FRS 102 paragraph 5.2 lets a company present total comprehensive income either in a single statement of comprehensive income or in two statements: an income statement followed by a statement of comprehensive income. A company with no other comprehensive income can present only an income statement, and one whose only equity movements are profit, dividends, error corrections and policy changes can replace both statements with a statement of income and retained earnings. Small entities, and parent companies using section 408, have further options.
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What does FRS 102 actually require?
Paragraph 5.1 requires an entity to present its total comprehensive income for a reporting period in one or two statements. Total comprehensive income is profit or loss plus other comprehensive income, the gains and losses that FRS 102 requires or permits to bypass profit or loss, such as revaluation surpluses on property, plant and equipment. Paragraph 3.17(b) sets out the same choice as part of a complete set of financial statements.
The choice is about presentation only. The same items appear and total comprehensive income is the same figure either way. What changes is where profit or loss sits and how many pages the reader turns. For background on the items involved, see other comprehensive income under FRS 102.
What does the single statement look like?
Under the single statement approach in paragraph 5.2(a), one statement presents all income and expense recognised in the period. Paragraph 5.5 requires the profit and loss account items from the relevant company law format, so the top half looks like a normal profit and loss account. Profit or loss is then a subtotal, and paragraph 5.5A requires further lines for each component of other comprehensive income classified by nature, the share of other comprehensive income of equity accounted associates and joint ventures, and total comprehensive income.
Paragraph 5.5A also allows other comprehensive income to be shown either net of tax or before tax with one aggregate tax line. In group accounts, paragraph 5.6 requires profit or loss and total comprehensive income each to be split between the non controlling interest and the owners of the parent.
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What does the two statement approach look like?
Under paragraph 5.2(b) the income statement presents every item of income and expense except those recognised outside profit or loss. Paragraph 5.2(b) notes that this income statement is what the Companies Act calls the profit and loss account. A separate statement of comprehensive income then begins with profit or loss as its first line and shows at least the items in paragraph 5.5A and the attribution of total comprehensive income (paragraph 5.7C). Where profit or loss is in the income statement, its split between non controlling interest and owners must be shown there too (paragraph 5.7B).
Paragraph 3.21 requires each financial statement to be presented with equal prominence, so the second statement cannot be relegated to the notes.
Which approach should a company choose?
FRS 102 does not prefer one over the other. Some practical points help:
- The two statement approach keeps the profit and loss account looking familiar to directors, lenders and HMRC, with other comprehensive income on a separate page.
- The single statement approach shows the whole picture in one place, which suits companies where revaluations or pension remeasurements are significant every year.
- Paragraph 5.3 says a change from one approach to the other is a change in accounting policy under Section 10, so comparatives are restated and the choice should be made with the long term in mind.
- Paragraph 5.7D requires turnover to be presented on the face of the income statement, or the statement of comprehensive income if that is the only one presented, whichever approach is used.
When can a company present only an income statement?
Paragraph 3.19 says that if an entity has no items of other comprehensive income in any of the periods presented, it may present only an income statement, or a statement of comprehensive income whose bottom line is labelled profit or loss. The test covers comparatives. A company that revalued a building in the previous year has other comprehensive income in a period presented, so it cannot drop the statement of comprehensive income this year even if nothing happened in the current year.
When does a statement of income and retained earnings replace both?
Paragraph 3.18 goes further. If the only changes to equity in the periods presented arise from profit or loss, payment of dividends, corrections of prior period errors and changes in accounting policy, the entity may present a single statement of income and retained earnings in place of both the statement of comprehensive income and the statement of changes in equity. Paragraph 6.5 lists what it adds beneath profit or loss: opening retained earnings, dividends declared and paid or payable, restatements for errors and policy changes, and closing retained earnings.
This is the format where a company shows neither a statement of comprehensive income nor a statement of changes in equity. It is lost as soon as there is any other movement in equity, such as a share issue or a revaluation. More detail is on the statement of income and retained earnings page.
What about small companies and parent companies?
Paragraph 1A.7A says a small entity applying Section 1A is not required to comply with Section 5. Paragraph 1A.8 requires only a statement of financial position, an income statement and notes. However, paragraph 1A.9(a) says a small entity that recognises gains or losses in other comprehensive income may need to present a statement of total comprehensive income to give a true and fair view. See FRS 102 Section 1A.
A parent company preparing group accounts can go further still. Section 408 of the Companies Act 2006 allows the company’s individual profit and loss account to be omitted from its annual accounts, provided it is approved by the directors under section 414(1) and the accounts disclose that the exemption applies. In that case the parent’s own accounts contain no performance statement at all, while the group statements carry the full presentation. The conditions are covered in the section 408 exemption.
This is different from the small company filing option. Section 444 lets the directors of a company subject to the small companies regime deliver the balance sheet to Companies House without the profit and loss account, but the profit and loss account must still be prepared and given to members.
How do the two layouts compare?
Illustration only. A company makes a profit after tax of £120,000 and a revaluation gain on its head office of £40,000, with £10,000 deferred tax on the gain.
| Layout | What the reader sees |
|---|---|
| Single statement | Turnover down to profit for the year £120,000, then revaluation gain £40,000, tax on it (£10,000), total comprehensive income £150,000 |
| Two statements | Income statement ending at profit for the year £120,000; separate statement starting at £120,000 and ending at £150,000 |
| Statement of income and retained earnings | Not available, because the revaluation is a change in equity outside the paragraph 3.18 list |
What mistakes come up most often?
- Using a statement of income and retained earnings when a revaluation or share issue has occurred in either year.
- Dropping the statement of comprehensive income because the current year has no other comprehensive income, while the comparative year does.
- Switching between one and two statements without treating it as a policy change.
- Describing items as extraordinary, which paragraph 5.10 prohibits for companies using the Schedule 1 formats.
- Omitting the parent’s profit and loss account under section 408 without the required disclosure.
The wider presentation rules are explained in FRS 102 financial statement presentation.
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Related Accountapedia entries
- FRS 102 Section 3: presenting financial statements
- Other comprehensive income under FRS 102
- The statement of capital explained
- Can HMRC charge two penalties for one error
- What happens when an LLP falls below two members
Sources
- Financial Reporting Council: FRS 102 September 2024 tmKYWO6
- legislation.gov.uk: Act 2006 c. 46, section 408
- legislation.gov.uk: Act 2006 c. 46, section 444
- legislation.gov.uk: Act 2006 c. 46, section 423
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.