Accounting requirements of company law in the UK

Company Law in the UK requires that directors of companies incorporated in the UK “prepare accounts for the company for each of its financial years”, which give a “true and fair view”.  Such accounts are either ‘Companies Act Accounts’ or ‘IAS Accounts’.

Part 15 of the Companies Act 2006, as amended, includes requirements relating to the preparation of the company’s annual accounts, content requirements for the directors’ report and the strategic report, and the requirements and options for the circulation and filing of accounts.

Further rules and requirements relating to the form and content of company accounts are set out in secondary legislation, including:

• SI 2008/409 The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 (as amended) brings together many of the statutory rules on form and content of accounts and reports for companies subject to both the small companies regime and the micro-entities regime.
• SI 2008/410 The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) brings together many of the statutory rules on form and content of accounts and reports for large and medium-sized companies.

Brexit and financial reporting

Certain Brexit-related changes to UK company law came into effect after the end of the transition period. BEIS and the FRC issued the following communications/guidance towards the end of 2020:

• Transitional provision guidance (December 2020) The FRC has issued guidance for preparers using IFRS, and their auditors. This includes proposed wording to explain the basis of accounts preparation, where an entity has a financial period which straddles the end of the transition period following the UK’s exit from the European Union. This is to ensure consistent understanding and application of requirements in the Companies Act.
• FRC/BEIS Letter: Accounting and Corporate Reporting after the end of the Transition Period (November 2020) In November 2020 the UK Government and the Financial Reporting Council published letters to the accounting and audit sectors setting out the UK framework for audit and reporting at the end of the transition period.

The following resources may also be of interest in this regard:

• ICAEW’s Brexit and financial reporting page brings together guidance and news from ICAEW, as well as externally produced resources providing practical information on financial and corporate reporting.
• The Impact of EU Exit Documents from the FRC and UK government on auditing and accounting during and after the transition period.

The Technical Hub’s IFRS page also includes some information on the UK endorsement of IAS.

This page will be further updated in due course.

This page provides a very brief overview only. Reporting entities will need to make reference to the relevant detailed legal accounting requirements when preparing financial statements.

These pages are provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.