In the second of a two-part series on the micro-entity regime under FRS 105, Anne Cowley ACA looks at why micro-entities should adopt this standard, but only if they are not considering rapid expansion as the jump to fully-fledged FRS 102 will be a big one
Moving from the FRSSE to ‘old’ UK GAAP was not a sizeable step change for growing companies in the past. Most, if not all, of the underlying principles were similar, requiring little or no change on transition. The same cannot be said of the move from FRS 105 to FRS 102. Fair values will once again be required, accounting policy choices will need to be made, and the more complex accounting requirements for things like financial instruments, deferred tax and share-based payments come back into play.
So while FRS 105 may make sense for a company which does not expect to grow beyond the micro thresholds in the future, other companies will need to bear in mind that, at some point, a significant leap will need to be made to move from one standard to the next.
