The Accounting Standards Board (ASB) has today issued an updated version of the Financial Reporting Standard for Smaller Entities (FRSSE) to reflect changes in company law arising from the Companies Act 2006. No changes are being made to the requirements that are based upon Generally Accepted Accounting Practice.

The updated FRSSE applies to accounting periods beginning on or after 6 April 2008; the date from which the accounting and reporting regime for smaller companies in the 2006 Act becomes effective. Early adoption is not permitted; hence smaller companies should continue to use the FRSSE (effective January 2007) for earlier accounting periods.

The main impact of the 2006 Act is to set out the accounting and reporting requirements for small companies in a separate regulation. This is largely a tidying- up exercise with few substantive changes being made. Where changes have been made, the most significant include a 20 per cent increase in the thresholds for qualifying as a smaller company; a requirement to report separately political donations and charitable donations; and an increase in the threshold for reporting these donations to £2,000.

Announcing publication of the updated FRSSE, Ian Mackintosh, Chairman of the ASB, said:

“The use of the FRSSE is widespread amongst smaller entities; hence it is important that it is kept up to date and retains its usefulness as a “one stop shop” I am therefore pleased to announce publication of an updated version to reflect the impact of the Companies Act 2006.”

The updated FRSSE is available free of charge on the ASB’s website at: www.frc.org.uk/asb/technical/frsse.cfm. Hard copies are available, price £10.00 (post-free) from FRC Publications, 145 London Road, Kingston Upon Thames, Surrey, KT2 6SR Telephone: 020 8247 1264. Email: customer.services@cch.co.uk  Website: www.frcpublications.com  

1. The FRSSE is an accounting standard that was developed specifically for smaller entities, by collecting together in one document and in simplified form the requirements from other accounting standards and UITF Abstracts that are applicable to smaller entities. It may be adopted by companies qualifying as small under companies legislation and by analogous bodies. This is generally those entities with an annual turnover of less than £5.6 million (a threshold the 2006 Companies Act has increased to £6.5 million).
2. Smaller entities that elect to comply with the FRSSE are exempt from applying all other accounting standards and UITF Abstracts. Smaller entities that do not adopt the FRSSE remain subject to the full range of accounting standards and UITF Abstracts.
3. The FRSSE (effective April 2008) incorporates the accounting requirements of United Kingdom company law with corresponding references to the legal requirements in the Republic of Ireland. References are also provided to legal requirements in the Republic of Ireland that are different or additional to those reflected in the FRSSE.
4. The derivation table on the ASB web-site, reconciling individual paragraphs in the FRSSE to their legislative source, has also been updated and is available on the ASB website at http://www.frc.org.uk/asb/technical/frsse.cfm.
5. The 2006 Companies Act provides for the Secretary of State to make regulations as to the form and content of small company accounts and reports. The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 set out these requirements which came into force on 6 April 2008. The main changes that have been made to the FRSSE to ensure that it continues to accurately reflect company law are as follows:
   • increased thresholds for companies and groups to qualify as small;
   • revised scope to reflect amended eligibility criteria (limiting the scope for small investment firms and entities such as e-money issuers to use the FRSSE);
   • a new requirement to disclose details of any liability limitation agreement (where the accounts subject to audit);
   • there is no longer a requirement for the disclosure of authorised share capital;
   • revised text for transactions with directors – ‘Loans, quasi-loans, credit transactions and guarantees’ are now referred to as ’Advances, credit and guarantees’;
   • a new requirement for separate disclosure of ‘political donations and expenditure’ and ‘charitable donations’. The threshold for reporting these donations in the directors’ report has increased to £2,000; and
   • a new requirement for disclosures in the directors’ report regarding independent election candidates.
6. The ASB is an operating body of the The Financial Reporting Council (FRC) , the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
7. The main role of the ASB is to issue accounting standards. The ASB collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both in order to influence the development of international standards and in order to ensure that its standards are developed with due regard to international developments.
8. The ASB has eleven Board members, of whom two (the Chairman and the Technical Director) are full-time, and the remainder, who represent a variety of interests, are part-time.
9. The ASB’s Committee on Accounting for Smaller Entities (CASE) advises the Board on keeping the FRSSE up to date. CASE was established in 1997 and its members represent a wide spread of interests, including practitioners, businessmen, users and others with an interest in smaller businesses.
10. Press enquiries should be directed to David Loweth (Technical Director) on 020 7492 2420 or Alan O’Connor (Project Director) on 020 7492 2421.