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Disclosure of exceptional items in FRS105

Do exceptional items need to be disclosed in published Accounts under FRS 105

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Client historically had a large long standing liability in its Accounts to a third party. Over 7 years old. The Directors no longer deem this debt is repayable and want to remove it from the Accounts and credit the write off to other income. They are a micro entity reporting under FRS105.

Do they need to disclose this write off in the published accounts? I can't see anything related to FRS105 that says that exceptional items need to be disclosed or explained

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By paul.benny
19th Sep 2020 12:25

The Companies Act requires financial statements to show a true and fair view.

I would suggest that disclosure may necessary under that requirement rather than FRS105. Bear in mind that in the subsequent year, readers of the accounts may well question the apparent drop in profitability and disclosure of the exceptional gain provides an immediate explanation.

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By fawltybasil2575
19th Sep 2020 13:26

@ Openhouse (OP).

I would have to respectfully slightly disagree the highly knowledgeable paul.benny's comment that:-

“I would suggest that disclosure may necessary under that requirement (the Companies Act requirement) rather than FRS105".

This is a link to an article by the redoubtable Steve Collings, on this site:-

The relevant extract from the above-mentioned article is:-

“The table below highlights some of the points to note where FRS 105 is concerned:
Issue FRS 105.
True and fair view Micro-entity financial statements prepared in accordance with the legally required minimum are presumed to give a true and fair view, and hence the directors do not need to consider any additional disclosure requirements. However, where the directors CHOOSE (my emphasis) to make the additional disclosure requirements they must do so in accordance with FRS 102, Section 1A”

Hence, if the company’s directors, in the OP’s case, EXCLUDE the “exceptional items” disclosure, this exclusion does NOT breach the Companies Act requirement to give a “true and fair view”, and IS thus perfectly in order.

If however the company’s directors WISH (as the OP impliedly states they so wish) to INCLUDE the “exceptional items” disclosure, then that disclosure is perfectly in order (but any such disclosure must be “in accordance with FRS102 Section 1A”).

[The company’s directors do of course, as ever, have the option to adopt FRS102 Section1A, instead of FRS105, but in the OP’s case I surmise they would not wish to exercise that option].


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