Reclassifying comparative figures

Prior year figures can be reclassified when the presentation or classification of items changes, either because a different presentation is clearly more appropriate or because a standard requires it. FRS 102 paragraph 3.12 then requires the comparatives to be reclassified unless that is impracticable, with disclosure of the nature of the reclassification, the amount of each item affected and the reason. Company law separately requires particulars of any adjustment to a corresponding amount.

When can presentation or classification be changed?

Paragraph 3.11 of FRS 102 starts from consistency: an entity must retain the presentation and classification of items from one period to the next. It may change only if:

• following a significant change in the nature of its operations, or a review of its financial statements, another presentation or classification would be more appropriate having regard to the criteria for selecting accounting policies in Section 10; or
• FRS 102 or another applicable standard requires the change.

Company law has a parallel rule for the statutory formats. Paragraph 2 of Schedule 1 to the small companies regulations (SI 2008/409) says that once a balance sheet or profit and loss format has been adopted, the directors must use the same format in later years unless in their opinion there are special reasons for a change, and particulars of the change and the reasons must be given in the note to the accounts in which the new format is first used.

A reclassification is a wish to show the same numbers better, not to change them. Typical examples are moving delivery costs from administrative expenses to cost of sales after a review, splitting a growing line out of other debtors, or regrouping creditors after a refinancing. A change made only to flatter a gross margin, or to hide a fall in one line inside another, does not meet the paragraph 3.11 test.

What has to happen to the comparatives?

Paragraph 3.12 says that when the presentation or classification of items is changed, the entity must reclassify the comparative amounts unless reclassification is impracticable. Paragraph 3.14 requires comparative information for all amounts presented in the current period, so the two years must be shown on the same basis wherever possible.

Impracticable is a high bar. The FRS 102 glossary says applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. Cost or inconvenience is not enough. If it genuinely is impracticable, for example because the prior year records needed to split a cost no longer exist, paragraph 3.13 requires the entity to disclose the reason.

Schedule 1 paragraph 7 sets the legal framework: for every item in the balance sheet and profit and loss account the corresponding amount for the preceding year must be shown, and where that amount is not comparable it may be adjusted, with particulars of the non comparability and of any adjustment disclosed in a note.

What must the note disclose?

When comparatives are reclassified, paragraph 3.12 requires:

1. the nature of the reclassification;
2. the amount of each item or class of items that is reclassified; and
3. the reason for the reclassification.

In practice the prior year column is usually headed “as reclassified” or “restated” and a short note explains what moved, between which lines, by how much and why. A table showing the original figure, the adjustment and the reclassified figure for each affected line is the clearest way to meet the amount requirement.

How is this different from a prior period adjustment?

Section 10 deals with two other reasons for changing prior year figures: a change in accounting policy and the correction of a material prior period error. Both normally change reported profit or net assets and require retrospective restatement, an adjustment to opening reserves and their own disclosures under paragraphs 10.13, 10.14 and 10.23. A pure reclassification moves amounts between captions without changing total profit or total net assets.

The distinction affects what the note must say. If last year’s classification was a mistake, for example a long term loan wrongly shown as falling due within one year, that may be a prior period error, not a voluntary reclassification, and labelling it a reclassification would understate what happened. The prior period adjustments and policies, estimates and errors pages cover those routes.

What applies to small companies?

Paragraph 3.1A exempts a small entity applying Section 1A from the disclosure requirements of paragraphs 3.12 and 3.13. The underlying requirement to present comparatives on a consistent basis still applies, and company law still bites. FRS 102 paragraph 1AC.7 repeats Schedule 1 paragraph 2(2), requiring particulars and reasons where the presentation of the balance sheet or income statement changes. Paragraph 1AC.8 repeats paragraph 7(2), requiring particulars of the non comparability and of any adjustment where a corresponding amount is adjusted.

So a small company that reclassifies comparatives still needs a short note. It need not follow the exact 3.12 wording, but in substance it will say much the same thing. Small companies combining format items should also remember paragraph 4 of Schedule 1: where items are combined to aid assessment, the individual amounts must be disclosed (paragraph 1AC.38). See FRS 102 Section 1A.

Are there cases where comparatives are not restated at all?

Yes. Some transitional provisions override the normal rule. On applying the Periodic Review 2024 lease amendments, paragraph 1.47 says a lessee does not restate comparative information and instead adjusts opening retained earnings at the date of initial application. Leases that would have been on the balance sheet are therefore not reclassified into the prior year column.

A change in the length of the reporting period is also handled by disclosure, not reclassification. Paragraph 3.10 requires an entity presenting a period longer or shorter than a year to disclose that fact, the reason, and that the comparative amounts are not entirely comparable.

What does a reclassification note look like?

Illustration only. A wholesaler previously included £30,000 of outbound carriage in administrative expenses. After a review of its management reporting, the directors decide carriage is a direct cost of sale.

Prior year line	As previously reported	Reclassification	As reclassified
Cost of sales	£400,000	£30,000	£430,000
Administrative expenses	£150,000	(£30,000)	£120,000
Operating profit	£50,000	Nil	£50,000

The note would say that outbound carriage costs are now presented within cost of sales because the directors consider this better reflects the cost of delivering goods to customers, that comparatives have been reclassified, and that the effect on the prior year was to increase cost of sales and reduce administrative expenses by £30,000, with no effect on profit or net assets.

What mistakes come up?

• Reclassifying without a note. A changed prior year column with no explanation fails both FRS 102 and Schedule 1.
• Calling an error a reclassification. If the old presentation was wrong, consider Section 10.
• Changing only the face of the accounts. The supporting notes, such as the analysis of debtors or creditors, must be reclassified consistently.
• Claiming impracticability too readily. The glossary test is every reasonable effort.
• Restating where a transitional rule says not to. Check the transition paragraphs for any standard change.

Common presentation problems more generally are listed on accounts presentation errors.

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Related Accountapedia entries

• Comparatives for a short or long period
• Distribution costs vs administrative expenses
• When can a company change its accounting policy
• FRS 102 Section 3: presenting financial statements
• Notes required in small company accounts

Sources

• Financial Reporting Council: FRS 102 September 2024 tmKYWO6
• legislation.gov.uk: SI 2008/409, schedule 1
• legislation.gov.uk: SI 2008/409, schedule 1
• legislation.gov.uk: SI 2008/409, schedule 1

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.