New FRC factsheets on financial statement presentation and the going concern basis of accounting for small companies

The Financial Reporting Council (FRC) has issued two new factsheets to support entities applying FRS 102 The Financial Reporting Standard (FRS) applicable in the UK and Republic of Ireland.

The new factsheets are:

• FRS Factsheet 12 Presentation of financial statements.
• FRS Factsheet 13 The going concern basis of accounting for small companies and micro-entities.

The full suite of FRC factsheets is available here.

FRC Factsheets are designed to assist preparers but aren’t a substitute for reading the applicable accounting standards or legislation.

Purpose and scope of Factsheet 12 on financial statement presentation

This factsheet is primarily aimed at entities, which are companies or limited liability partnerships (LLPs), applying FRS 102. It also refers to considerations for entities applying FRS 101 Reduced disclosure framework or FRS 105 The FRS applicable to the micro-entities' regime. It covers the options available to preparers for presenting the financial statements when applying these standards.

The presentation requirements relevant to the scope of the factsheet are those set out in Section 4 Statement of financial position and Section 5 Statement of comprehensive income and income statement of FRS 102.

The corresponding sections in FRS 105 are Section 4 Statement of financial position and Section 5 Income statement.

The factsheet contains references to UK company law and regulations and the equivalent legal provisions relevant to LLPs.

Terminology used in the factsheet

References in company law to the ‘balance sheet’ correspond with the ‘statement of financial position’ in accounting standards, and references in company law to the ‘profit and loss account’ correspond with either the ‘statement of comprehensive income’ (if taking the ‘single-statement approach’) or the ‘income statement’ (if taking the ‘two-statement approach’) in accounting standards.

Presentation options under accounting regulations

Large and medium-sized entities, except for banking and insurance companies, have the option of applying one of two statutory formats for the balance sheet, and the profit and loss account. Alternatively, large and medium-sized entities can use an adapted balance sheet format under Section 4 of FRS 102 and/ or an adapted profit and loss account under Section 5 of FRS 102. An entity can choose to adapt the format of one of those statements or both of them.

Small entities, like large and medium-sized entities, have the option of applying one of two statutory formats for the balance sheet, and the profit and loss account. Also, for small entities applying the small entities regime and choosing to use adapted formats, there are equivalent requirements in Section 1A Small entities of FRS 102.

There’s no option under FRS 105 to apply an adapted format.

Adapted formats

FRS 102 sets out:

• The presentation and disclosure required when choosing to adapt the presentation of the balance sheet or profit and loss account (paragraphs 4.2B and 5.5B).
• The minimum line items required in the balance sheet and profit and loss account of an entity which chooses to adapt the formats (paragraphs 4.2A and 5.5B).

Small entities applying Section 1A of FRS 102 and using an adapted format to prepare their primary statements must refer to the presentation requirements set out in:

• Section 1A, Appendix A Guidance on adapting the balance sheet formats.
• Section 1A, Appendix B Guidance on adapting the profit and loss account formats.

Appendices A and B of Section 1A state the line items that should be presented when choosing to adapt the formats, similar to Section 4 and Section 5 of FRS 102.

More about an adapted balance sheet

The purpose specified in the accounting regulations for adapting the format of the balance sheet is to allow an entity to distinguish between current and non-current items in a different way. No specific purpose is identified in the accounting regulations for adapting the format of the profit and loss account.

Statutory formats include groupings in the balance sheet for fixed assets, current assets,
creditors falling due within one year and creditors falling due after one year, while adapted formats
group the balance sheet into current and non-current assets, and current and non-current liabilities.

These groups of terms aren’t interchangeable. For example, the definition of fixed assets isn’t
the same as the definition of non-current assets.

Alignment with IFRS 18

IFRS 18 Presentation and disclosure of financial statements, replaces IAS 1 Presentation of financial statements for periods beginning on or after 1 January 2027. The UK Endorsement Board (EB) is expected to adopt IFRS 18 for application in the UK for financial statement preparers applying IFRS accounting standards.

The FRC is currently consulting on proposed changes to FRS 102, including Section 1A, so that the standard continues to align with IFRS accounting standards. The proposed changes will impact on companies and LLPs using adapted formats. The IFRS 18-related changes will be subject to the UKEB’s endorsement of IFRS 18.

Purpose and scope of Factsheet 13 on going concern accounting by small companies

This factsheet is to assist preparers of small company and micro-entity financial statements in the UK in applying the going concern basis of accounting under FRS 102 or FRS 105.

Small companies and micro-entities are defined in the Companies Act 2006. The definitions include size criteria and other eligibility criteria.

Small companies, including micro-entities, can choose to apply FRS 102 or Section 1A of FRS 102. Small companies meeting the definition of a micro-entity can choose to apply FRS 105.

Factsheet 13 is likely to be helpful for other types of entities (for example, LLPs) of the same size category and applying the same accounting standards. Such entities may be subject to other requirements not covered in Factsheet 13 depending on their legal form.

There’s an emphasis throughout the factsheet on the role and responsibilities of directors in relation to going concern, including the conduct of the going concern assessment and their overarching responsibility to prepare financial statements which give a true and fair view.

Effective date of Factsheet 13

While the factsheet doesn’t specify an effective date, it does reflect the disclosure requirements in UK accounting standards relating to going concern, which include updated FRS 102, Section 1A disclosures for small companies arising from the latest Periodic review. These changes are effective for periods beginning on or after 1 January 2026 and have been incorporated into the factsheet.

Footnotes are used to reference going concern requirements within FRC 102 and FRS 105 including the updated FRS 102, Section 1A requirements which apply to accounting periods beginning on or after 1 January 2026.

Content and status of commentary used within Factsheet 13

The content of the factsheet is set out the following four sections:

• Section 1. Introduction
• Section 2. The going concern basis of accounting and material uncertainties
• Section 3. The [going concern] assessment process
• Section 4 The micro-entities regime: the going concern basis of accounting under FRS 105

The factsheet uses requirements derived from company law and accounting standards as the springboard for setting out good practice guidance and recommended ways of applying requirements. It also touches on alternative ways to perform the going concern assessment and to present information, and provides examples of issues, techniques or disclosures which may be applicable depending on the company’s specific circumstances.

Section 3 of the Factsheet also cross-references to the FRC’s Guidance on the Going Concern Basis of Accounting and Related Reporting (including Solvency and Liquidity Risks), issued in February 2025. This non-mandatory guidance is designed primarily for companies applying the UK Corporate Governance Code and non-Code companies which are large or medium-sized.

Section 2 of the factsheet sets out summaries of related requirements, where FRS 102 or Section 1A of FRS 102 is applied, under the following sub-headings:

Adoption of the going concern basis of accounting

• Material uncertainties
• The assessment period
• Reporting requirements
• Summary of [overarching] requirements

Adoption of the going concern basis of accounting

All companies must assess the appropriateness of the going concern basis of accounting when preparing their financial statements

Financial statements are normally prepared on the assumption that the company is a going concern and will continue in operation for the foreseeable future.

Companies are required to adopt the going concern basis of accounting, except in circumstances when the directors determine at the date of approval of the financial statements either that they intend to liquidate the company or to cease trading or have no realistic alternative to liquidation or cessation of operations.

Material uncertainties

FRS 102 requires directors to assess the company’s ability to continue as a going concern. As part of their assessment, the directors must determine if there are any material uncertainties relating to events or conditions that may cast significant doubt upon the company’s ability to continue as a going concern.

In performing this assessment, the directors must consider all available information about the future.

The assessment period

FRS 102 provides for a minimum period that must be reviewed by directors as part of their assessment of the going concern basis of accounting and any material uncertainties. It requires companies to consider a period of at least, but not limited to, 12 months from the date the financial statements are authorised for issue.

Reporting requirements

FRS 102 requires a company that prepares financial statements on a going concern basis to disclose that fact, together with confirmation that the directors have considered all available information about the future.

When a company doesn’t prepare financial statements on a going concern basis, it must disclose that fact, together with the basis on which it prepared the financial statements and the reason it’s not regarded as a going concern.

FRS 102 requires disclosure when the directors are aware of material uncertainties related to events or conditions that may cast significant doubt upon the company’s ability to continue to adopt the going concern basis of accounting.

A company must also disclose, in accordance with FRS 102 paragraph 8.6, any significant judgements made in assessing the company’s ability to continue as a going concern.

Summary of [overarching] requirements

Other disclosures may be required by accounting standards or company law; for example, to comply with requirements to disclose key assumptions concerning the future and other key sources of estimation uncertainty, or for the financial statements to give a true and fair view. 

The directors are responsible for ensuring that the financial statements give a true and fair view.

The financial statements of a company must give a true and fair view of the assets, liabilities, financial position and profit or loss of the company for the reporting period.

In order to give a true and fair view, financial statements may need to provide disclosures in addition to those set out in FRS 102.