A qualifying entity is a member of a group whose parent prepares publicly available consolidated financial statements intended to give a true and fair view, in which that member is consolidated. In its individual accounts it can skip several FRS 102 disclosures, including the cash flow statement and key management personnel compensation, provided it otherwise follows FRS 102 in full, gives a short note of the exemptions used, and names the parent and where the group accounts can be obtained. Some exemptions also depend on equivalent disclosures appearing in the group accounts.

Who counts as a qualifying entity?

The FRS 102 glossary defines a qualifying entity as a member of a group where the parent of that group prepares publicly available consolidated financial statements intended to give a true and fair view, and that member is included in the consolidation. A footnote points to section 474(1) of the Companies Act 2006 for the meaning used. Three conditions follow:

  1. Group membership. The entity is a subsidiary in the group, or the parent itself.
  2. Publicly available group accounts. The parent’s consolidated accounts must be available to the public and intended to give a true and fair view.
  3. Inclusion. The entity must actually be consolidated in those accounts. A subsidiary excluded from consolidation does not qualify.

The definition does not require the immediate parent, or group accounts prepared under FRS 102, although several exemptions depend on equivalent disclosures appearing in the group accounts. The entity must name the parent in whose consolidated accounts it is included.

Being a parent is not a barrier. Paragraph 1.12(d) refers to an ultimate parent presenting its separate financial statements alongside the group accounts, so a parent can use the exemptions in its own individual accounts. But paragraph 1.10 says the exemptions cannot be used in consolidated financial statements, whether the entity is required to prepare them under section 399 of the Act (and not exempt under sections 400 to 402) or chooses to (see consolidated accounts under FRS 102).

What conditions must be met to use the exemptions?

Paragraph 1.11 sets two conditions:

  • the entity otherwise applies the recognition, measurement and disclosure requirements of FRS 102; and
  • it discloses in the notes a brief narrative summary of the exemptions adopted, and the name of the parent of the group in whose consolidated accounts it is included and where those accounts can be obtained.

There used to be a further condition requiring shareholders to be notified in advance without objection. Paragraph 1.17 records that this was deleted in December 2016 for accounting periods beginning on or after 1 January 2016. The FRC’s reasons, in paragraphs B1.3 to B1.5, include the cost of notifying all shareholders of an ultimate parent and the fact that a controlling shareholder can direct its subsidiary’s reporting anyway.

Which disclosures can be left out?

Paragraph 1.12 lists the exemptions. Some are unconditional; others apply only if equivalent disclosures are included in the group accounts.

Exemption Paragraph Equivalent group disclosure needed?
Statement of cash flows (Section 7 and paragraph 3.17(d)) 1.12(b) Only for the supplier finance disclosures in paragraph 7.20C
Certain financial instrument disclosures in Sections 11 and 12 1.12(c) Yes
Certain lease disclosures (paragraphs 20.80(f) and 20.116) 1.12(cA) No
Certain revenue disclosures in Section 23 1.12(cB) No
Certain share based payment disclosures in Section 26 1.12(d) Yes, and the arrangement must concern equity instruments of another group entity (subsidiary) or the parent’s own (ultimate parent)
Certain income tax disclosures (paragraphs 29.28(b) and 29.29) 1.12(dA) Yes
Key management personnel compensation in total (paragraph 33.7) 1.12(e) No
IFRS 6 exploration cash flow disclosures 1.12(f) No

Financial institutions are treated differently. Under paragraph 1.9, a qualifying entity that is a financial institution can use the exemptions except those from Sections 11 and 12.

What does equivalent mean?

Paragraph 1.13 points to the Application Guidance in FRS 100. That guidance (paragraph AG6) says equivalence does not mean compliance with every detail; it is a qualitative judgement about whether the basic requirements are met, not a checklist exercise. Paragraph AG26 adds that the exemptions are available when the equivalent disclosures appear in the group accounts in aggregate or abbreviated form, or, for intra group balances, where those balances have been eliminated on consolidation. But if the group accounts leave a disclosure out on materiality grounds, the subsidiary must give it if it is material to the subsidiary’s own accounts.

That last point catches people out. A disclosure that is trivial at group level can be significant for a small subsidiary, and the exemption does not cover it.

What still has to be disclosed?

The exemptions are limited to the listed paragraphs. Everything else in FRS 102 still applies, and paragraph 1.2A reminds preparers that the standard does not contain every disclosure company law requires. The FRC notes in paragraph B1.2 that because company law requires certain financial instrument disclosures, a qualifying entity is not exempt from all of the Section 11 and 12 disclosures.

Related parties need care. The 1.12(e) exemption removes only the total of key management personnel compensation. The relief for intra group transactions is separate: paragraph 33.1A says the paragraph 33.9 disclosures need not be given for transactions between group members where any subsidiary party is wholly owned. Transactions with partly owned subsidiaries, directors and other related parties still need disclosing (see related party disclosures).

How does this compare with FRS 101 and Section 1A?

  • FRS 101 is a separate reduced disclosure framework for qualifying entities that otherwise apply the recognition and measurement rules of adopted IFRS. FRS 100 allows it only for the individual accounts of a qualifying entity, and it can be used whatever framework the group accounts use. A subsidiary in an IFRS group often uses FRS 101 to keep its numbers aligned with the group.
  • FRS 102 reduced disclosures suit a subsidiary in a group that reports under FRS 102, or one that prefers FRS 102 measurement.
  • Section 1A is the small entities regime and depends on size, not group membership (see FRS 102 Section 1A).

What does this look like in practice?

Illustration only. Brook Holdings Ltd prepares consolidated FRS 102 accounts that are filed at Companies House. Its wholly owned subsidiary, Brook Logistics Ltd, is consolidated. In Brook Logistics’ individual accounts:

  • no cash flow statement is presented (paragraph 1.12(b));
  • the total of key management personnel compensation is omitted (paragraph 1.12(e));
  • the financial instrument disclosures covered by paragraph 1.12(c) are omitted, because equivalent disclosures appear in the group accounts;
  • transactions with Brook Holdings and fellow wholly owned subsidiaries are not disclosed under paragraph 33.1A, but a property rented from a director is; and
  • a note summarises the exemptions taken and states that the company is included in the consolidated financial statements of Brook Holdings Ltd, available from its registered office and Companies House.

If Brook Logistics itself had a subsidiary and had to prepare group accounts, it could not use these exemptions in those consolidated accounts.

What mistakes come up most often?

  • Missing the parent note. Paragraph 1.11 requires both the summary of exemptions and the parent’s name and where its accounts can be obtained.
  • Assuming conditional exemptions apply. Several require equivalent group disclosure, and AG26 makes a material subsidiary disclosure necessary where the group omitted it.
  • Dropping company law disclosures. The standard’s exemptions do not override the Companies Act.
  • Using the exemptions in group accounts. Paragraph 1.10 prohibits it.
  • Treating the 33.7 exemption as a general related party exemption. It is not.

For the wider standard, see FRS 102 explained.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.