The Accounting Standards Board (ASB) is issuing 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.

There are not that many changes, but a number of them are significant. These include a 20 per cent increase in the thresholds for qualifying as a smaller company; a requirement to report separately political and charitable donations; and an increase in the threshold for reporting these donations to £2,000. The main changes are listed at note 5.

The updated FRSSE will apply for 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.

Announcing the intention to update the 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. I am therefore pleased to announce the Board’s intention to issue an updated version to reflect the impact of the Companies Act 2006.”

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. These are 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) will incorporate 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 website, reconciling individual paragraphs in the FRSSE to their legislative source, is also being updated. 
5. The main changes being made to the FRSSE are as follows: Insert new 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);
   
   
   • Insert requirement to disclose details of any liability limitation agreement (where the accounts are subject to audit);
     
   • Delete requirement for disclosure of authorised share capital;
     
   • Change text for transactions with directors – ‘Loans, quasi-loans, credit transactions and guarantees’ now referred to as ’Advances, credits and guarantees;
     
   • Delete text for Directors’ interests – as no longer a requirement for companies to maintain a Register of Interests;
     
   • Separate out new requirement for disclosure of ‘political donations and expenditure’ from ‘charitable donations’ and insert £2,000 (to reflect increase in reporting threshold from £200); and
     
   • Insert new requirement for disclosures regarding Independent election candidates.
     
6. The intention is to publish the FRSSE (effective April 2008) before the end of May 2008. Once published, the updated FRSSE will be made available free of charge on the ASB’s website at: www.frc.org.uk/asb/technical/frsse.cfm. Hard copies will be available, price £10.00 (post-free) from ASB Publications, 145 London Road, Kingston Upon Thames, Surrey, KT2 6SR (020 8247 1274). www.asbpublications.com.
7. The ASB is an operating body of the Financial Reporting Council, the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. The FRC’s functions are exercised principally by its operating bodies (the ASB, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy Discipline and Investigation Board) and by the Committee on Corporate Governance. 
8. 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. 
9. 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. 
10. 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. 
11. Press enquiries should be directed to: Ian Mackintosh (Chairman) on 020 7492 2434, David Loweth (Technical Director) on 020 7492 2420 or Alan O’Connor (Project Director) on 020 7492 2421.