March 2018 FRS 105 The Financial Reporting …

Financial Reporting Council

Standard

Accounting and Reporting

March 2018

FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime

The FRC's mission is to promote transparency and integrity in business. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.

The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it.

? The Financial Reporting Council Limited 2018 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Office: 8th Floor, 125 London Wall, London, EC2Y 5AS.

This Financial Reporting Standard contains material in which the IFRS Foundation holds copyright and which has been reproduced with its permission. The copyright notice is reproduced on page 140.

Financial Reporting Council

March 2018

FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime

FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime is an accounting standard. It is issued by the Financial Reporting Council, as a prescribed body, in respect of its application in the United Kingdom and the Republic of Ireland.

Contents

Overview

Page 3

FRS 105 The Financial Reporting Standard applicable to the

Micro-entities Regime

5

1 Scope

6

2 Concepts and Pervasive Principles

8

3 Financial Statement Presentation

14

4 Statement of Financial Position

17

5 Income Statement

19

6 Notes to the Financial Statements

20

Appendix A: Company law disclosure requirements for micro-entities

in the UK

21

Appendix B: Company law disclosure requirements for micro-entities in the

Republic of Ireland

23

7 Subsidiaries, Associates, Jointly Controlled Entities and Intermediate

Payment Arrangements

30

8 Accounting Policies, Estimates and Errors

33

9 Financial Instruments

36

10 Inventories

44

11 Investments in Joint Ventures

48

12 Property, Plant and Equipment and Investment Property

50

13 Intangible Assets other than Goodwill

55

14 Business Combinations and Goodwill

58

15 Leases

59

16 Provisions and Contingencies

64

Appendix: Examples of recognising and measuring provisions

68

17 Liabilities and Equity

72

18 Revenue

75

Appendix: Examples of revenue recognition under the principles in Section 18

80

19 Government Grants

86

20 Borrowing Costs

87

21 Share-based Payment

88

22 Impairment of Assets

90

23 Employee Benefits

94

24 Income Tax

99

25 Foreign Currency Translation

101

26 Events after the End of the Reporting Period

102

Financial Reporting Council 1

27 Specialised Activities

104

28 Transition to this FRS

105

Appendices

I Glossary

109

II Table of equivalence for company law terminology

123

III Note on legal requirements

124

IV Republic of Ireland legal references

126

Approval by the FRC

130

Basis for Conclusions

FRS 105 The Financial Reporting Standard applicable to the Micro-entities

Regime

131

2 FRS 105 (March 2018)

Overview

(i) The FRC's overriding objective in setting accounting standards is to enable users of accounts to receive high-quality understandable financial reporting proportionate to the size and complexity of the entity and users' information needs.

FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime (ii) FRS 105 The Financial Reporting Standard applicable to the Micro-entities Regime is an

accounting standard designed to apply to the financial statements of companies, LLPs and qualifying partnerships that qualify for, and choose to apply, the micro-entities regime. (iii) FRS 105 is based on FRS 102, but its accounting requirements are adapted to satisfy the legal requirements applicable to micro-entities and to reflect the simpler nature and smaller size of micro-entities. (iv) The application of the micro-entities regime is optional; however, a micro-entity that chooses to prepare its financial statements in accordance with the micro-entities regime is required to apply FRS 105. A company that qualifies for this regime, but chooses not to apply it, is required to apply another accounting standard. The possible options are set out in FRS 100 Application of Financial Reporting Requirements. Organisation of FRS 105 (v) FRS 105 is organised by topic with each topic presented in a separate numbered section. (vi) Terms defined in the glossary are in bold type the first time they appear in each section. (vii) This edition of FRS 105 issued in March 2018 updates the edition of FRS 105 issued in July 2015 for the following: (a) Amendments to FRS 105 The Financial Reporting Standard applicable to the

Micro-entities Regime ? Limited Liability Partnerships and Qualifying Partnerships issued in May 2016; (b) Triennial review 2017 amendments issued in December 2017; and (c) some minor typographical or presentational corrections.

Financial Reporting Council 3

4 FRS 105 (March 2018)

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