Changes affecting small company financial reporting: periods commencing on or after 1 January 2026

Why is it relevant?

After a period of relative stability in the financial reporting landscape for small entities, a number of recent and forthcoming changes will bring about both greater scope for more entities to qualify as a small entity but within a short space of time be required to report under enhanced financial reporting requirements with the ultimate removal of filing exemptions which small entities previously benefitted from.

Who does it affect?

All companies eligible to prepare their financial statements under the small companies’ regime including Limited Liability Partnerships.

What do you need to know?

There are 3 key changes, as discussed below:

Eligibility to apply the small companies’ regime

The small companies’ regime offers certain simplifications in financial reporting requirements for eligible entities that meet quantitative and qualitative criteria. Because of changes to regulations made in the UK in December 2024, which were effective for periods commencing on or after 6 April 2025, the monetary thresholds for what is regarded as a small company were increased.

For qualifying companies, the revised size limits for determining whether a company is a small company, are met in a year in which the company does not exceed two or more of the following criteria

(a) Turnover £15 million

(b) Balance sheet total £7.5 million

(c) Average number of employees 50

More companies and LLPs may therefore be eligible to access the small companies’ regime.

2. Disclosures required by FRS 102 Section 1A (Small entities)

Section 1A of FRS 102 sets out the requirements for disclosures in small entity financial statements which differ to those for medium and large companies. The Periodic Review of FRS 102 introduced many changes to the accounting requirements for entities for periods commencing on or after 1 January 2026, with consequential changes to disclosure requirements for small companies.

Previously encouraged disclosures have now become mandatory such as a statement of compliance with FRS 102 Section 1A, going concern basis disclosures, and disclosures of dividends paid and payable. Alongside other general Periodic Review amendments and improvements, the key changes are:

• The requirements to disclose material accounting policies, this includes extensive and descriptive new policies for revenue recognition and leasing
• The standard now requires disclosure of all related party transactions for small entities
• Disclosures will now be required in respect of the new lease accounting model
• Disclosures are now required in respect of provisions and contingencies as would typically be required for a non-small entity
• As would be required for a non-small entity, disclosures will be required in respect of current and deferred taxation
• Small entity performance obligations in its revenue contracts with customers must be disclosed
• A small entity now needs to provide a description of the nature and extent of share-based payment arrangements it is party to

Other disclosures include the impact of applying the Periodic Review amendments and where relevant additional primary statements for total comprehensive income and a statement of changes in equity

3. Changes to filing exemptions for small companies and other matters

The Economic Crime and Corporate Transparency Act (2023) will introduce further changes aimed at improving transparency over UK companies and other legal entities. As regards what is filed on the public register, changes include the following:

• Remove the option for small companies and micro-businesses to file abridged financial statements
• Require all companies to file profit and loss accounts
• Require small companies to also file their directors’ report
• Require a company claiming an audit exemption to provide an enhanced statement from their directors on the balance sheet

These changes are expected to be applicable to financial statements filed after 1 April 2027.

What should you do next?

Ensure your systems and processes are geared towards meeting these enhanced disclosure requirements and consult with your professional advisors.

Contact us

Get clear, practical guidance on the impact of these changes to you. If you’d like to discuss the above, please speak to your usual Blick Rothenberg contact or Sunil Bhavnani using the form below.

A more detailed version of this article can also be found here.