I am a co-director of a small CIC whose main activity is organising community music activities and I am preparing the accounts for our first year of trading. I understand that CICs are subject to the same accounting requirements as limited companies apart from an additional requirement to submit a CIC 34 Report to Companies House along with the accounts. As we are a small operation with low turnover (less than 10K) and straightforward accounts (no fixed assets, long-term liabilities, share capital or shareholders) I believe that FRS 105 for micro-entities would be the most appropriate standard to use for preparing our accounts. I would appreciate some advice on the following points;
Neither myself or the other co-director have received any payment for our role as directors. However, the other co-director is also a self-employed musician and has been paid fees for his services as a musician (teaching, leading workshops, jam-sessions, etc). These payments are included (along with payments to other musicians) in the accounts under Cost of Sales as they are direct costs rather than administrative expenses.
I understand that transactions with company directors need to be disclosed in order for the accounts to show a true and fair view but am unsure as to how this is done under FRS 105. Do these payments constitute a Related Party transaction? My understanding is that FRS 105 does not allow for the disclosure of such transactions and therefore the accounts would have to be prepared under FRS 102 1A. Is this correct?
Your advice would be greatly appreciated