| Turnover | Balance sheet total assets | Employees | |
| Micro-entity | £1,000,000 | £560,000 | 10 |
| Small | £15,000,000 | £7,500,000 | 50 |
| Medium | £54,000,000 | £27,000,000 | 250 |
| Large | >£54,000,000 | >£27,000,000 | >250 |
Companies must meet 2 out of the 3 criteria in both the current and preceding financial year (or first financial year only if it is the first financial year) in order to qualify for a specific size regime.*
What are the potential impacts?
Audit thresholds are linked to the small company limits above. Accordingly more entities could become audit exempt, subject to other factors such as for groups and charitable organisations. However this is also subject to impending updates to FRS 102, where significant changes to accounting for leases could uplift the values for companies’ total gross assets.
Less disclosure for companies falling down into a lower size regime, although the new Economic Crime (Transparency and Enforcement) Act places additional reporting requirements on all entities, such as the requirement for small and micro entities to file their Profit and Loss Accounts with Companies House.
More companies may choose to adopt the micro-company regime and prepare accounts under FRS 105 instead of FRS 102. Currently many companies prepare accounts under the small companies’ regime rather than the micro-entity one because of the impact on potential bank borrowing for the company or its shareholders when attempting to get a mortgage. However the changes to the thresholds, as well as changes to lease accounting within FRS 102, may cause more entities to adopt FRS 105 as an alternative.
As you can see there are many factors to consider, but one thing is clear – choosing the right accounting regime is becoming more important than ever.
* Note that other qualitative aspects may impact on this, such as for charitable entities.
Should you require any further advice then please contact your local MFW office where our teams will be pleased to help.
