FRS 102 1A vs FRS 105 — accounts production in practice.

The short answer

FRS 105 is faster and cheaper to produce but strips out information a sophisticated user of accounts would expect. FRS 102 Section 1A is the small-entities regime — reduced disclosures vs full FRS 102, but still including fair-value accounting, deferred tax and a more complete picture. Eligibility for FRS 105 is a permission, not a requirement; many firms keep some FRS-105-eligible clients on FRS 102 1A because the accounts have a real audience.

1. The April 2025 thresholds — what changed

For accounting periods commencing on or after 6 April 2025, the UK company-size thresholds increased materially. The post-change picture:

A company is eligible for a regime if it meets at least two of the threethresholds in the relevant test year(s), subject to the “two consecutive years” rule when moving up or down between regimes.

What didn’t change:some entity types are excluded from FRS 105 regardless of size — LLPs (which have their own version, FRS 105 LLP), charities, public companies, insurance and financial entities, parent companies preparing group accounts.

2. The key differences in practice

FRS 105 is deliberately minimalist. The differences from FRS 102 1A that matter most operationally:

• Investment property. FRS 102 1A: fair value, with revaluation through P&L. FRS 105: cost less depreciation and impairment. Materially relevant for landlord micro-entities.
• Deferred tax. FRS 102 1A: recognised for most timing differences. FRS 105: not recognised. Simplifies the year-end massively where there are no significant differences; misleading if there are.
• Cash-flow statement. Not required under FRS 105.
• Statement of changes in equity. Not required under FRS 105.
• Fair-value option for financial instruments. Not available under FRS 105 (cost model only).
• Goodwill amortisation. FRS 102 1A allows an indefinite useful-life rebuttable presumption (with annual impairment review); FRS 105 requires amortisation over a useful life (max 10 years if reliable estimation is impossible).
• Government grants. FRS 102 1A allows accrual or performance models; FRS 105 only the accrual model.
• Disclosures. FRS 105 strips most discretionary disclosures. The Companies House filed accounts are highly abbreviated.

3. When FRS 105 is the right call for a client

• The client is genuinely small. Owner-managed company, single director, no growth ambition, no external lenders requiring detailed accounts.
• No investment property held at scale. If the client is a landlord micro-entity, the cost-less-depreciation model can over-simplify, but for a property held for owner-occupation rather than investment, FRS 105 is fine.
• No material timing differences. If capital allowances roughly track depreciation and there’s no revaluation, FRS 105’s no-deferred-tax model is a clean simplification.
• The accounts have a narrow audience. HMRC and Companies House are the primary users; no bank lender, no prospective buyer, no significant credit relationship.
• Cost matters to the client. FRS 105 accounts are 30–50% cheaper to produce in practice.

4. When FRS 102 1A is the better call

• The client is FRS 105-eligible but the accounts have a real audience. Bank lender, growth-equity investor, prospective buyer.
• The client holds investment property. Fair-value accounting through P&L gives a much more useful picture for property-heavy businesses.
• Material timing differences exist. Capital allowances diverge materially from depreciation; revaluations are made; deferred tax recognition gives a more honest P&L.
• The client has goodwill on the balance sheet with no reliable life estimate — FRS 102 1A’s indefinite-life option (with impairment) is more economic than FRS 105’s mandatory amortisation.
• The client is approaching the FRS 105 thresholds upward. Switching frameworks every year creates re-statement work; start on 1A if the trajectory is clear.

5. Switching a client between regimes

Two triggers force a switch up from FRS 105 to FRS 102 1A:

1. Outgrowing the FRS 105 thresholds for two consecutive years. The company stops being eligible.
2. Acquiring an item that requires accounting treatment not available under FRS 105 — for example, taking on material investment property where the cost-model treatment misrepresents the position.

Voluntary switches (a client that’s eligible for FRS 105 but wants 1A accounts) happen at year-end on the firm’s recommendation — usually triggered by a planned bank borrowing, sale process, or audit prep.

The mechanics of the switch:

• Restate the comparative period under the new framework.
• Recognise any items not previously on the balance sheet (most commonly: deferred tax balances).
• Disclose the change in framework in the accounting policies note.
• Update the directors’ / accountants’ report wording.

Switches downward from FRS 102 1A to FRS 105 are rarer (most firms keep clients on the more informative framework once they’ve been on it) but are permissible if eligibility is re-established for two consecutive years.

6. Firm workflow — how to make the call at scale

For a firm running 30+ accounts-production clients, the right pattern is:

1. At year-end, the software flags each client’s framework eligibility (in scope / borderline / out of scope) and current framework.
2. For borderline clients — those at or near threshold — the partner reviews whether to keep them on the current framework or switch.
3. For clients with a material audience (lender, prospective buyer), the framework choice is part of the year-end client conversation, not a back-office decision.
4. The fee schedule reflects the cost difference between FRS 105 and FRS 102 1A — usually £100–£300 difference per year per client at firm-grade pricing.

7. Where SmartBooks fits

SmartBooks accounts production ships both frameworks built in inside the Firm plan, no add-on subscription. The per-client framework choice is a single-click in the year-end pack workflow; the software produces statutory-ready FRS 102 1A or FRS 105 accounts, with the Companies House abbreviated filing format extracted automatically.

Switching a client between frameworks at year-end is a workflow we’ve designed for — the software handles the comparative-period restatement, the accounting-policy disclosure note, and the deferred-tax recognition where relevant.

The closest equivalent in the existing market: Xero Tax, Sage Final Accounts, or specialist accounts-production tools (Capium, Iris, TaxCalc). All work; the SmartBooks difference is that accounts production sits inside the same product as Smart Inbox and the MTD filing engine, not as a separate vendor relationship.

Related guides

• MTD ITSA April 2026 — what it means for firms
• MTD ITSA for landlords — the April 2026 mandate
• SmartBooks vs Xero
• SmartBooks vs Sage
• For accountancy and bookkeeping firms

FAQ

A note on advice

This guide is general operational guidance on the FRS 102 Section 1A vs FRS 105 framework choice. It is not accounting or audit advice for a specific entity. UK firms should consult the FRC’s published standards (FRS 102, FRS 105) and their ICAEW / ACCA / AAT institute guidance. The April 2025 threshold changes are reflected at the time of writing; the FRC and Companies House occasionally update the regime — verify against current published material before relying on this guide for a specific filing.