FRS 102 Section 1A disclosure requirements: what small companies must now disclose

If your company prepares accounts under FRS 102, you’ll probably have heard that the rules changed for accounting periods beginning on or after 1st January 2026. Much of the discussion has focused on leases and revenue recognition – and we’ve covered those changes in a separate article. But there’s a third area that matters just as much for many of our clients: the disclosure requirements for small companies.

This article focuses on UK small entities that prepare accounts under FRS 102 using Section 1A, the small companies regime. It does not cover micro-entities using FRS 105, or companies reporting under IFRS or FRS 101.

In plain terms, your annual accounts will need to include more information than they did before. Some of it is genuinely new. Some of it was always expected – but is now mandatory, rather than a matter of professional judgement. Either way, the result is that small company accounts will look noticeably different going forward.

Here’s what’s changing and what it means for you.

Who do the FRS 102 Section 1A disclosure requirements apply to?

The changes affect UK small companies that prepare accounts under FRS 102 using Section 1A, the small companies regime. From financial years beginning on or after 6th April 2025, the thresholds for qualifying as a small company increased significantly. You’re likely to fall into this category if your company meets at least two of the following:

• Annual turnover of no more than £15 million (up from £10.2 million)
• Balance sheet total of no more than £7.5 million (up from £5.1 million)
• No more than 50 employees (unchanged)

These higher thresholds – which came into effect for accounting periods starting on or after 6th April 2025 – mean more companies now qualify as small. That in turn means more businesses will be affected by the Section 1A disclosure changes described in this article.

The new disclosure rules apply to accounting periods starting on or after 1st January 2026. For most companies with a 31st December year-end, they will first appear in the accounts prepared for the year ending 31st December 2026.

Why are the rules changing?

The Financial Reporting Council (FRC) – the body that sets UK accounting standards – carried out a major review of FRS 102 in 2024. Part of this review involved aligning UK standards more closely with international ones (IFRS), particularly in areas like lease accounting and revenue recognition. But the previous rules left more room for judgement, which in practice could lead to inconsistency between one set of small company accounts and another. Different accountants were making different judgements about what needed to be included, which made it harder for lenders, suppliers and other readers to get a reliable picture from a set of accounts.

The solution was to make more disclosures explicitly mandatory rather than leaving them to judgement. Your accounts will be more detailed – but also more consistent and transparent.

What do you now have to disclose?

The main additions are set out below. Not all of them will be relevant to every company, but most small businesses will be affected by at least some of them.

Small entities will also need to include an explicit and unreserved statement that the accounts have been prepared in accordance with FRS 102 Section 1A.

Related party transactions

This is probably the most significant change for owner-managed businesses. Previously, small companies only had to disclose transactions with related parties if those transactions were not conducted on normal commercial terms. In practice, this meant that many loans, payments and arrangements between a company and its directors or shareholders went unreported.

From January 2026, that exemption is no longer available. Small companies now have to disclose all material transactions with related parties. This includes:

• The nature of the relationship (e.g. director, shareholder, close family member)
• The amounts involved
• Any balances outstanding at the year-end
• Details of any bad debts relating to those balances

A key exception is for transactions between wholly owned group entities, with certain other exemptions also applying in specific cases.

What this means in practice: if a director has a loan account with the company, or if the business has made payments to a connected person or entity, this will now need to be disclosed in the notes. For many owner-managed businesses, this will be new information appearing in their accounts for the first time.

One common concern: does this mean your total salary or director’s remuneration will appear in the accounts? The short answer is no. The FRC has confirmed that small companies are still not required to disclose total key management personnel compensation – in other words, the overall pay figure for directors as a group. What must be disclosed is the nature and amounts of related party transactions – which is a different thing. So if a director’s salary is set at a normal commercial rate, it won’t automatically require a specific disclosure note.

Dividends

Small companies have always been able to include dividends in certain primary statements – but many chose not to present those statements in their filed accounts. As a result, dividend figures often didn’t appear anywhere that was publicly visible.

From January 2026, dividends declared and paid or payable during the year must be disclosed.

What this means in practice: the total dividends taken by shareholders – which for many owner-managed businesses is the primary way of extracting profit – will now be visible in the notes. This is a meaningful change in terms of what is on public record.

Going concern

“Going concern” is the assumption that your business will continue to operate for the foreseeable future. From January 2026, this becomes a formal disclosure requirement for small companies using Section 1A. Specifically, your accounts must:

• State explicitly that the accounts have been prepared on a going concern basis
• Confirm that management has considered information about the future – covering at least, but not limited to, 12 months from the date the financial statements are authorised for issue
• Disclose any significant judgements made in reaching that conclusion
• Disclose any material uncertainties that could cast doubt on the company’s ability to continue trading

For most well-established businesses, this won’t involve much additional work. But it is now an explicit requirement rather than a matter of discretion.

Tax disclosures

The requirements around tax have also been tightened. Small companies must now separately disclose the major components of their tax charge or credit, along with a reconciliation between the tax charge shown in the accounts and the expected charge based on the standard rate. Deferred tax balances must also be broken down by type of timing difference.

In many cases, these disclosures will already have been included as good practice. But they are now explicitly required.

Provisions and contingencies

If your company has made a financial provision – for example, for a warranty liability, a legal dispute or a restructuring cost – you will now need to provide more detail. The accounts must include:

• A reconciliation showing the opening and closing balance of each provision
• A description of the nature of the obligation
• The expected timing of any payments
• Any significant uncertainties about the amounts or timing involved

Where a contingent liability exists – a potential obligation that depends on a future event – this must also be described in the notes.

One small piece of good news: in the first year these disclosures are required, you are not obliged to provide comparative figures for the provisions reconciliation. In practice, this means you won’t need to reconstruct a full reconciliation table for the prior year – only for the current one.

Share-based payments

This one is relevant to a smaller subset of companies – but if it applies to you, it matters. From January 2026, small companies that operate share schemes, such as EMI options for employees, must now disclose:

• A description of each type of share-based payment arrangement that existed at any point during the year
• The number of options outstanding at the start and end of the period, together with the weighted average exercise price
• The number of options that are exercisable at the end of the period, together with the weighted average exercise price
• The total expense recognised in the profit and loss account in the year
• The carrying amount of any related liabilities at the year-end, where relevant

Previously, small companies had no specific mandatory disclosure requirements in this area, although some businesses may already have included additional information where needed to give a true and fair view. In practice, this means companies with EMI schemes or other share option arrangements will now need to gather more information for the year-end accounts than before.

If your company operates an EMI scheme or any other form of share option arrangement, this is something to raise with us ahead of your next accounts so that the right information is captured early.

Revenue recognition and leases

Because the underlying accounting treatment for revenue and leases has also changed from January 2026 – as part of a wider effort to align UK standards with their international equivalents (IFRS 15 and IFRS 16) – small companies will need to provide some additional disclosures in these areas too. For revenue, this means information about performance obligations in customer contracts. For leases, it means details of the lease liabilities and right-of-use assets now appearing on the balance sheet.

These changes are covered in detail in our separate article.

A note on “true and fair”

Even where Section 1A doesn’t explicitly require a particular note, directors still have a legal duty under the Companies Act to ensure their accounts give a “true and fair view”. In practice, this means that if a transaction or arrangement is material to understanding the company’s financial position, it may need to be disclosed even if there’s no specific rule demanding it. Think of the mandatory requirements as a floor, not a ceiling. Your accountant will help you assess what else may be needed in your particular circumstances.

What about filing at Companies House?

You may have heard that Companies House is planning to require small companies to file fuller accounts, including their profit and loss account. This is a separate change – introduced by the Economic Crime and Corporate Transparency Act 2023 – and the implementation timetable has been delayed. At the time of writing, the original April 2027 date has been postponed and the position is under review.

The FRS 102 Section 1A changes described in this article are independent of that and apply regardless. Both changes point in the same direction, however: towards greater transparency in small company reporting.

What should you do now?

These changes are worth planning for early, because some disclosures will draw on information from the current period, and the wider FRS 102 transition rules vary by area. The right time to start that conversation is before your year-end, not after.

In practical terms, it’s worth:

• Reviewing any loan accounts, payments or arrangements involving directors, shareholders or connected parties
• Keeping clear records of dividends declared and paid
• Being ready to discuss any provisions or contingent liabilities in more detail
• Letting us know if your company operates any share option or EMI schemes
• Flagging any significant uncertainties about the future of the business as early as possible

If you’re unsure how these changes affect your business, get in touch with your account manager at THP. They’d be very happy to advise you.