Can a small company use full FRS 102 instead of Section 1A

Yes. Section 1A of FRS 102 is an option for small entities, not a requirement, and a small company can instead prepare its accounts under FRS 102 without Section 1A. The numbers do not change, because recognition and measurement are identical either way; what changes is the presentation and the volume of notes, with a statement of changes in equity and the full disclosures of Sections 8 to 35 becoming compulsory.

Is Section 1A optional?

Paragraph 1A.1 describes Section 1A as setting out the presentation and disclosure for a small entity that chooses to apply the small entities regime. Paragraph 1A.2 then says that a small entity that chooses not to apply the regime shall apply FRS 102 excluding Section 1A, unless it chooses adopted IFRS or, if eligible, FRS 101. So the choice is the company’s, and in practice the directors’.

A small entity is defined in the FRS 102 glossary by reference to company law: a company meeting the definition of a small company in section 382 or 383 of the Companies Act 2006 and not excluded from the small companies regime by section 384. Under section 382(3), a company meets the qualifying conditions in a year if it satisfies two or more of turnover not more than 15 million pounds, balance sheet total not more than 7.5 million pounds, and not more than 50 employees. Section 382(2) means a change only affects qualification if it happens in two consecutive years.

How Section 1A itself works is explained on our page on FRS 102 Section 1A for small entities. This page covers the other route.

Do the profit and balance sheet figures change?

No. Paragraph 1A.1 states that, unless excluded, all of FRS 102 applies to a small entity, including recognition and measurement. The FRC explains in paragraph B1A.8 of the basis for conclusions that accounting for a given transaction should not depend on whether the entity is small. Leases, revenue, deferred tax and financial instruments are therefore measured the same way under both routes.

The practical consequence is that moving from Section 1A to full FRS 102 is a change of presentation and disclosure, not a restatement of profit. Comparatives are still needed for every amount presented, under paragraph 3.14, so the new notes and statements need prior year figures too.

Which extra statements does full FRS 102 require?

Under Section 1A, paragraph 1A.8 requires only a statement of financial position, an income statement and notes, with paragraph 1A.7A switching off Sections 4 to 7. Paragraph 1A.9 says a statement of comprehensive income or a statement of changes in equity may be needed only if required for a true and fair view.

Under full FRS 102, paragraph 3.17 defines a complete set as a statement of financial position, a statement of comprehensive income (single statement or two statements), a statement of changes in equity, a statement of cash flows and notes. Sections 4 to 6 then apply in full. Paragraph 3.18 allows a combined statement of income and retained earnings in place of the statement of comprehensive income and statement of changes in equity in limited circumstances.

Is a cash flow statement compulsory?

No. Paragraph 7.1B states that a small entity is not required to comply with Section 7, and the FRC’s basis for conclusions at paragraph B1A.7 says expressly that a small entity choosing to apply full FRS 102 is not required to present a cash flow statement. Many companies moving to full FRS 102 for a lender include one anyway, because it is often what the lender most wants to see.

What extra notes would a small company disclose?

Under Section 1A, paragraph 1A.16A sets the minimum as the disclosures in Appendix C, and paragraph 1A.17 says a small entity is not specifically required to give the other disclosures in Sections 8 to 35, although it may need some of them for a true and fair view. Full FRS 102 removes that filter. Examples of disclosures that a small company would typically add include:

• Key management personnel compensation in total (paragraph 33.7), unless the exemption in paragraph 33.7A applies because the key management personnel are the directors and directors’ remuneration is already disclosed under a legal requirement.
• Revenue disaggregated into categories such as product line, geography or timing (paragraph 23.131), and opening and closing contract balances (paragraph 23.134).
• Leases: interest on lease liabilities and total cash outflow for leases (paragraph 20.80(a) and (f)), on top of the lease items Section 1A already requires.
• Tax: the expected net reversal of deferred tax in the next year and an explanation of changes in tax rates (paragraph 29.27(c) and (d)). The tax rate reconciliation is already required under Section 1A through paragraph 1AC.32C.
• Financial instruments: the terms of significant debt and other information on the significance of financial instruments (paragraph 11.42), and income, expense, gains and losses by category (paragraph 11.48).
• Judgements and estimates: the judgements with the most significant effect on the amounts recognised (paragraph 8.6) and key sources of estimation uncertainty with their nature and carrying amounts (paragraph 8.7). Appendix C only notes that judgement disclosures may be useful.

The 2026 amendments narrowed the gap. Paragraph B1A.3B explains that Appendix C was expanded in the Periodic Review 2024 to specify more disclosures the FRC considers necessary for a true and fair view, and paragraph B1A.10 notes that UK small entities must now disclose all related party transactions. Our page on Section 1A disclosure changes for 2026 lists those additions.

What does the comparison look like?

Area	Section 1A	Full FRS 102
Recognition and measurement	All of FRS 102	All of FRS 102
Primary statements	Balance sheet and income statement; others only if needed for a true and fair view	Balance sheet, statement of comprehensive income and statement of changes in equity
Cash flow statement	Not required	Not required for a small entity
Notes	Appendix C minimum plus anything needed for a true and fair view	All disclosures in Sections 8 to 35
Compliance statement	Must state that Section 1A has been applied (paragraph 1AC.2A)	Explicit and unreserved statement of compliance with FRS 102 (paragraph 3.3)

Why would a small company choose full FRS 102?

• Lenders and investors. A bank, private equity investor or acquirer may want the cash flow statement, debt terms and revenue analysis that Section 1A does not provide. Producing them within audited statutory accounts can be cheaper than a separate reporting pack.
• Growth. A company close to the thresholds in section 382 will lose small status after exceeding them in two consecutive years. Moving early means the full notes and their comparatives already exist when the change becomes compulsory.
• Group consistency. A small subsidiary of a group whose consolidated accounts use full FRS 102 may find it simpler to produce the same pack, although such a subsidiary should also consider the reduced disclosure framework or FRS 101.
• True and fair comfort. Paragraph B1A.5 notes that the full disclosures are usually considered necessary for larger entities to give a true and fair view, and that a small entity may need extra disclosures relevant to its material transactions. A company with complex arrangements may prefer full disclosure to case by case judgement.

Does it affect company law filing and exemptions?

The small companies regime in company law depends on size, not on which FRS 102 route is used. Section 381 applies the regime to a company that qualifies as small and is not excluded. Section 444 sets the filing obligations of companies subject to the small companies regime, including the option to deliver only the balance sheet. Directors should still check that whatever they file is a true copy of the relevant accounts, as section 444(3) requires.

The balance sheet statement under section 414(3) applies where the accounts are prepared in accordance with the small companies regime, and paragraph 1A.6A of FRS 102 requires that statement for a small entity applying Section 1A. If the board moves to full FRS 102, the accountant should review the wording above the director’s signature rather than roll forward last year’s template.

What does this look like in practice?

Illustration only. A design and build company has turnover of 12 million pounds, total assets of 5 million pounds and 45 staff, so it is small. It is negotiating a 3 million pound revolving facility, and the bank wants audited accounts showing cash flows, debt terms and revenue by sector. The directors adopt full FRS 102 for the year. Profit is unchanged. The accounts gain a statement of changes in equity, a voluntary cash flow statement, a revenue analysis, a loan terms note and a deferred tax reversal note, each with comparatives. The company still files under the small companies regime.

What mistakes come up?

• Believing full FRS 102 changes the profit figure; it does not.
• Describing accounts as complying with FRS 102 while leaving out notes that only Section 1A permits a company to omit.
• Forgetting comparatives for new statements and notes in the first year.
• Assuming a cash flow statement becomes mandatory, or that the small company filing options are lost.
• Leaving the Section 1A wording above the signature after switching routes.

For the very smallest companies the alternative comparison is covered on our page on FRS 105 versus Section 1A.

Solar Protect provides tax investigation insurance for businesses and fee protection schemes for accountancy practices. Read how our cover works or get a quote.

Related Accountapedia entries

• FRS 102 Section 1A: small entity reporting
• Choosing between FRS 105 and FRS 102 Section 1A
• Encouraged disclosures for small companies
• FRS 102 explained
• Section 1A disclosure changes from 2026

Sources

• Financial Reporting Council: FRS 102 September 2024 tmKYWO6
• legislation.gov.uk: Act 2006 c. 46, section 382
• legislation.gov.uk: Act 2006 c. 46, section 381
• legislation.gov.uk: Act 2006 c. 46, section 444
• legislation.gov.uk: Act 2006 c. 46, section 414

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.