FRS 102 amendments – section 1A

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members with practical tips on how the Period Review 2024 changes will affect small companies applying the presentation and disclosure requirements of Section 1A. Please note the helpsheet is written for UK companies applying the Companies Act 2006, not those applying company law in the Republic of Ireland.

Further guidance is currently being written. In the meantime, members may wish to refer to this related guidance:

• Amendments under FRS 102 - a practical approach
• FRS 102 amendments - revenue recognition
• Periodic review of UK GAAP – FAQs

In March 2024, the FRC published its Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs Periodic Review 2024 (‘the amendments’), following its public consultation in FRED 82 issued in December 2022.

The majority of the amendments are mandatorily effective for accounting periods beginning on or after 1 January 2026, with early application permitted provided all amendments are applied at the same time.

This helpsheet focuses on the amendments to the Section 1A presentation and disclosure requirements for small companies. There are a significant number of additional disclosures now required for small companies and therefore preparers of these accounts should expect most small companies’ financial statements to be longer and more detailed than under the previous version of the Standard.

Whilst the mandatory effective date is for periods beginning on or after 1 January 2026 it is worth noting that the first financial statements prepared under the new amendments will be required to provide comparative information as per paragraph 1A.10. This will extend to the comparative disclosures needing to meet the new requirements too.

This is anticipated to be one of the more impactful amendments to the Standard, along with the dividend disclosure requirements discussed below.

There have been significant revisions to para 1AC.35 which previously required disclosure of material transactions not conducted under normal market conditions with related parties as defined more narrowly than in Section 33 of the full Standard. This paragraph now reads:

“A small company shall provide the disclosures required by paragraphs 33.9 and 33.14, subject to the provisions of paragraphs 33.1A and 33.11.”

This removes the judgement of what constitutes normal market conditions and materiality, as well as expanding the definition of a related party to mirror that which non-small companies were previously using.

In practice, this means that all transactions with related parties will now be disclosed in small company accounts, unless they are between two or more members of a group where any subsidiary which is party to the transaction is wholly owned (para 33.1A), or the related party is a government, or a company connected by a government (para 33.11).

For example, all transactions with the small company’s directors, shareholders and companies controlled by the same person who controls the reporting company, will now need to be disclosed, irrespective of whether they are conducted at market rate or not.

Some small companies may have already been disclosing all related party transactions in their financial statements to comply with the requirement to provide a true and fair view, however it is expected that some companies will be making additional disclosures under the amended Standard.

For reference, paragraph 33.9 requires the disclosure of the following information:

• The nature of the related party relationship;
• The amount of the transactions;
• The amount of outstanding balances and commitments, their terms and conditions and details of any guarantees given or received;
• Provisions for any uncollectible receivables related to outstanding balances; and
• The expense recognised during the period for any bad or doubtful debts due from related parties.

Consequential amendments

Changes have been made to some disclosures required by Section 1A to reflect the amendments to lease and revenue accounting.

It will therefore be important to ensure that right-of-use assets are included in the fixed asset disclosure note which reconciles the opening net book value to the closing net book value including all movements in the year and, where they have been revalued, the appropriate disclosures are made (which have not been changed).

Small company lessees will now be required to provide a general description of their significant leasing arrangements (para 1AC.31A) and give additional disclosures on such leasing arrangements where necessary for users’ understanding (para 1AC.31B). Where the company has low-value or short-term leases, disclosure of the expenses recognised will be mandatory, along with the expense for any variable lease payments not included in lease liabilities (para 1AC.32A which points to 20.80(b) to (d)).

Detailed disclosures will be required about revenue recognition. The company must disclose when it typically satisfies its performance obligations (E.g., upon delivery or as services are rendered), the significant payment terms (including any variability in consideration and typical payment terms), and the nature of goods or services transferred by the revenue contract, including where the company is acting as agent for another party (para 1AC.32B which points to 23.135 (a) to (c)).

Share-based payments

Previously small companies had no specific mandatory disclosure requirements for share-based payment transactions, although they may have presented them to achieve a true and fair view. The amendments to FRS 102 require that the following disclosures are made (para 1AC.31D):

• A description of each type of share-based payment arrangement that existed at any time during the period (para 26.18(a))
• The number and weighted average exercise price of share options for those options outstanding at the beginning and end of the period and those exercisable at the end of the period (para 26.18(b)(i), (vi) and (vii))
• The total expense recognised in the profit and loss and the carrying amount of any liabilities at the year end (para 26.23).

Provisions and contingencies

Under the previous version of the Standard, small companies were only required to include disclosures about contingent liabilities, however, they must now include the same disclosures as a company applying full FRS 102 (para 1AC.31C).

Therefore, all small companies with provisions will be required to present a reconciliation of the opening and closing balances, along with descriptive disclosures covering the nature and timing of the obligation and any uncertainties and reimbursements.

Additionally, disclosures will be required for contingent assets and financial guarantee contracts, although these would likely have been included historically to give a true and fair view.

Taxation

Additional disclosures will now be required in respect of current and deferred tax. Para 1AC.32C requires that a small company discloses separately the major components of its tax expense or income. Examples given of categories to be shown separately include -adjustments recognised in respect of prior periods, deferred tax movements split by their cause (e.g. rate changes, timing difference reversals) and Pillar Two income tax amounts. Companies will also be required to present separately the aggregate tax amounts recognised in other comprehensive income or equity.

Para 1AC.11A requires disclosures which split out deferred tax liabilities or assets at the balance sheet date into each type of timing difference and state the amount of unused tax losses and credits where not recognised as deferred tax assets.

Dividends

Previously, it was not required and therefore uncommon for small companies to disclose dividends declared and paid or payable during the reporting period, however para 1AC.40 makes this disclosure mandatory under the amended standard.

Changes to ‘encouraged’ disclosure

Under the previous edition of the Standard, there were various ‘encouraged’ disclosures contained in Appendix E to Section 1A. Appendix C, which sets out mandatory disclosures for UK small entities, has been expanded to include the previously encouraged disclosures, along with additional mandatory disclosures. Appendix E has been amended to only apply to Republic of Ireland companies.

This is not anticipated to result in significant modifications to the financial statements as these disclosures would frequently have been presented under the previous version of FRS 102, however it is important to note that requirements have changed.

• Going concern (para 1AC.2C) – a small company is now required to include the disclosures in paras 3.8A and 3.9. In summary, where a company is a going concern it must disclose this fact, confirmation that management has considered information about the future and any significant judgements involved in the assessment. Where a company has material uncertainties that cast doubt on its ability to continue as a going concern, details of these uncertainties must be disclosed. When a company is not a going concern, this fact must be disclosed together with the reason why the entity is not a going concern.
• Compliance with FRS 102 (para 1AC.2A) – a company must include an explicit and unreserved statement of compliance with FRS 102 Section 1A.
• Public benefit company (para PBE1AC.2B) – a public benefit company must make an explicit and unreserved statement that it is a public benefit company.
• Gains or losses in other comprehensive income (para 1A.9) – the wording has been changed to emphasise that a Statement of Total Comprehensive Income may need to be presented to give a true and fair view, where previously it was simply being encouraged.
• Changes in equity other than profit/loss (para 1A.9) – the wording has been changed to emphasise that a Statement of Changes in Equity may need to be presented to give a true and fair view, as opposed to being encouraged.

Disclosures required on transition to this FRS

Existing FRS 102 1a preparers will need to include in the first set of financial statements applying the amendments to FRS 102 the following specific disclosures:

• A description of the nature of each change in accounting policy – we expect as a minimum this will include changes to revenue and lease recognition (where applicable).
• A reconciliation between the equity reported under the previous edition of the Standard and the amended edition, at both the end of the previous financial year and the start of the financial year when transition occurs – these will likely be different values due to the transition exemptions available.
• A reconciliation of profit or loss for the current period determined under the amended and the previous edition of FRS 102.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.