FRS 105 is applicable to entities that are eligible for, and choose to apply, the micro-entities regime. An entity meets the qualifying conditions for a micro-entity if it meets at least two out of three of the following thresholds:
1) Turnover not more than £632,000 (adjusted for periods longer or shorter than 12 months)
2) Balance sheet total not more than £316,000
3) Average number of employees not more than 10.
After the first financial year of the entity, the criteria must be met in two consecutive years for an entity to qualify as a micro-entity and must be exceeded in two consecutive years to cease to qualify.
For the year ended 31 March 2018 all three criteria were met. For the year ended 31 March 2019 both turnover and balance sheet total were just exceeded. Only average number of employees is less than 10.
I believe based on the above for 2019 I can still file micro entity accounts as it is only the first year they do not qualify, and if they still do not qualify in 2020 then they can no longer apply FRS 105. I would be grateful if someone could confirm my understanding please.
Thanks in advance.
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I agree with lionofludesh but as ever, a small tale.
Years ago, when the Audit limit went from £300k to £1m turnover, one client who usually had an audit and turned over around £900k had a very good year and turned over £1,018k that year. They asked about the audit and the existing audit manager gleefully shook their head and said, "Over a million. Tough."
Another, more reasonable manager, said on the QT, "Isn't that £19k of deferred income I see?". They also correctly foresaw them dropping back below £1m a year later.
If you want to keep them micro, and we are looking at very small numbers, then is there not a bad debt that needs providing? Is there some income that could be deferred?
