The revenue and leasing changes within the FRS 102 periodic review continue to prompt lots of discussions on courses, but what about changes to FRS 102 section 1A for small entities? Here are some of the questions that we are commonly getting in this area: 

Since the section 1a disclosure rules are based on legislation, presumably they can’t be changed?

That’s not true. They are specifically based on the requirements of the European Union Accounting Directive from 2016. However, now the UK is no longer part of the European Union, the Financial Reporting Council (FRC), which is responsible for developing UK accounting standards (including FRS 102) can expand the disclosure requirements of FRS 102 Section 1A without legislation being passed.

What new mandatory disclosures are the FRC looking to bring in?

In short it’s looking to ‘ramp up’ the mandatory Section 1A disclosures for small entities, with particular focus on going concern, dividends, tax, related party transactions, current & deferred tax and provisions & contingencies.

Dividend disclosures looks worrying. Is that new?

Not particularly. Appendix E of section 1A has always ‘encouraged’ entities to disclose dividends paid in aggregate. The revisions (effective for periods commencing on or after 1 January 2026) now simply mandate that. Small entities don’t generally disclose the dividends figure in their ‘filleted’ accounts filed at Companies House. They include the dividends figure either in a Statement of Changes in Equity or at the foot of a Statement of Income and Retained Earnings and then remove that primary statement for filing.

Is there also a change affecting accounts filing we need to be aware of?

There is – but that has nothing to do with the periodic review. Changes being brought in by the Economic Crime and Corporate Transparency Act 2023 are going to require small and micro entity shareholder accounts to be published in full on the public record in the future, which will mean total transparency in respect of turnover, profit and dividends. However, the timescale for that legislative change is still unclear.

Haven’t related party transactions always needed to be disclosed?

Yes – but not in full. The current version of FRS 102 section 1A defaults towards only requiring transactions with certain related parties to be disclosed and, even then, only when not concluded under normal market conditions. That requirement is overridden when other related party transactions need to be disclosed in order to inform a true and fair view. However, the reality is that, since FRS 102 section 1A was introduced back in 2016, related party transaction disclosure notes for small entities have been pretty much few and far between!

That all changes now with the 2026 revisions. These will simply signpost preparers to paragraph 33.9 of ‘full’ FRS 102 for the relevant disclosures. That means that, forthwith, the disclosures for small entities will be exactly the same as for medium-sized and large entities.

Anything else to be thinking about in relation to related party transactions?

There’s currently a bit of a debate about whether the revised FRS 102 section 1A disclosure rules will require small entities to disclose key management personnel compensation or remuneration. This is due to slight ambiguity about how paragraph 33.9 should be interpreted for small entities. It seems that this additional disclosure will NOT be required for small entities and we expect a clarification statement from the FRC shortly to make that clear.

Peter Herbert

June 2025