proposed amendments to the Financial Reporting Standard for Smaller Entities (FRSSE) to enable micro-entities to comply with the FRSSE whilst taking advantage of these exemptions.

A micro-entity is defined by the regulations as a company (or group) that satisfies at least two of the following three requirements in relation to a financial year:

  • Turnover: Not more than £632,000 (pro-rated appropriately where a company’s year is shorter or longer than a calendar year);
  • Balance sheet total (i.e. gross assets): Not more than £316,000; and
  • Average number of employees: Not more than 10. 

A company must meet at least two of these limits in two consecutive years to qualify as a micro-entity and, once qualified, must exceed at least two of these limits for two consecutive years to cease to qualify.

The new regulations mean that such companies can prepare accounts using simplified formats for the balance sheet and profit and loss account and are only required to provide notes to the financial statements concerning guarantees, other financial commitments and certain transactions with directors. A set of accounts will still need to be filed at Companies House, but the profit and loss account may be excluded.

The proposed amendments to the FRSSE reflect the new primary statement formats available in the Regulations and permit micro-entities to dis-apply all presentation and disclosure requirements of the FRSSE except those that are required by the Regulations, while also deeming that the accounts give a true and fair view without this supplementary information.

Project Milestones

The regulations are now law and can be applied for periods ending on or after 30 September 2013.

FRED 52 was issued by the FRC in December 2013 with a comment period running until 12 February 2014.

Current status of the project

The FRC published amendments to the FRSSE on 29 April 2014. 

The amendments are effective for periods ending on or after 30 September 2013 for companies filing their accounts on or after 1 December 2013.


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